Pre-Merger Notification Guide. PERU Estudio Olaechea

Transcription

1 Pre-Merger Notification Guide PERU Estudio Olaechea CONTACT INFORMATION Jose Antonio Olaechea and Martin Serkovic Estudio Olaechea Bernardo Monteagudo 201 San Isidro Lima 27, Peru and www. esola.com.pe 1. Is there a regulatory regime applicable to mergers and similar transactions? Yes. The general mergers regime is set forth in the General Companies Act. Under this general regime there is no need to file pre-merger notifications. However, certain aspects of mergers (i.e., notifications or authorizations) for some specific industries or economic sectors (i.e., banking and insurance; energy/power sector) are ruled by specific regulations. Additional Comments: Peruvian merger notification requirements vary depending on the economic sector. In general, Peruvian legal provisions do not establish an obligation to notify the authorities prior to implementing a merger agreement; however in some cases not only a notification is required, but also a pre-authorization. For example, publicly traded companies (listed on the Lima Stock Exchange) must inform to the local securities regulator, The Capital Markets Superintendency ( SMV ) of any merger resolution passed by its correspondent corporate body; mutual funds must obtain a pre-authorization from SMV; rating agencies must obtain a pre-authorization from SMV to amend their by-laws and/or for transferences of their stockholders shares (all mergers usually originate a by-laws amendment and produces changes in the shareholders structure); securities brokers ( Agentes de Intermediación ) must obtain a pre-authorization from SMV to amend its by laws in case of a merger; banking and insurance companies must obtain a pre-authorization from the Banking, Insurance and Pension Funds Administrators Authority ( SBS ); companies in the

2 energy/power sector must obtain a pre-authorization from the National Institute for the Protection of the Competition and Intellectual Property ( INDECOPI ) provided some market share is reached; etc. The above are just only examples of sectors or entities which require preauthorizations or notifications from/to their correspondent regulator and do not constitute a full list of them. The need of a previous authorization or notification shall be specified in a case-by-case basis. Nevertheless, all companies must give notice to the Peruvian Tax Agency ( SUNAT ) about the merger but only for tax purposes and not to obtain an authorization. Both surviving and absorbed entities must file a writ with SUNAT giving notice of the effective date of the merger. Such writ must be filed within 10 business days following its effective date. A copy of the merger agreement or of the public deed of merger must also be filed. If such writ is filed within the prescribed term, the merger will be deemed effective, for tax purposes, as from the date agreed upon in the merger agreement. On the contrary, if the writ is not filed within such term, the merger will be deemed effective as from the date the public deed of merger is granted. 2. Identify Applicable National Regulatory Agency/Agencies. In general, mergers are not subject to the supervision of any agency. However, some specific corporations, or mergers occurred in some industries or economic sectors (i.e., energy/power sector) are supervised by some government agencies (e.g., publicly traded companies are supervised by the SMV; Insurance and Banking entities are supervised by the SBS; mergers of companies in the energy/power sector shall be cleared before INDECOPI through the Free Competition Commission (the Commission ); etc.). 3. Is there a supranational regulatory agency (e. g., the European Commission) that has, or may have exclusive competence? If so, indicate. No. Please see our answer immediately above. 4. Are there pre-merger filing requirements; if so, where are they published? In general there are no pre-merger filings. Although please take note that merger resolutions passed by the stockholders must be published in the Official Gazzete El Peruano and in other paper of general circulation. Notices must be published 3 times, with an interval of 5 days between each notice. The notices may be published independently or jointly by the participating companies. Mergers are recorded in the Public Registry. On the other hand, and as mentioned before, some entities do require some clearance or notification prior to implementing a merger agreement.

3 Additional Comments: The approval of the merger agreement triggers the right of the stockholders to withdraw from the company. The term for exercising this right (10 days) is counted from the date of the last notice informing about the merger. Withdrawal rights can be exercised by: i) stockholders who opposed to the merger in the Shareholders or Partners Meeting; ii) stockholders absent to said meeting; iii) stockholders who were illegally bared to vote; and, iv) holders of non-voting stock. Withdrawal rights triggers appraisal rights and does not exempt the partners from personal liabilities that might arise from the company s obligations assumed before the merger. Creditors of any participating company are entitled to oppose to the merger agreement. However, when the opposition is filed in bad faith or with a notorious lack of reason, the judge will impose to the plaintiff, and in benefit of the affected company with the opposition, a fine in accordance with the seriousness of the matter, as well as an indemnity for damages and injuries that may correspond. The right to oppose can be exercised within 30 days from the date of the last notice informing about the merger. 5. What kinds of transactions are "caught" by the national rules? (Identify any notable exceptions) As mentioned before, in general there is no obligation to obtain an authorization or clearance prior to implementing a merger agreement. Triggering events for the power/energy sector: Promotion Process for Private Investment (e.g. privatizations, project finance), mergers, acquisition of controlling interests (in terms of shares, equity or management decision-making power), acquisition of assets, establishment of joint ventures, any other combinations in the power/energy sector, and in general any other concentration transaction that may damage, decrease or obstruct free competition in the generation, and/or transmission, and/or distribution of energy activities. Exemptions for the power/energy sector: when the acquired productive assets do not exceed 5% of the acquiror s total productive assets, or when an acquisition of less than 10% of the voting shares or equity in another company does not give direct or indirect control of a company active in the generation, distribution or transmission activity. 6. Is there a "size of transaction" threshold? Thresholds for the energy/power sector: parties market share is at least 15% in the case of horizontal combinations or 5% in the case of vertical combinations.

4 7. Is there a "size or turnover of the parties" test; if so, what is it and how are size and turnover to be calculated? For the energy/power sector: The test used to decide if a merger is approved or not is the one described under the Substantive Test for Clearance question below. 8. Is geographic scope/national market effect of transaction an issue with respect to filing or approval requirements? If so, specify. For the energy/power sector: Cross-border mergers are subject to Peruvian antitrust provisions for the energy/power sector provided generation, distribution and/or transmission local companies are involved in the transaction. Antitrust provisions for the energy/power sector seek to avoid concentration transactions which will reduce, damage or prevent competition and free concurrence in the energy/power generation, distribution and/or transmission markets or related markets. 9. Is the filing voluntary or mandatory? What are the penalties for noncompliance? Notification filings are mandatory for the energy/power sector: Fines of up to 500 tax units (approximately US$ 690, 000) may be imposed for not filing a notification. Likewise, in the energy/power sector, fines of up to 10% of gross sales or gross income may be imposed as penalties for implementing a merger without the previous authorization. Additionally, nullity may be ordered where a transaction is found to be unlawful. Transactions involving concentration in the generation, and/or transmission, and/or distribution of energy activities without prior authorization will not have any legal effect in Peru. 10. Time in which a filing must be made. For the energy/power sector: There are no statutory deadlines for pre-notification filings. However, closing is suspended pending clearance. 11. Form and Content of Initial Filing. For the energy/power sector: Pre-merger notification is filed with the Commission by all the entities involved in the merger. The notification is filed as an affidavit. This filing must include, at least, the following information: a) identification of the entities making the notification and of any other entity involved in the merger; b) description of the property and control of each of the entities participating in the merger, including the companies of the same Economic Group; c) description of the relations (personal, property or management) between each of the companies mentioned in (b) above with other companies operating in the market or related markets;

5 d) description of the details of the transaction; e) list of the affected markets; f) information related to the affected markets: geographic scope of the affected markets; degree of competition in the affected markets; elements that determine how easy or difficult is to access the affected markets; etc.; g) detailed description of the effects of the transaction over the market as well as the economic efficiencies generated; h) copy of all the final documents related to the transaction, or copy of their last versions; i) copy of the analysis or studies carried out in order to evaluate the merger in connection with competition conditions, competitors and market situation; j) other documents required by the Commission. 12. Are filing fees required? For the energy/power sector: Yes. Filing fees are equivalent to 0.1% of the transaction s total value with a 50 tax units cap (approximately US$ 609,000). 13. Is There An Automatic Waiting Period? If so, specify. For the energy/power sector: A procedure before the Commission must be followed. This procedure begins with the pre-merger notification filing, and concludes with the decision of the Commission (authorizing or not the transaction). Such decision must be issued within the time limit set forth in the answer immediately below. Provided the abovementioned triggering events and thresholds are met, mergers on the energy/power sector cannot become effective until the merger authorization is granted by the Commission, hence all this period could be deemed as a Waiting Period. 14. Are There Time Limits Within Which The Regulatory Agency Must Act? Can they be shortened by the parties or be extended by the regulatory agency? For the energy/power sector: Decisions are due within 30 business days (extendable by another 30 business days or 10 business days in the case of transactions within the scope of the Promotion Process for Private Investment). If a decision is not given within the review time periods, the administrative veto by silence applies and the request for clearance is deemed to have been denied. 15. What is the substantive test for clearance? For the energy/power sector: When making its decisions, the Commission takes into account the following: position in the market of the participating companies; delimitation of the relevant market; structure of the relevant market; possibilities to select suppliers, distributors and customers; existence of obstacles to access the market; supply and demand evolution; technical and economic progress evolution; perspectives of integration with other markets; effects of the transaction over the relevant markets in the short and long terms.

6 Likewise, the evaluation made by the Commission should consider, among other issues: a) if the transaction may contribute to improve the production and commercialization systems, or to promote technical and economic progress and customers interests; b) if the transaction may create efficiencies within the market and if this contribution is sufficient to compensate the restrictive effects created by the transaction towards competition; c) if the transaction produces a material increase of market concentration sufficiently to limit the competition in a considerable way; d) if the transaction facilitates conducts, practices, agreements or contracts that prevents, limits or restricts free competition or creates hurdles for the entrance of new competitors; e) if the transaction aims to replace other companies from the market or to prevent access to the market. 16. What are the common Post-Filing Procedures: Requests for further information, etc? For the energy/power sector: Usually the Commission requests further information which should be submitted within the following 10 business days. Also, parties are granted the right to express their points of view in an Audience. 17. Describe the sanctions for not filing or filing and incorrect/incomplete notification. For the energy/power sector: Fines of up to 500 tax units (approximately US$ 690,000) may be imposed as penalties for not filing a notification, for providing false information, or for not providing information within the given period. Transactions involving concentration in the generation, and/or transmission, and/or distribution of energy activities without prior authorization will not have any legal effect in Peru. 18. Describe the procedures if the agency wants to challenge the transaction? Without detriment of the penalties and sanctions mentioned in this template, the Commission can enforce its decision preventing the effectiveness of the transaction. For this purpose the Commission may file a legal action seeking an injunction as to stop the transaction. 19. Describe the penalties applicable to the implementation of a merger before clearance or of a prohibited merger? For the energy/power sector: Fines of up to 10% of gross sales or gross income may be imposed as penalties for implementing a merger without the previous authorization, or for implementing it without an actual authorization. Additionally, nullity may be ordered where a transaction is found to be unlawful.

7 Transactions involving concentration in the generation, and/or transmission, and/or distribution of energy activities without prior authorization will not have any legal effect in Peru. 20. Describe, briefly, your assessment of the regulatory agency's current attitudes/activities. For the energy/power sector: Although the legislation currently in force establishes ex-ante control for mergers in the energy/power sector, in practice the Commission has been having an open approach and giving clearance to transactions, provided no damage is caused to free competition. 21. Other Important Information: