Corporate M&A 2024 Comparisons

The uncertain political environment arising from the Guatemalan Presidential elections and a general regional decline in transactions was responsible for a decline in M&A market activity during the second part of 2023. In addition, a number of government initiatives did not result in new legislation. The proposal for a new Competition Law, for example, did not pass Congress and has been put on hold. Issues with transportation and logistics (largely a result of pandemic-era restrictions) were, however, generally resolved. With these restrictions removed, economic activity in Guatemala increased in the first quarter of 2023, but remained stagnant thereafter. Overall, the economy grew at a 3.4% rate in 2023, helped by money remittances from abroad, which have continued to increase as the flow of migration to the United States has also continued.

Key Sectors

The telecommunications sector continued to see significant M&A activity. Frequencies necessary for 5G services were auctioned in the second quarter of the year and the increase in share participation in the parent company of the largest telecommunications operator in the country during the second and third quarters led to new movements in the M&A Market as its Guatemalan subsidiary is an important component of the balance sheet of this operator. In the energy sector the largest distributor in the region was also subject to an M&A transaction in the later part of 2023. The energy sector also saw the awarding of new long-term generation contracts with a 50:50 split between renewable and non-renewable generation. A total of 235 MW were assigned. International acquisitions of worldwide operations had some impact on the local market through, in particular, the local branches and subsidiaries of acquired companies in the advertising market.

M&A activity in Guatemala, as across the entire region, was reduced, and transactions regarding existing operations were outliers. The most important inbound M&A acquisitions during 2023 were the following:

• Comcel and Claro bought a 700 MHZ frequency band for USD135 million;
• the largest electricity distributor in Guatemala was sold in a share purchase; and
• the PEG-4 bidding process took place for a total of 235 MW of new renewable and non-renewable generation with bids for 15-year contracts.

The most important outbound activity was the following:

• Grupo Hame, S.A.’s purchase of a Peruvian agricultural producer Agritasa; and
• CMI, owner of the Pollo Campero franchise, announcing that it had obtained a USD75 million facility for the expansion of its US operations.

The industries that experienced the most significant M&A activity in the past 12 months in Guatemala are telecommunications, energy and advertising. The construction and housing sectors continue to be affected by the aftermath of the COVID-19 pandemic.

The economy has been able to sustain a 3.4% growth rate through 2023, notwithstanding continued inflationary trends.

In regulated and licence-requiring entities, the primary legal means for acquiring a company in Guatemala is through the acquisition of shares or equity participation in the licensed entity, depending on whether it is a share-based company or not. The acquisition target holds the licence, which is only transferable in rare cases, except in the financial sector where banks and financial companies’ shares are transferable with approval from the authorities. In other instances, and regarding non-regulated entities, such as real estate, asset acquisition is a preferred method of acquisition.

In Guatemala, the M&A of financial institutions, insurance companies and other entities controlled by a regulator is subject to the prior approval of the Monetary Board and the Superintendency of Banks. In the case of an M&A transaction of privately owned companies, no prior approval is required from any authority.

In the telecommunications sector, the regulator is the Superintendency of Telecommunications, although regulations are not competition-related, but essential and limited resources-related. In the energy sector, the main regulator is the National Electric Energy Commission, which oversees authorisations for rendering distribution and energy transportation services and their assignment.

Mining and oil exploration and production activities licences are assignable with approval from the Ministry of Energy and Mines.

The Registry of the Securities Market is the regulator for securities issuers under Decree 34-96 of the Guatemalan Congress, and it is entrusted with the registry of issuance of securities and public offerings of securities.

Guatemala has not yet enacted a competition law and there is no competition authority. A competition authority is expected within the framework of a new competition law mandated by Guatemala’s Trade Association Treaty with the European Union and the most recent treaty with the United Kingdom. A competition law is currently being discussed in the Guatemalan Congress.

There are almost no restrictions on foreign investments in Guatemala, except for certain constitutionally mandated limitations. However, Guatemala’s legal provisions try to promote foreign investments.

The following restrictions or differentiations do remain for foreign investments:

• forestry preservation concessions by the National Forestry Institute;
• Banking and Insurance Regulations for the establishment of foreign branches for foreign insurers and the Investment Banking Laws – the regulations allow for the establishment of Guatemalan branches of foreign banks and insurance entities;
• restrictions allowing adverse possession of real estate only for Guatemalan and Guatemalan-owned companies; and 
• restrictions allowing for land grants only for Guatemalan and Guatemalan entities.

All other restrictions have been removed.

Restrictions regarding land ownership in Guatemala’s coastal areas and frontiers continue to exist in Guatemala’s Constitution.

A new competition regulation was announced at the start of the new government’s term in 2024. Guatemala has not approved any antitrust legislation; however, there are certain dispersed antitrust provisions amongst which is Article 130 of Guatemala’s Constitution, which prohibits the existence of monopolies and privileges, and indicates that the government shall protect the market economy and impede associations that tend to limit market liberty or negatively impact consumers.

Article 360 of the Commerce Code, Decree 2-70, indicates that all companies are obliged to do business with anyone that requests their products or services, complying with the principles of equality in treatment amongst the different consumer categories. Thus, a technical ban on price discrimination activities is deemed to exist. Remedies are unclear but an affected party may sue for damages. Little or no judicial activity to that effect exists.

Furthermore, the Criminal Code indicates in Article 340 that anyone that commits any acts detrimental to the national economy by taking over the production of one or more industries, or the same commercial or agricultural activity, or who takes advantage of such activities through any privilege or using any other means, will be sanctioned with a prison sentence of six months to five years and a fine from GTQ500 to GTQ1,000. Only two cases have been seen regarding complaints filed before the authorities over the last ten years, and there are no specific results from the authority’s investigations.

Three issues stand out regarding labour matters in M&A.

• The fact that a labour contract or relationship is deemed to exist even if disguised under a professional services relationship or a services agreement. For as long as there is a personal obligation to render services and some degree of subordination and obedience to the instructions of the other party the relationship may be deemed as labour. Payments made under such contracts would be deemed as salary, and based on such amounts, other fringe benefits such as severance pay, annual paid vacation, and Christmas and July bonuses do arise and remain contingent.
• Issues related to rights of employees granted under collective bargaining agreements, which have not been renewed due to unions that are dormant or have ceased to exist.
• Issues related to payments made to employees as “incentive bonuses”, which carry with them issues related to potential social security claims, claims regarding severance pay and other fringe benefits unpaid on these, which, by the nature of International Labour Organization (ILO) Agreement 95, are part of the employee’s salary.

Labour rights (salary, benefits, bonuses, vacations, unionisation, striking, etc) are considered human rights, and are recognised in the Constitution of the Republic of Guatemala. Also, the country is part of the ILO and has ratified international agreements that protect workers’ rights.

Workers’ rights are minimum guarantees, which more favourable benefits enhance and cannot be waived at a later stage.

Some of the most important labour laws in Guatemala are:

• the Labour Code, which includes the rights and obligations of employers and workers, as well as processes to resolve disputes in labour matters;
• the Organic Law of the Social Security Institute of Guatemala, which establishes the social security regime – Decree 295 (old age, disability and survival) – in Guatemala for workers and regulations issued by its board of directors;
• the Governmental Agreement 221-94; Regulation for the Negotiation, Homologation and Denunciation Procedure of the Collective Pacts of Working Conditions of Company or Certain Production Centre; and
• Convention 175 of the ILO, under which part-time work is applicable in Guatemala but which has generated certain uncertainties about the best way to apply it, and there are law initiatives that seek to regulate it more efficiently. Nevertheless, part-time work in Guatemala is legal and there is a regulation for part-time work in the Government Agreement 89-2019.

In addition, a home office regulation has been issued (Government Agreement 79-2020).

There are no provisions for a national security review for foreign investments in Guatemala, for either acquisitions or mergers.

In the Guatemalan Congress, a specific initiative for the regulation of the topic has been discussed for more than three years, but there are still no laws enacted in this regard except for existing regulations on restricted military items, chlorates, nitrates, ammunition, explosives and similar. The same is true regarding firearms and the import of nuclear residues as well as similar topics.

Community Consultations and Mining

One notable recent development was in the case of Compañía Guatemalteca de Niquel, Sociedad Anónima (Extracción Minera Fénix), where the Constitutional Court decided that the government (through the Ministry of Energy) was responsible for paying for a community consultation process. However, it was also decided that the mining operation should remain closed until the consultation procedure could take place.

There have been no regulations enacted to determine how the consultation mechanism should be applied. The court has found insufficient consultation methods in these cases and the absence of clarity has affected investment in these areas. The government decided to undertake the consultation procedure and a state of emergency was declared in the zone.

Part-Time Employment and Campaign Finance

The court decided that the Regulations of Part-Time Employment were legal and thus partial employment has been made possible by regulations enacted by the Ministry of Work.

The Constitutional Court declared the unconstitutionality of prosecutions of illegal campaign finance against contributors based on the ambiguity of the felony description contained in the law, by stating that constitutional requirements of fixing the contents of the felony by law were not complied with by the Guatemalan Congress in the cases of contributors. It further stated that the prosecutions based on the felony that substituted the previous law regarding illegal campaign finance could not be applied retroactively to judge alleged crimes committed before the existence of the new law.

Cases Presented Before the Ministry of the Economy

Notices of intent to present investment arbitrations have been filed before the Ministry of the Economy in the following cases:

• Trelec, an electricity grid contractor with a long-term provision of grid agreement with the National Electric Commission, has been prevented from finalising its construction activities in the interior of the country;
• Energía y Renovación Holding, Sociedad Anónima v Guatemala, arising from Hydroelectric construction in the Department of Huehuetenango; and
• APM Terminals v Guatemala, a case related to the construction of a Port Facility at Puerto Quetzal.

Corruption

Criminal corruption cases and irregular election financing criminal cases have had an impact on how transactions are structured, providing for between-parties relief and warranties in such situations in which the target or their principals or agents are targets of the investigation or criminal proceedings. Locally corruption prosecution activities were reduced during 2023 and the government prosecutor suffered some major corruption cases. The authorities focused on the prosecution of actors who in the past were corruption prosecutors or judges, which has resulted in the jailing or prosecution of anti-corruption actors.

Tax

Changes in the tax authority’s interpretation of the tax law, in which reverse merger activities have been subject to scrutiny from the authorities, have been significant during recent years because of the treatment given to goodwill and its non-recognition as deductible and the authorities’ aggressive pursuit of reverse mergers. The tax authority has generated a much stricter digital control model based on the ability to request the withdrawal of bank secrecy.

Guatemala does not have a takeover law or any official initiative to implement a takeover law, except in the financial and insurance sectors. A new securities issuance law is under discussion, with provisions regarding takeover legislation and notices for publicly traded entities.

Even though the Commercial Code was recently amended, no provisions regarding takeovers have been amended or enacted.

Some anti-takeover contractual provisions do exist but have not yet been assessed in court.

It is not customary in Guatemala for a bidder to build a stake in the target before launching an offer, mainly because the acquisition strategies for a target usually entail the purchase of shares of a company. The regulations for stakebuilding in the stock market only apply when announcing an increase in the shareholding of a publicly traded company for the purchase of a majority stake of the shares of the company.

In regulated industries, stakebuilding has been used as a strategy for the foreign acquisition of local entities. Note that there is no regulatory difference between foreign and domestic acquirers in stakebuilding.

In Guatemala there are no applicable material shareholding disclosure thresholds. The only legal requirement relating to share ownership is that any corporation or limited liability company, except venture companies, shall have at least two shareholders or equity owners. Disclosure obligations for direct or indirect holders of more than 5% of shares of banks, financial institutions and insurance companies are mandatory together with the approval of regulators.

The proposal to acquire control of a securities issuance entity in Guatemala triggers the obligation to modify the public offer registration of the securities issuance of the target when securities have been issued by such entities under the Securities Law Decree 34-96. Control means a majority of the shares of the controlled entity.

The only applicable legal filing obligations relating to share ownership are the requirement for any share-based company to file a notice at the Mercantile Registry every time new shares are issued, and the mandatory offering of shares via media publications of edicts for existing shareholders to exercise their pre-emptive rights under the Code of Commerce for new share issuance within authorised capital of a target entity before a third-party offering.

Before shareholder meetings take place, the Board of Directors or sole director have to place the information regarding such shareholder meetings, with 15 days’ advance notice, in the company’s place of business. The administration of the company must place at the disposal of the shareholders the annual accounts, including financial statements, yearly balance, management discussion and analysis report, remunerations received by management and the projection for dividend distribution 15 days before the annual mandatory shareholder meeting, which must take place 90 days after expiration of the annual period of the company.

The Commerce Code, Decree 2-70, stipulates mandatory and minimum reporting standards for all types of companies, meaning a company can introduce additional reporting requirements in their articles of incorporation as long as the minimum is complied with. There are no other hurdles to stakebuilding in Guatemala. Information rights are minimum requirements under the law and cannot be waived in articles of incorporation.

There are no confidential statutory rules for reporting standards, but certain entities have introduced articles of incorporation with mandated confidentiality rules for company information.

In Guatemala, dealing in derivatives is allowed. Some derivative regulation exists under the Law of the Securities Market and its Amendments. The only regulated derivatives are conditional and term agreements under the current Securities Law of Guatemala, Decree 34-96 and its amendments, with very general provisions in the law and no contract-specific type of registration requirements, except if such derivatives are subject to a public offering.

Swaps agreements and other derivatives are unregulated and, usually, allowed under innominate agreements allowed under the Code of Commerce and the Securities Law.

Tax treatment of derivatives is not regulated and may cause, for Guatemalan tax purposes, non-deductibility of derivatives transactions.

Under the Law of the Securities and Merchandise Market, filing/reporting obligations depend on the nature of the derivatives offer. When offered to more than 35 persons, it will be deemed a public offer and certain requirements (such as registration at a Stock Exchange Registry and for the issuer to obtain a risk qualification) shall apply.

When offered to 35 people or less, it will be deemed private, and the offer should be made directly to each of them. Neither the law nor the regulations contain any derivative-specific registration requirements for public offerings of derivatives.

There are no competition laws mandating the registration of derivatives or filing obligations.

Derivative agreements remain unregulated as securities, no securities disclosure exists regarding such agreements and when existing they are usually dealt with in extra-market activities under the securities law.

There is no legal obligation for a shareholder to notify the purpose of the acquisition. The only legal requirement is to inform of the intention to issue shares of the company so that existing shareholders can exercise their pre-emptive right under Article 127 of the Commercial Code.

For issuers of shares that are registered securities for public offering purposes, a notice of intent to acquire shares is a requirement under Article 39 of the Securities Law with its general conditions, to the company, the registry and the exchange in which the shares are traded, with such requirements as the exchange and registry requests in addition to the price, terms of payment and number of shares to be transacted.

The acquisition of controlling voting trusts is also subject to notices to be provided to the regulator and in any public notice of a shareholders’ meeting in which such rights will be exercised.

As a practical matter, no registered public offering of shares is currently in place in the Securities Registry of Guatemala.

Only if the target is a financial institution is it required to disclose a deal, preferably (but not mandatorily) when a negotiation starts, to the Superintendency of Banks for its approval before obtaining the Monetary Board’s approval. If the target is a private company and only some of its equity holders or shareholders are negotiating, there is no requirement to disclose a deal unless the company will increase its share capital to complete the deal.

Share capital increases are subject to a right of first refusal by shareholders, which must be waived or not exercised before a third party can participate in any shareholding arising from increases in the share capital of a Guatemalan entity.

Other shareholders may have a right of first refusal on any sale of shares. If this is the case, disclosure and waiver are a requirement. The Commercial Code authorises board approval for the disposal and acquisition of shares by a new shareholder.

In publicly traded shares or shares with a public offering, registered intent to acquire is mandatory under Article 39 of the Securities Law before the negotiation can commence and is made public to the Securities Registrar, the exchange and the company. As a practical matter, no company shares are currently registered and active in the Securities Registry of Guatemala.

Since Guatemala does not have any practical legal disclosure requirements, market practice is to disclose once the terms and conditions of the acquisition have been agreed upon between the parties and the public. Disclosure is not required.

Please note that there is no offering requirement to purchase the rest of the shares under Guatemalan law. Local entities are not publicly traded and, therefore, it cannot be said that there is a particular market practice that applies to them.

The scope of the due diligence usually encompasses the corporate, asset titling, tax, labour, permitting, environmental, or regulatory and litigation matters of the target, its shareholders, and the ultimate beneficiaries.

In the energy sector, force majeure situations became an issue given certain provisions regarding consumer protections that were enacted.

In Guatemala, exclusivity is typical of M&A transactions. There are no regulations on this subject.

In Guatemala, it is permissible for tender offer terms and conditions to be documented in definitive agreements. Due to the nature of the local shareholding composition, most local entities are closely held and, other than a share securities exchange, tenders are rare.

The length of the process to acquire or sell a business will depend on several matters, and most of the time such matters depend on the parties involved in the M&A transaction – ie, on the nature of the target. If it is a financial institution, the process can take up to approximately 12 months as the approval of the authority is required before closing the deal.

If the acquisition or sale of the business requires the transfer of real estate, then the transfer shall be registered at the General Property Registry, which can take approximately 20 business days for owned entities, and one month for majority shares acquisitions which require public notice of shareholder meetings.

During the pandemic, the Mercantile Registry of the Republic of Guatemala introduced the use of electronic signatures for Public Notaries, so when the Public Notaries register public documents with electronic signatures, their registration is more agile. It is possible that similar changes will be made to the General Property Registry in the near future.

In Guatemala there is no mandatory offer threshold; however, if an offer is made to more than 35 persons, the offer will be deemed as public and certain mandatory requirements will apply under the Law of the Securities and Merchandise Market. Offers between existing shareholders of local entities, even if made to more than 35 persons, have not been deemed a public offer.

In Guatemala, it is more common to use cash as a consideration but it is also common for the consideration to be mixed, part cash and part securities, and not just shares but bonds as well.

Common tools to bridge value gaps between the parties include escrow accounts to determine certainty on final decisions in litigation matters.

The common conditions for a takeover offer are:

• establishing the number of shares to be acquired;
• the price of acquisition;
• terms of payment of the price;
• all regulatory, and governmental approvals and/or permits required to complete the offer being granted on terms acceptable to the offeror;
• that no material adverse effect has occurred or will occur in a certain period;
• no material pending litigation against the target or any of its legal representatives, shareholders or ultimate beneficiaries has occurred or is expected to occur; and
• that no public information or information disclosed by the target to the offeror is inaccurate, incomplete, or misleading, amongst others.

The only restrictions imposed by law and enforced by regulators are the those related to the acquisition of a controlling interest in the shares of a publicly traded entity (see 4.1 Principal Stakebuilding Strategies) and those applicable to financial institutions – ie, acquiring more than 5% of the shares of any institution supervised and regulated by the Superintendency of Banks necessitates obtaining prior approval from the Monetary Board.

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The minimum acceptance conditions for tender offers in Guatemala are as follows:

• agree on the percentage of shares to be acquired;
• obtain all regulatory and/or governmental approvals and/or permits required to complete the offer;
• no material adverse effect has occurred or will occur in a certain period;
• no material pending litigation against the target or any of its legal representatives, shareholders or ultimate beneficiaries has occurred or is expected to occur; and
• that no public information or information disclosed by the target to the offeror is inaccurate, incomplete, or misleading, amongst others.

In Guatemala, it is permissible for a business combination to be conditional on the bidder obtaining the financing.

There are no statutory restrictions on deal security measures, which can be negotiated. Non-solicitation agreements for employees may have some issues related to enforceability against the employees because of constitutionally mandated freedom of employment provisions and labour code provisions limiting restrictions on work. However, it is enforceable against third parties based on unfair competition, and upon registration of non-solicitation.

In Guatemala, it has been requested for the target to appoint independent directors and for certain board of directors’ meetings to exclude management. Information rights before shareholder meetings and rights to appoint a director are usual, and anti-dilution provisions may also be applicable when acquisition percentages are low, although elections by cumulative voting allow directors to be elected by minority shareholders based on shareholding.

Shareholders voting by proxy is permissible under Article 1687 of Guatemala’s Civil Code. The commercial code allowed at-distance participation in meetings and COVID-19 regulations allowed for virtual meetings only if the public deed allows it. If the constitution public deed does not allow the virtual meeting, it is necessary to modify the constitution public deed to hold them.

There are no squeeze-out mechanisms contemplated under the law, short-form mergers or other mechanisms to buy shareholders which have not tendered. Extensive litigation has existed when attempts to force squeeze-out mechanisms are available under foreign legislation when mergers with foreign entities are attempted.

Share capital reductions are available. Rules to select shareholders subject to reduction are ample and open; however, this is rarely seen in practice.

It is not common to obtain irrevocable commitments. Voting trusts are not commonly used for such purposes in Guatemala; they are allowed under Guatemalan law, but not commonly used due to the shareholding structure of the majority of target companies in Guatemala.

Considering that in Guatemala most target companies are private, a bid is usually made public to the rest of the shareholders after the sellers and the buyers have agreed on the terms and conditions of the transaction to exercise their right of first refusal and to the public after the deal has closed.

There are no specific disclosure requirements for non-public issuers of securities, for the issuance of shares in a business combination, other than the usual, which include the effective payment of the shares to be issued and the subsequent notice to the Mercantile Registry indicating the number of shares paid and issued and their nominative value.

Controlling entities need to disclose the following information if the target has registered securities in the Securities Registry. When control is acquired, information regarding the controlling entity needs to be recorded as part of the public offering registration stating the following information:

• composition of its board management power of attorney holders, if resources from the issuance will be used solely in the issuer or employed to finance the controlling entity;
• if the controlled entity is the issuer if the controlling entity will or not be liable to respond for the obligations of the controlled entity, and if there is a warranty the terms of such warranty; and
• if any other controlled entity will respond for its obligations.

There is no legal requirement for bidders to produce financial statements in their disclosure documents. As of today, most of Guatemala’s medium to large companies are preparing their financial statements using the IFRS. The IFRS has been the method increasingly used by tax authorities for tax auditing mechanisms, although tax rules change and conversion into a tax rules form is also required.

Under Guatemala’s applicable rules and regulations, there is no obligation to disclose any of the transaction documents in full for private or public transactions.

Under Articles 171 and 172 of Guatemala’s Commerce Code, the administrator shall be held liable before the company, the shareholders and creditors of the company, for any damage caused by them, wilfully or by negligence. If there were many administrators, they will all be held jointly liable, except when the administrators have expressly voted against the decision that caused the damage or upon approval of management’s report by shareholders if such a decision was reported to shareholders. Approval of management reports by shareholders equates to the release of all matters expressly reported in such management report.

It is common for the board of directors to establish special committees in business combinations, and such committees are used to internally facilitate the transition from the acquiree to the acquirer regardless of whether some of the directors might have a conflict of interest.

Under the Code of Commerce of Guatemala, the administration of a company cannot be delegated and thus decisions of the Committee must be ratified and adopted as decisions of the board to become mandatory.

In Guatemala, courts do not apply the business judgement rule. In criminal proceedings, courts have applied the standard that boards have a duty of due diligence, which is opposite to the business judgement rule.

Accounting, tax, legal and any other advice required and that might affect the combination can be given. However, acting upon advice does not waive board liability.

A board member has to abstain from participating in any manner, including being in the room in which the matter is subject to approval and in participating in discussions and decisions, when and if the decision carries a conflict of interest for him or her. The acting director is subject to liability and damages, but the operation is not voided unless directly acting on behalf of two contracting parties. The situation contravenes the provisions of Article 1694 of the Civil Code, which establishes that a single agent cannot grant contracts representing at the same time the rights or interests of the two contracting parties.

These types of conflicts are usually solved through ADR procedures due to the arbitral and confidentiality clauses included in the transactional documents; hence, many of the conflicts are privately resolved between the parties. Contracts have been voided by conflict-of-interest rules, but damages litigation has been rare in courts in Guatemala for this type of cause.

Hostile tender offers are permitted but not that common in this jurisdiction, they occur concerning big targets, under Decree 34-96 of the Congress of the Republic, Law of Stock Market and Merchandise.

Boards in Guatemala do not hold the power to use defensive measures against acquisitions in general. Board compensation is not within the powers of the board, but a shareholder has, in a manner that boards do not have at their disposal, measures that allow them to adopt disruptive or defensive measures. Again, tenders are not usual in Guatemala. If defensive measures exist under the articles of incorporation or in the entity’s Corporate Governance Manuals the board may use them if allowed.

There is no specific subject regulation. There are only general considerations on good faith in business.

The directors hold the same liability and duties when enacting defensive measures as when exercising their duties. Directors are not mandated to transmit sales proposals to shareholders.

Directors cannot “just say no”. They are subject to the decision of the supreme authority of the company, the shareholders’ meeting or the equity partners’ meeting, and the director is obliged to comply with the resolution taken by this authority. Directors do not have the authority to decide upon offers to purchase shares. Directors have authority, except where limited by statute, to accept or not the sales of assets.

Litigation is not common in connection with M&A deals when the acquisition is for the totality of the shares or assets of the target. Minority rights litigation is more normal when minority shareholders’ rights are not protected in the deal. Arbitration is the most common manner in which M&A disputes are resolved locally and internationally.

Because the deal is not made public until finalised, litigation comes after acquisition in most cases in which it arises. Typically, litigation is brought due to causes related to the price or the condition of the target and its contingencies, which are found after acquisition. A new Competition Law has been announced by the incoming president of Guatemala. The outlook will increase the possibilities of pre-closing litigation.

Litigation has been menaced in broken deals within the region, in cases in which deals have been made subject to US jurisdiction.

Arbitrations have been conducted on issues such as electricity and regulated matters.

Shareholder activism is a force upon the infringement of minority rights as a root cause. Due to the shareholding structure, it is not an important force. Shareholding tends to behave in certain entities as a dividend provision scheme in cases of utilities and other entities, in some cases with employee share participation, and the driving force is when dividends are not distributed.

Social activism does exist in Guatemala, especially in the mining, hydroelectric and telecommunications industries. The activism is referred to as the implementation of the ILO 169 Convention.

Shareholder activism does not seek any of the above-stated results. Social activism seeks major divestitures and even the close of operating businesses, which even cause capital flights. Social activism was affected during the pandemic, due to different factors, such as limited hours and transportation, and the informal economy was not supported with the loans granted by the government. On the other hand, cybernetic activism arose.

Activists do seek to interfere with the completion of announced transactions, especially the M&A transactions in the mining, hydroelectric and telecommunications industries.