Mergers and Acquisitions in Chile.
Cross border mergers and acquisitions are a significant contributor to the increase in global foreign direct investment (Didier et al., 2019). The increased potential of mergers and acquisitions makes the practices and structure of the deals important to both the acquiring and host country. In Chilean transactions, it is the best practice for the participant entity to consider the structure of corporate control and the political climate in Chile. Chilean law allows the controlling shareholder to have a significant ability to determine the viability and layout of the merger or acquisition transaction, especially in instances where they control at least two-thirds of the voting shares issued. However, the Chilean Corporation Act (Law 18, 046) and the Security Market Act limit the capability of the controlling shareholder by placing specific requirements to protect the minority shareholder. Lee (2018) emphasizes that the political climate of a host country makes the returns on inter-country acquisitions unpredictable. The Human Resource element is also crucial since it deals with any contractual or performance issues that arise during and after the merger or acquisition process.
The primary Chilean laws that provide for the transaction agreement in mergers and acquisitions deals involving Chilean entities are Civil and Commercial Codes, the Securities Act, the Competition and Antitrust Act, the Limited Liabilities Company Act, the regulations from the SVS concerning corporations (public), and the Corporation Act. Furthermore, the government authorizations are applicable in deals involving companies in regulated industries such as mass media, pension fund administrations (Samels, 2018), and banking and insurance. It is important to note that the Chilean government does not impose any stamp or government taxes during a business government process that has a Chilean entity as the target company.
References
Didier, T., Herrador, S., & Pinat, M. (2019). Network Determinants of Cross-Border Merger and Acquisition Decisions (No. 19/264). International Monetary Fund.
Lee, K. H. (2018). Cross‐border mergers and acquisitions amid political uncertainty: A bargaining perspective. Strategic Management Journal, 39(11), 2992-3005.
Samels, M. (2018). Recent Changes to Merger Notification in Chilean Antitrust Law.