In the world of business transactions, mergers and acquisitions (M&A) are essential strategies employed by for-profit corporations to maximize shareholder value, which remains their primary objective and we are all aware of this fact. To grasp the nuances of these transactions, it’s crucial to view them within a self-contained, unified framework—an «M&A universe.» This approach allows for a focused comparison of how such deals are executed in the United States, including transactions involving foreign entities that introduce complexities like diverse languages, jurisdictions, and legal systems. Also, having this closed universe allows one to “ignore” or bypass many considerations that would make any opinion or article quite lengthy.
Corporations today adopt a variety of strategies to enhance value for their shareholders, and M&A activities often include foreign actors that require that these decisions are taken across borders. These cross-border transactions bring multiple legal systems and jurisdictions into play, with one party typically assuming a dominant role to control as many variables as possible. Corporate law’s inherent flexibility facilitates this, allowing companies to operate within both macro and micro frameworks with ample space. For instance, a macro perspective might involve negotiating contracts for constructing a building in a foreign country with U.S.-based funds, while a micro perspective could focus on the format of notices that must be provided to project managers before being presented to shareholders.
Examining the most commonly engaged areas of law during M&A transactions reveals the adaptability of corporate law, which encourages business growth. Key aspects include tax implications—where the aim is to apply the most advantageous tax regulations available, regardless of the jurisdiction. Boards of Directors, whether in the U.S. or Honduras, will invariably seek the best tax treatment to fulfill their fiduciary duties, even when navigating the complex regulatory landscape typical of the region. Compliance with U.S. regulatory requirements and ensuring the transaction’s registration are equally critical. Although the legal frameworks of different countries may not always align seamlessly, the responsibility lies with legal counsel to identify the optimal path forward, ensuring the corporation’s compliance while protecting the best interests of its shareholders.
A pivotal aspect of M&A transactions is the fiduciary duties owed by officers, shareholders, and legal counsel throughout the entire process. This process spans from the initial interest in merging two companies—following board and shareholder approval—to the final stage, when all registration requirements are fulfilled, and the newly formed entity begins normal operations. Throughout this period, all parties involved must uphold their duties to the corporation and its shareholders. A thorough analysis of these responsibilities, the importance of due diligence, and the consequences of failing to meet these obligations is crucial to understanding the stakes in M&A deals.
In today’s business environment, particularly in the aftermath of a global pandemic, the need for pragmatic business law has never been greater. The pandemic has likely altered some of the established norms, forcing companies to adapt to a new reality. Consider a transaction initiated before the pandemic, then paused, and later resumed under different circumstances is a reality for many organizations. All parties involved must now adjust to these changes, leveraging the flexibility of the law to navigate the altered landscape strategically. The dynamic nature of business law and evolving market practices demand ongoing analysis, especially as companies adapt their strategies to comply with new regulations while continuing to pursue revenue growth.
The objective here is to illuminate the flexible and adaptive nature of corporate law in the context of M&A, emphasizing the need for an open-minded approach when reviewing or commenting on such transactions. This understanding lays the groundwork for a deeper exploration of the specificities of American and Honduran corporate law and the interactions that arise when transactions span both jurisdictions.
Reynaldo Emilio Pineda
