Contributed By Ferrere Abogados
The principal duties of directors in a business combination are basically the same duties they have in general: the duty of loyalty and the duty of acting with the diligence of a good businessman. These duties are with respect to the company.
Also, directors have the general duty to negotiate in good faith with respect to all the stakeholders involved.
It is not common for boards of directors to establish special or ad hoc committees in business combinations.
Although there are not many judicial cases in Uruguay related to takeover situations, courts generally defer to the judgement of the board of directors for business decisions (known as the 'business judgement rule' in the US), except when there is a conflict of interest or when the board of directors acts against prohibitive or imperative rules.
Companies involved in a business combination in Uruguay usually rely on external counsel and external financial and tax consultants.
Conflicts of interest of directors and shareholders have been the subject of judicial scrutiny in Uruguay, mainly in cases where the directors or the shareholders compete with the company, or where the directors perform transactions with the company without the necessary disclosures or approvals from the rest of the directors or the shareholders.