Contributed By Ferrere Abogados
The primary technique for acquiring a company in Uruguay is the purchase of shares or participations in the target company. In some cases, mainly where the buyer wants to acquire only a specific line of business of the target company, wants to limit its liability or does not want to keep two separate entities after the acquisition, the acquisition of the assets or business (called commercial establishment under Uruguayan law) is also used. There is a specific procedure foreseen by the law where the purchaser of a commercial establishment can limit its liability from the liabilities of the seller. Mergers are not commonly used as they involve a lengthy, expensive and bureaucratic procedure.
The antitrust authorities are among the primary regulators for M&A activity, with a key regulator being the Antitrust Commission, which is a body of the Ministry of Economy. In regulated sectors, antitrust matters are the charge of specialised regulators such as the Central Bank of Uruguay, the Regulator for Energy and Water Services and the Regulator for Telecommunication Services. Antitrust regulation imposes a legal duty of clearance of some covered transactions by the Antitrust Commission or a specific regulator, while other transactions with certain aspects require a prior notification.
In addition to antitrust regulations, in certain regulated sectors, companies that undergo an M&A process must obtain prior authorisation from the specific regulator – for example, the transfer of participations of a financial institution requires the authorisation of the Central Bank of Uruguay.
The Central Bank of Uruguay is a key regulator for publicly listed companies, as it regulates the securities market. However, publicly traded companies are scarce in Uruguay.
Uruguayan law ensures equal treatment for foreign and local investors, as well as the free transfer of foreign investment-related capital and profits.
In general, there are no restrictions in Uruguay with respect to the citizenship or domicile of the investors in companies, except for certain specific activities that are considered to be in the national interest. For instance, shareholders in radio transmitters and open television services must be Uruguayan citizens domiciled in Uruguay, and more than 50% of the stock and effective control in companies that are dedicated to the international transport of goods/passengers by highway must be held by Uruguayan citizens domiciled in Uruguay. Also, restrictions have recently been imposed on foreign states and sovereign funds regarding the acquisition of rural properties.
Prior authorisation from the Antitrust Commission or specialised regulator is required only for transactions that create a de facto monopoly (100% of the relevant market).
Transactions that may trigger antitrust prior notification requirements in Uruguay are acts of economic concentration that either take place in Uruguay, or whose effects unfold – totally or partially – in Uruguayan territory. Acts of economic concentration are defined by the law as those operations that entail a modification of the participating companies’ structure of control by way of merger, acquisition of shares, quotas or membership interests, acquisition of commercial, industrial or civil establishments, total or partial acquisition of business assets, and any other transaction whereby the effective control over the whole or part of the economic units or companies is transferred.
Transactions that involve economic concentrations should be notified to the Antitrust Commission or to the specific regulator only when any of the following thresholds are met:
Some exceptions are stipulated in the law, such as a 'first-landing' exception and the acquisition of companies in which the buyer already has at least 50% of the shares.
The notification needs to be filed at least ten days prior to the execution of the agreement or the effective delivery of the shares.
In the context of an M&A transaction, acquirers should be aware that employees who are terminated by the company have the right to receive compensation equal to one month's remuneration for each year (or fraction thereof) of service, up to a maximum of six months' remuneration. The employer is exempt from paying this compensation in the event of the employees' proven notorious misconduct. This amount increases in cases of dismissal during pregnancy, illness or occupational accident, for example.
If the target company is a free trade zone company, acquirers should bear in mind that, as a general rule, a minimum of 75% of the persons employed by such company must be native or naturalised Uruguayan citizens in order to maintain Free Trade Zone user status and the exemptions, benefits and rights granted by law. A recent law allows the reduction of this percentage upon Executive Branch authorisation, and also introduces certain flexibility for the services sector. Companies outside the free trade zone do not have such limitation.
The statute of limitations for labour claims is one year following the termination of employment, with five years retroactivity.
There is no national security review of acquisitions in Uruguay.