Private mergers and acquisitions in Panama 2020

By Maria De Lourdes Marengo and Nadya Price

Q&A guide to private mergers and acquisitions law in Panama - published by Thomson Reuters.

The Q&A gives a high level overview of key issues including corporate entities and acquisition methods, preliminary agreements, main documents, warranties and indemnities, acquisition financing, signing and closing, tax, employees, pensions, competition and environmental issues. This Q&A is part of the global guide to private mergers and acquisitions law, published by Thomson Reuters.

Corporate entities and acquisition methods 1. What are the main corporate entities commonly involved in private acquisitions? The corporate entities most commonly involved in private acquisitions are companies (sociedades anónimas) constituted under Law 32 of 2017 (Corporations Law). Foreign companies can act as buyers in private acquisitions.

2. Are there any restrictions under corporate law on the transfer of shares in a private company? Are there any restrictions on acquisitions by foreign buyers?

Restrictions on share transfer The Corporations Law allows a company's articles of incorporation to contain provisions restricting the transfer of its shares, but any restriction that absolutely prohibits the transfer of shares is null. Rights of first refusal are frequently included in the articles of incorporation. Some regulated activities in certain sectors impose special requirements on shareholders, and therefore restrict the transfer of shares to parties that do not meet the requirements.

Foreign ownership restrictions The Corporations Law does not restrict the foreign ownership of shares. However, under the National Constitution of Panama, retail sales can only be undertaken by Panamanian nationals. Panama aviation laws require at least 51% of the shares of Panamanian air carriers to be held by Panamanian nationals. Professional activities, including the practice of law, engineering and architecture, are also restricted to

Panamanian nationals. 3. What are the most common ways to acquire a private company? What are the main advantages and disadvantages of a share purchase (as opposed to an asset purchase)? Share purchases: advantages/asset purchases: disadvantages The main advantage in a share purchase is that the buyer acquires the company as it is, with all its assets, licences, contracts and experienced staff. The buyer does not have to go through the process of executing new commercial and labour contracts, paying transfer taxes and complying with formalities for the transfer of titles. Except for in certain regulated industries such as banking, insurance and trust services, a share purchase can be completed privately without the need for public filings or authorisations. In an asset purchase, the buyer must:

• Negotiate new commercial and labour contracts.

• Complete formalities for the transfer of assets.

• Pay transfer taxes.

The seller may have to:

• Sell unpurchased assets.

• Cover pending liabilities.

• Terminate any unwanted contracts.

Share purchases: disadvantages/asset purchases: advantages The main disadvantage of a share purchase is that the buyer acquires the company with all liabilities, which may have not been fully, properly or accurately revealed or evaluated. This can result in the buyer taking over liabilities that arose before the acquisition. Indemnities for these events are generally included in the share purchase agreement.

In an asset purchase transaction, assets are generally acquired free of liens and liabilities. However, Panamanian labour laws provide that when all or the majority of the assets of a company are sold, the seller and the buyer remain jointly and severally liable for a period of one year after the acquisition for labour liabilities that arose before the acquisition (see Question 31).

4. Are sales of companies by auction common? Briefly outline the procedure and regulations that apply. Sales of companies by auction are not common. There are no regulations on the sale of companies by auction.

Preliminary agreements 5. What preliminary agreements are commonly made between the buyer and the seller before contract?

Letters of intent The acquisition process starts with a letter of intent or memorandum of understanding whereby the parties express their mutual interest in pursuing the transaction. A letter of intent must be in writing but is typically non-binding. It typically includes:

• The nature of the business.

• Conditions that must be fulfilled for the completion of the transaction.

• Whether the parties wish to pursue an asset purchase or a share purchase, or are open to explore both.

• A confidentiality agreement.

• A term of validity.

Exclusivity agreements Panamanian law allows parties to freely agree on contractual terms, unless those terms are contrary to the law or public policy in Panama. The parties can therefore validly agree on the exclusivity of an agreement. An exclusivity agreement must be in writing and is typically granted for a limited period. Remedies for breach of an exclusivity agreement include the right to claim either:

• Compliance with the obligations contained in the agreement plus indemnification for losses, damages and interest.

• Termination of the contract plus indemnification for losses, damages and interest.

Non-disclosure agreements Non-disclosure agreements are generally executed to maintain confidentiality before the release of information on a transaction. These are binding and must be in writing. They typically include:

• A description of the information in question and its scope.

• Exclusions, if applicable.

• A commitment by the recipient to protect and maintain the confidential information.

• Dispute resolution provisions, applicable law and indemnifications in case of breach of confidentiality.

The parties often include provisions to the effect that the execution of the non-disclosure agreement does not result in an obligation to complete the acquisition. Remedies for breach of the exclusivity agreement include:

• Indemnification for losses, damages and interest.

• The right to claim termination of the contract plus indemnification for losses, damages and interest.

Asset sales 6. Are any assets or liabilities automatically transferred in an asset sale that cannot be excluded from the purchase?

Panamanian labour laws provide that when all or the majority of the assets of a company are sold, the seller and the buyer remain jointly and severally liable for a period of one year after the acquisition for labour liabilities that arose before the acquisition (see Question 31).

Assets are generally transferred subject to existing tax liabilities and liens or encumbrances. The buyer must ensure that all taxes on the assets are paid before transfer. A tax clearance certificate (paz y salvo) is required for the registration of the transfer of title of assets that are subject to registration, such as real estate property and certain movable assets. The Public Registry only registers the transfer of title after receiving evidence that the payment of the relevant taxes is up to date.

Assets subject to liens or encumbrances such as mortgages can only be transferred with the prior written consent of the creditor.

7. Do creditors have to be notified or their consent obtained to the transfer in an asset sale? Creditors holding registered liens on assets must be notified of any proposed transfer, as the lien must be either cancelled or assumed by the buyer before the transfer of title. The secured creditor's consent is required if the buyer assumes the seller's obligations. There is no requirement for notification of an asset sale to non-secured creditors, except where there is a contractual agreement requiring this, or in mergers.

Share sales 8. What common conditions precedent are typically included in a share sale agreement? A share sale agreement generally includes the following conditions precedent:

• The seller holds clean and legal title to the shares, free of any liens or charges.

• The seller has complied with all its obligations under the share purchase agreement.

• There are no orders issued by any governmental authority preventing the completion of the transaction.

• There are no pending proceedings initiated by any governmental authority seeking an order and no other pending proceedings nor any applicable law or order that prevents, restrains or prohibits the transaction, or that makes it illegal.

• The representations and warranties made by the parties are true and correct.

Seller's title and liability 9. Are there any terms implied by law as to the seller's title to the shares in a share sale? Is any specific wording necessary and do buyers normally impose a higher standard than is implied by law?

The seller's title to the shares is contained in a share certificate stating the number of shares held. The ownership of shares becomes effective for the company when the share issuance or transfer is registered in the register of shares, which is a private registry generally kept by the company's secretary. Before closing, the buyer must request:

• A copy of the share certificate.

• An updated certified copy of the register of shares.

• An officer's certificate confirming ownership by the seller.

There is no specific wording required for the transfer of shares. The seller must state its intention to transfer title to the buyer. Share transfers are generally made through a share purchase agreement. This entails the:

• Execution of the agreement.

• Endorsement of the share certificate in favour of the buyer.

• Request by the buyer to the board of directors of the company to note the transfer of shares in the register of shares.

• Annulation of the share certificate being transferred.

• Issuance of a new certificate in the name of the buyer.

10. Can a seller and its advisers be liable for pre-contractual misrepresentation, misleading statements or similar matters?

Seller Panama civil law recognises contractual and tortious liability. There are no express provisions under Panamanian law imposing liability on a seller for pre-contractual misrepresentations, misleading statements or similar actions. However, if a seller has acted with negligence or fault causing damage to a buyer, it can be liable in tort.

Advisers Similarly, if the seller's advisers have acted with negligence or fault, they may be liable in tort for the damages caused.

Main documents 11. What are the main documents in an acquisition and who generally prepares the first draft? Sale purchase agreements are typically prepared by the seller's advisers. The main documents in an asset purchase agreement are:

• Deed of title to the asset.

• Certificate confirming the asset is free of liens, encumbrances and charges.

• Tax clearance certificates issued by the corresponding authorities.

• Insurance policies, where applicable.

• Purchase and sale agreement.

• Corporate authorities of the parties approving the transaction and appointing attorneys for the execution of the transaction documents.

• Evidence of identity and authority of the parties.

• Legal opinion of counsel in the parties' jurisdiction of incorporation confirming their legal capacity and authority.

The main documents in a share sale acquisition are:

• Articles of incorporation of the company and the amendments to them.

• Evidence of payment of annual franchise tax.

• Financial statements up to the year before the sale.

• Purchase and sale agreement.

• Certificate of the secretary or other officer of the company in respect of the shareholding.

• Certified updated register of shares.

• Share certificate in the name of the seller.

• Letters of resignation of all directors and officers.

• Shareholders' resolution accepting resignations of directors and officers and appointing new directors and officers, and new registered agents, when applicable.

• Corporate authorities of the parties approving the transaction and appointing attorneys for execution of the transaction documents.

• Evidence of the identity and authority of the parties.

• Legal opinion of counsel in the parties' jurisdiction of incorporation confirming their legal capacity and authority.

Acquisition agreements 12. What are the main substantive clauses in an acquisition agreement? The main substantive clauses in an acquisition agreement are:

• Identification of the parties.

• Definitions.

• Object.

• Purchase price.

• Form and time of payment of purchase price.

• Time and place of completion.

• Conditions precedent.

• Deliveries by seller and buyer.

• Confidentiality and announcements.

• Causes and effect of termination.

• Representations and warranties of the parties.

• Covenants of the parties.

• Conditions to completion.

• Tax matters.

• Indemnifications.

• Responsibility for expenses and fees.

• Governing law.

• Notices.

• Effects of variation and waivers.

• Miscellaneous.

• Date and place of execution.

13. Can a share purchase agreement provide for a foreign governing law? If so, are there any provisions of national law that would still automatically apply? Panamanian law recognises the principle of freedom of contract and accordingly parties are free to agree on the law that will govern their relationship. Provisions of foreign law will be recognised and upheld by Panamanian courts unless they are contrary to the law or public policy in Panama.

Warranties and indemnities 14. Are seller warranties/indemnities typically included in acquisition agreements and what main areas do they cover? In a share sale, the seller's warranties typically include:

• Existence and good standing of the company and the seller.

• Power and authority of the seller to enter into the agreement.

• No requirement for the consent, approval or authority of any other person to execute the agreement.

• Obligations under the agreement are valid, binding and enforceable against the seller.

• Legal, valid and clean title on shares.

• Compliance with laws.

• No encumbrances or restriction on the transfer of shares.

• Due execution and compliance with laws and contracts by the company and the seller.

• Payment of taxes.

• Payment of labour liabilities and compliance with labour laws.

• Accuracy of inventories.

• No litigation pending.

• No insolvency.

• Accuracy of financial statements.

• Compliance with environmental laws.

In an asset sale, the seller's warranties typically include:

• Existence and good standing of the seller.

• Power and authority of seller to enter into the agreement.

• No requirement for consent, approval or authority of any other person to execute the agreement.

• Obligations under the agreement are valid, binding and enforceable against the seller.

• Legal, valid and clean title to the asset.

• Compliance with laws.

• No encumbrances or restriction on the transfer of the asset.

• Due execution and compliance with laws by the seller.

• Compliance with laws.

• Payment of taxes.

• Payment of labour liabilities and compliance with labour laws.

• No pending litigation that affects the asset.

15. What are the main limitations on warranties? Limitations on warranties There are no limitations on warranties. Parties are free to agree on the warranties provided. Qualifying warranties by disclosure The parties can qualify the warranties by schedules of disclosures. 16. What are the remedies for breach of a warranty? What are the time limits for bringing claims under warranties? Remedies Remedies for breach of a warranty include the right to claim either:

• Compliance with the warranties, where feasible, plus indemnification for losses, damages and interest.

• Termination of the contract, plus indemnification for losses, damages and interest.

Time limits for claims under warranties The statute of limitation for claims under warranties is three years from the date on which the warranty is due.

Consideration and acquisition financing 17. What forms of consideration are commonly offered in a share sale?

Forms of consideration Cash and non-cash consideration (including stock-for-stock) are acceptable for the purchase of shares, but cash is most commonly used. Factors in choice of consideration The choice of consideration is often influenced by the type of company that is being acquired, and the parties' liquidity and the value of the transaction.

18. If a buyer listed in your jurisdiction raises cash to fund an acquisition by an issue of shares, how is the issue typically structured? What consents and regulatory approvals are likely to be required?

Structure The interested party must file a registration request through a qualified lawyer. The request consists of two parts:

• The first part containing the information required for the prospectus.

• The second part containing the information and documents required for filing with the Superintendence of the Securities Market (Superintendencia del Mercado de Valores) (Superintendence), such as material contracts, incorporation documents, and so on.

Consents and approvals The following are subject to registration with the Superintendence:

• Securities, in a public offering that is subject to the approval of the Superintendence.

• Shares of issuers domiciled in Panama that, on the last day of the fiscal year, have 50 or more shareholders domiciled in Panama that are the effective owners of 10% or more of the paid in capital of the issuer (excluding affiliates and employees, directors and officers).

• Securities listed on any Panamanian Stock Exchange.

The issuer cannot negotiate the securities subject to the offering before approval from the Superintendence.

In addition, under the Panama Securities Law, an issuer must notify the Superintendence of any tender offer that either:

• Is for more than 25% or more of the issuer's issued and outstanding stock.

• Would result in the acquisition by the offeror of over 50% of the issuer's issued and outstanding stock.

This notice must also be delivered to the issuer and to the stock exchanges in Panama where the shares subject to the tender offer are listed.

The following offers, sales and transactions are exempt from registration with the Superintendence:

• The offer and sale of government securities or government-backed securities, including securities issued by international institutions in which the government participates.

• Private placements, which are offers of securities made by the issuer or any affiliate of the issuer to no more than 25 persons with no more than ten buyers within a one-year period.

• The offer and sale of securities to institutional investors.

• Corporate transfers, including:
  

  • offers, sales, distributions, transfers and exchanges of securities between an issuer and holders of its securities in connection with the payment of dividends from shares or other securities of the issuer;

  • reorganisations, dissolutions, liquidations or mergers of the issuer;

  • the exercise of rights or options granted by the issuer; and

  • offers of shares to increase the capital of the issuer that are made exclusively to its existing shareholders.

• The offer and sale of securities by an issuer exclusively to its employees, directors or officers, or to the employees, directors or officers of its affiliates.

Requirements for a prospectus

Prospectuses must contain financial statements and information on the issuer, its operations, business and securities as required by the Superintendence, as well as any additional information that the issuer wishes to include, as long as it is relevant and not otherwise legally prohibited.

There are no statutory requirements for private offerings.

19. Can a company give financial assistance to a potential buyer of shares in that company? Restrictions There are no restrictions on companies providing financial assistance to a potential buyer. Exemptions There are no exemptions, as Panamanian law does not restrict financial assistance to a potential buyer. Signing and closing

20. What documents are commonly produced and executed at signing and closing meetings in a private company share sale? Signing The documents commonly produced and executed on signing in a private company share sale are:

• Certificate issued by the relevant authority evidencing the existence of the parties.

• Evidence of payment of annual franchise tax.

• Secretarial certificate confirming the shareholding of the company.

• Copy of the resolution of the board of directors of the buyer authorising the purchase of the shares and the transactions contemplated by the share purchase agreement, certified by the secretary of the company as validly adopted and in full force and effect.

• Written resignations signed by each officer and director of the company, including revocation of all powers of attorneys granted to them by the company.

• Shareholders' resolution accepting resignations of directors and officers, and appointing new directors and officers, and registered agents, when applicable.

• Copy of the resolution adopted by the seller's shareholders authorising the sale of the shares and the transactions contemplated by the share purchase agreement, certified by the secretary of the company as validly adopted and in full force and effect.

• Written confirmation that none of the warranties set out in share purchase agreement have been breached.

• Articles of incorporation of the company and any amendments to them.

• Financial statements up to the year before the sale.

• Purchase and sale agreement.

• Evidence of the identity and authority of the parties.

• Legal opinion of counsel in the parties' jurisdiction of incorporation confirming their legal capacity and authority.

Closing The documents are commonly produced and executed at closing in a private company share sale are:

• Certificate(s) representing the shares, duly endorsed in the name of the buyer by the seller.

• Updated register of shares evidencing the share transfer.

Delivery of endorsed share certificates is not required for asset sales. Instead, a deed of title for the assets, together with tax clearance certificates and insurances policies if applicable, must be produced in addition to the sale and purchase agreement.

21. Do different types of document have different legal formalities? What are the formalities for the execution of documents by companies incorporated in your jurisdiction?

Commercial contracts are not normally subject to special formalities for validity. Whatever the form and language of the contract, the parties are subject to the terms agreed on between them. Good faith and the parties' real intentions prevail. Any commercial obligations exceeding USD5,000 must be in writing or filed technologically.

The transfer of real estate property requires the execution of a public deed before a notary public in Panama, where the terms and conditions of the sale are recorded. The seller must provide evidence of payment of property transfer taxes, including tax clearance certificates and confirmation of utilities and condominium fees (if applicable).

These are reviewed by the notary public. The notarial public deed must be filed and registered at the Public Registry. Title to the property is effectively transferred on registration.

Documents executed abroad must comply with the formalities of the place of execution. It is advisable to have the documents notarised by public notary in the place of execution as, in the event of enforcement in Panama, submission in evidence may be easier as authenticated documents are presumed to have complied with all the legal formalities of the jurisdiction where they are executed.

22. What are the formalities for the execution of documents by foreign companies? See Question 21.

23. Are digital signatures binding and enforceable as evidence of execution? Under Law 51 of 2008, modified by Law 82 of 2012 and regulated by Executive Decree 40 of 2008, digital signatures are binding and enforceable as evidence of execution provided that the signature is:

• Unique to the person using it.

• Verifiable.

• Under the exclusive control of the user.

• Linked to the information or message.

24. What formalities are required to transfer title to shares in a private limited company? Registered shares in a private limited company are transferred by endorsement and a corresponding annotation in the company's share register book. Under the provisions of Law No. 47 of 2013, as modified by Law 18 of 2015, which regulates the custody of bearer shares, for a transfer of bearer shares to be perfected, the authorised custodian of the shares must be notified in writing of the transfer and the buyer must issue a sworn declaration confirming the contact details.

Tax 25. What transfer taxes are payable on a share sale and an asset sale? What are the applicable rates? Share sale Capital gains derived from a share sale are subject to a 10% tax, of which 5% must be withheld by the buyer as an advance and paid to the authorities. The seller can choose to consider this advance as the definitive capital gain tax or request the return of the surplus when it considers that the amount withheld is greater than the tax on the profit obtained at the 10% rate.

Asset sale Transfer of movable goods and services tax (Impuesto de Transferencia de Bienes Muebles y Prestación de Servicios) (ITBMS) of 7% is payable on transfers of moveable chattel assets.

Capital gains tax at 10% is payable on profits made on the sale of real estate property. The seller of the property must pay 3% on the sale price or the registered property value, whichever is higher, as an advance on the income tax payable on seller's capital gains and has the option to consider the 3% tax payment as the definitive income. If the sum withheld exceeds the amount resulting from the application of the 10% rate to the gain obtained from the sale, the seller can file a special tax return to credit the sum retained and claim the excess resulting as a credit in their favour.

26. What are the main transfer tax exemptions and reliefs in a share sale and an asset sale? Are there any common ways used to mitigate tax liability? Share sale There is no tax payable on the transfer of shares if the company has not engaged in commercial activities in Panama. If a transfer results from a merger or corporate re-organisation or consolidation and the shareholder only receives other shares in the surviving entity or its affiliate, the transfer of shares is exempt from capital gains tax. Asset sale Food, medicine, medical services and crude oil are exempt from ITBMS in Panama.

27. What corporate taxes are payable on a share sale and an asset sale? What are the applicable rates? Share sale No corporate taxes are payable on a share sale. Asset sale Corporate tax is only applicable if the asset sale is part of the company's ordinary business activities. Sales giving rise to gains as part of the company's ordinary business are subject to a corporate tax rate of 25%.

28. What are the main corporate tax exemptions and reliefs in a share sale and an asset sale? Are there any common ways used to mitigate tax liability? Share sale No corporate taxes are payable on a share sale. Asset sale Corporate tax is only applicable if the asset sale is part of the company's ordinary business activities. If any of the parties is a national of any of the nations with double-taxation agreement with Panama, it may be possible to reduce the applicable taxes.

29. Are other taxes potentially payable on a share sale and an asset sale? Under the general stamp tax provisions, tax of USD0.10 per USD100 fraction of value of the document or transaction applies to all contracts that refer to acts that are subject to Panamanian jurisdiction and that are not subject to a special tax. There is an exception to this general provision for documents that refer to matters that do not generate taxable income in Panama, unless those documents are used, or filed before Panamanian courts or administrative authorities, in which case the stamp tax must be paid.

30. Are companies in the same group able to surrender losses to each other for tax purposes? For example, can interest expenses incurred by a bid vehicle incorporated in your country be set off against profits of the target before tax? Companies in the same group are not able to surrender losses to each other for tax purposes. Employees

31. Are there obligations to inform or consult employees or their representatives or obtain employee consent to a share sale or asset sale?

Asset sale Panamanian labour laws provide that when all or the majority of the assets of a company are sold causing the substitution of the employer, the seller and the buyer remain jointly and severally liable for a period of one year after the acquisition for labour liabilities that arose before the acquisition.

The substitution of the employer must be notified in writing to employees and their unions no later than 15 days after the date of transfer. Failure to give notice will maintain the joint and several liability between old and new employer until notice is given and the one-year period lapses.

Share sale Under the Panamanian Labour Code, changes to the legal or economic structure of the company or the substitution of an employer must not affect the employment relation to the detriment of the employees. The employees and respective unions must be notified of the substitution of the employer in writing within 15 days following the date of substitution. The seller is jointly liable with the buyer for the obligations derived from employment contracts or Panamanian law that arose before the date of substitution, for a period of one year from the date of notifying the employees of the substitution. Once this period is concluded, the responsibility remains solely that of the buyer. A failure to notify maintains the joint liability of the sellers and the buyers until the notification is made.

32. What protection do employees have against dismissal in the context of a share or asset sale? Are employees automatically transferred to the buyer in a business sale?

Asset sale The substitution of the employer in a business sale must not affect existing employment relationships in a manner prejudicial to employees. The replaced employer remains jointly and severally liable with the new employer for obligations under the labour agreements or imposed by law that arose before substitution one year from the notice given to employees of the substitution. After this term, the new employer has sole liability.

Share sale In a share sale, the company remains liable for obligations under the labour contracts. The share sale must not affect existing employment relationships in a manner prejudicial to employees.

Pensions 33. Do employees commonly participate in private pension schemes established by their employer? If an employee is transferred as part of a business acquisition, is the transferee obliged to honour existing pension rights or provide equivalent rights?

Private pension schemes Private retirement and pension plans are voluntary and complementary to the social security programme managed by the government, for which registration is compulsory. In a business acquisition where the company has private pension schemes in place, the purchaser must honour the existing pension rights and claims.

Pensions on a business transfer Pensions must not be affected in a manner prejudicial to employees on a business transfer.

Competition/anti-trust issues

34. Outline the regulatory competition law framework that can apply to private acquisitions.

Panama enacted competition legislation for the first time in 1996 through Law No.29 of 1 February 1996. In 2007, Law 29 was repealed by Law No.45 of 2007 (Competition Law). The objective of the Competition Law is to:

• Protect and ensure free economic competition.

• Eradicate monopolistic practices and other restrictions in the efficient functioning of the markets of goods and services.

• Preserve the interests of consumers.

Triggering events/thresholds

Any act, contract or practice that restrains, diminishes, harms, impedes or that in any other way damages free economic competition in the manufacturing, processing, distribution, supply or commercialisation of goods or services is prohibited. There are no threshold requirements under Panamanian law. It is presumed that the acquisition of a company, or the merger of companies, has an objective or effect prohibited by the Competition Law if the act or attempt:

• Grants or may grant to the merging entity, the acquirer or the economic agent that results from the concentration, the power to fix prices unilaterally or to substantially restrict the supply in the pertinent market, without competitors being able to effectively or potentially neutralise that power.

• Has or may have as an objective the shifting or displacement of other existing or potential competitors or the impeding of their access to the relevant market.

• Has or may have as an objective substantially facilitating a prohibited act or attempted act.

Notification and regulatory authorities Acquisitions that are considered to be concentrations under the Competition Law can be voluntarily notified to the Competition Authority and are subject to verification by the

Competition Authority. Acquisitions considered as concentrations under the terms of the Competition Law that have been verified and passed by the Competition Authority can validly take place and cannot be challenged later, except when the favourable decision is granted based on false or incomplete information provided by the interested parties.

Substantive test The following criteria are considered by the Competition Authority in determining if the acquisition is a prohibited concentration under the Competition Law:

• The market share of the economic agents in the relevant market and the effects with respect to other competitors and buyers of the relevant product or service, as well as with respect to other directly-related markets and economic agents.

• Whether the concentration facilitates the implementation of conducts, practices or agreements that restrain or limit free competition or the imposition of barriers to the entry of new economic agents.

• Whether the acquisition facilitates the unilateral rising of prices, without allowing other economic agents to actually or potentially counteract or block that power.

• Whether sufficient opportunities are maintained for the entry of economic agents into the market to avoid price increases above the level before the concentration.

• Whether the concentration is necessary to avoid the exit from the market of productive assets of one of the economic agents that participate in the concentration.

• Whether the concentration would result in the improvement of the manufacturing, processing, distribution, supply, commercialisation or consumption conditions of the products or services.

Environment 35. Who is liable for clean-up of contaminated land? In what circumstances can a buyer inherit and a seller retain liability in an asset sale and a share sale?

A party that commits or causes contaminating activity is liable for the cleaning up of the contaminated land and must:

• Repair the damage caused.

• Apply prevention and mitigation measures.

• Assume the corresponding costs.

It is uncommon for a buyer to inherit liability in an asset or share sale. Indemnity agreements and insurance releases are generally included in the sale agreement to limit liability. The authorities will retain the ability to initiate actions against the contaminating party.