We are proud to share the latest edition of the TerraLex Pre-Merger Notification Guide. Each of the contributors to the guide has provided information and background as to the likely application of their respective notification regimes to a proposed transaction.
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Yes, since June 2021, all transactions which involve a change of control in companies, assets and joint ventures and surpasses the thresholds (“Thresholds”) established in the Merger Control Act would have to file a prior mandatory notification to the National Institute for Defense of Competition and Protection of Intellectual Property (INDECOPI).
Yes. The parties may file voluntarily a notification before INDECOPI. However, once the notification has been filed, the procedure turns mandatory, and the parties would have to wait until INDECOPI issues its definitive resolution.
Also, INDECOPI can review a transaction which has not been notified up to one year from its closing. This ex officio review will occur if INDECOPI considers that the closed transaction can affect the competition. Under this scenario, in case there is any doubt or different interpretations, it will be recommendable to file a voluntary merger notification. It must be noted that the law and regulation is not totally clear on this matter. It is expected that INDECOPI issues guidelines to clear it.
Accordingly, this voluntary merger notification would be advisable in case of doubt or controversial transactions where the parties would prefer to obtain clearance from INDECOPI prior to closing the transaction.
The mandatory notification involves transactions where a change of control occurs, in transfer of shares in companies, assets and joint ventures. A change of control involves that the buyer or group of buyers have more than 50% of the voting shares in a company or interest in an asset. However, control also involves being able to decide on the strategy and business matters through the board or management even if the buyer has less than 50% of the voting shares or interest in an asset.
Additionally, the transaction should surpass the following Thresholds:
As detailed in Section 3 above the transaction should surpass the following Thresholds: 1. Overall turnover in Peru or Peruvian assets’ book value of approximate US$ 143.4 million of all involved parties in a transaction. 2. That at least two parties involved in a transaction have, individually, a turnover in Peru or Peruvian assets’ book value of approximate US$ 21.7 million.
The mandatory notification will be applicable if Thresholds (1) and (2) are met. It must be noted that the evaluation is performed on turnovers and assets separately. If, for example, the turnover Threshold is met but the assets Threshold isn’t, the mandatory notification will be applicable.
Finally, there are some specific rules to consider regarding turnovers and assets. For example, if revenues are obtained from abroad sales to foreign clients, these turnovers will not be considered to calculate the turnover Threshold. For non-tangible assets located abroad (i.e., bonds or IP rights) this will also not be considered to calculate the assets Threshold.
As pointed in answer to question number 3, associative contracts, joint ventures, and partnerships are caught by a mandatory notification system if they surpass the Thresholds or if, under the joint venture rules, there is a shift in the capacity to decide on the strategy and business matters of one of the parties to the joint venture.
The transactions that fall within the scope of the obligation to require a filing (as detailed in Sections 3 and 4 above), even if performed abroad, are those which involve - directly or indirectly - companies that perform commercial activities in the Peruvian market.
Additionally, if there are merger control reviews by competition authorities in other jurisdictions, then they must be disclosed to INDECOPI.
Parties must fill a form, which include the following information: identification of the companies and individuals who perform the notification and of the other parties involved in the anti-trust procedure; description of property and control structure of the notifying party/parties and other parties involved in the merge procedure, description of personal, property or management nexus, details of the transaction’s structure, detail of the affected markets and a description of the competition therein, detail of the transaction’s effects over the market, economic efficiencies generated and copies of the transaction’s documents.
Additionally, all involved parties must file their last annual financial statements, including the ones of their economic group, located in Peru or abroad.
We estimate that typically it takes between two to three weeks to compile said information, although the time depends on the size of both the transaction and the companies involved.
Only if the required information is irrelevant for INDECOPI’s analysis or it is difficult to be obtained. However, this decision will be resolve under the sole discretion of INDECOPI.
Yes, the fee is S/ 91,629.40 (approximately US$ 24,211). The same fee is applicable for ordinary procedure and the fast-track procedure
No term is established. Peruvian law only states that the notification must be filed before the transaction is closed.
The parties must obtain prior authorization of INDECOPI before completing the transaction
To “clear” a transaction, the corresponding authority, the first phase has a term of 30 business days from the date on which the notification is deemed valid and all the documents and information related to the transaction are filed. If INDECOPI considers that it would require a further analysis, then it will start a second phase. Such phase has a term of 90 days, that could be extended for an additional period of 30 business days. INDECOPI shall resolve either by approving the transaction, approving the transaction under certain conditions, or denying it.
In case the corresponding authority does not deliver its decision in such period, the transaction shall be considered approved.
The notifying party/parties may appeal the first instance decision, after which the corresponding authority has a term of 90 business days to deliver its decision in second instance.
In practice, the corresponding authority takes approximately three to nine months in first instance to deliver its decision.
Notwithstanding, there is a fast-track procedure for newcomers to a sector or first landing investors in Peru if they meet the Thresholds. The fast-track procedure is approved in 30 business days from the date on which the notification is deemed valid and all the documents and information related to the transaction are filed.
The consequences can consist of the corresponding authority initiating judicial or administrative claims to declare the transaction void. Also, an official investigation of the parties involved in the transaction may be initiated. The statute of limitation lapses after 4 years since the transaction is closed.
The most serious administrative sanction that could be imposed to the defaulting parties is up to 12% of the notifying party’s/parties’ sales or gross income, in addition to dissolve the transaction.
Other sanctions that could be imposed will be calculated in accordance with the Supreme Decree N° 032-2021-PCM. These calculations will be performed by a mathematical formula under three possible methods: (i) based in preestablished values, depending on the size of the company and the time the damage was caused; (ii) based on a percentage on the sale or services; and (iii) an ad-hoc method consisting in maintaining the method applied before the Supreme Decree was approved to resolve in the same manner cases with a big impact or considerable damage. Nonetheless, the administrative sanctions will not surpass the amount of US$ 10 million (approximately).
After the waiting period expires, the transaction is deemed to be approved by INDECOPI. However, to have further legal protection, it is recommendable to obtain a resolution of INDECOPI stating that the transaction has been approved due to the expiration of the legal term.
Transactions which have not been notified to INDECOPI can also be reviewed up to one year after its closing. If INDECOPI considers that there are competition issues and that it should have been given notice, then INDECOPI may impose sanctions to the parties.
Obtaining a resolution of INDECOPI stating that the transaction has been approved due to the expiration of the legal term
The Antitrust Commission of the INDECOPI, in first instance, and the Court for Defense of Competition of the same entity, in second instance, are the corresponding authorities against anti-competitive transactions.
Both the Antitrust Commission and the Court for Defense of Competition have powers to (i) “clear” transactions; (ii) deny transactions; (iii) request for transactions to be amended; (iv) impose fines; and (v) initiate claims of judicial or administrative nature to deprive transactions of legal effect.
All information filed has confidential and reserved nature, being used only for the purpose for which it was requested. Personnel of the corresponding authority have the legal obligation of not disclosing any related information.
However, the above does not prohibit publishing the corresponding technical report and resolutions in the official gazette, once they have become final. Notwithstanding, said publication still prohibits disclosure of commercial/trade or industrial secrets.
To date, INDECOPI has only published one guideline on Thresholds. However, INDECOPI will publish further guidance in the future. Additionally, as the law entered into force less a year ago there is still not much case precedents. However, this case precedent would also be applicable as guidance.
It is advisable to contact the Antitrust Commission to discuss matters which are likely to pose competition issues at as early a stage as is possible. In addition, it is advisable to disclose as much information as possible during the notification procedure.
If it is likely that competition issues would arise from the transaction, then it is advisable to file remedies before the Antitrust Commission. These remedies may be structural or conduct remedies and can be negotiated with the Antitrust Commission
According to the Peruvian Constitution, Peruvian and foreign investors receive equal treatment and there is no investment control or review for a foreign investor to perform and investment in Peru.
However, there are restrictions as to foreigners and foreign-owned companies obtaining radio and television licenses and authorizations.
In addition, there is a limitation for foreigners and foreign-owned companies to own or possess, directly or indirectly, mines, lands, woodlands, water rights, fuel, or sources of energy within 50 kilometers of the Peruvian border. In such cases, an authorization from the sectorial ministry and the Ministry of Defense will be required.
Nowadays the Peruvian Congress is discussing a merger and acquisition control law (the Law Project). The Law Project establishes a mandatory notification system for every merge or acquisition that is going to take place or will have effects in Peru. The Law Project states that a prior authorization from INDECIPI is required when the total revenue of all the involved entities is over US$130 million or when the total revenue of at least two of the participating entities is over US$25 million. If the participating entities fail to notify or to obtain the authorization, they will be fined for an amount equal to the 12% of their total revenue of the previous fiscal year and the transaction will have any effect.
Disclaimer: This guide contains summaries of general principles of law. It is not a substitute for specific legal advice and should not be relied upon in relation to the application of the law or subject matter covered.
