All those planning on concluding an M&A deal in Ecuador should keep in mind the recently introduced procedure which significantly speeds up the M&A process. Let’s have a closer look at the key aspects of this legal innovation.
What Does It Mean?
The new procedure establishes improved legal mechanisms for regulation of M&A transactions in Ecuador & provides for protection of insolvent companies.
It also provides businesses meeting its requirements with a number of benefits, including:
- less time expended on M&A transactions;
- no uncertainty associated insolvent companies’ protection.
Prior to the introduction of the new procedure, the average time required for reviewing, approving, or rejecting an M&A deal in Ecuador was seven months. Now, it has been significantly reduced.
Ecuador: Updated M&A Regulation
Companies intending to benefit from the new procedure are required to meet at least one of the below criteria:
- an acquirer mustn’t undertake economic activities in Ecuador;
- participants’ market share mustn’t exceed thirty per cent (for vertical & horizontal deals);
- the HHI index mustn’t exceed two thousand points prior to the deal & two hundred and fifty points after the deal (for horizontal deals);
- the HHI index mustn’t exceed two thousand points prior to the deal (no data is available for a post-merger period);
- concluding an M&A deal in Ecuador impacts insolvent companies.
If one of the above criteria is met, companies may qualify for the new procedure.
Normally, it takes up to twenty five days for Ecuadorian regulators to grant or reject a request.
Applying for insolvency protection in Ecuador requires meeting one of the below criteria:
- inability to pay off debts;
- obligation to exit the market if an M&A deal doesn’t go through;
- having no other options.
It should be kept in mind, though, that the new procedure for protecting insolvent companies is far from perfect, which is why its practical application may be somewhat problematic.
The new procedure is a big time saver & can, therefore, significantly speed up the conclusion of M&A deals in Ecuador. All those planning on conducting M&A transactions in South America should keep in mind that doing so requires familiarity with the basic legal requirements of a particular jurisdiction.
If you’re looking for legal advice on M&A regulation in Ecuador or need legal assistance with DD of an Ecuadorian company, your best be would be to contact IQ Decision UK. Our legal assistants will be happy to give you a hand with any legal issues you're facing in this respect.