Chile: Corporate Mergers As Related-Party Transactions In Chile

Last Updated: 17 May 2017
Article by Luciano Aguilera and Felipe Chamorro

Like most Latin American countries (and other emerging markets), the corporate structure in Chile presents high ownership concentration characterized by the presence of family-owned conglomerates.1 This structure could eventually create in some cases conflicts of interest between the controlling shareholder and minority shareholders. The controlling shareholder usually obtains control through the acquisition of the majority of the company's shares, and in other cases in order to maintain control of the firms that are part of the business conglomerate it uses pyramidal schemes and dual class stocks. Considering the foregoing, minority shareholders may eventually be affected if the controlling shareholder benefits from asymmetry of information or discrepancies between the controlling shareholder and minority shareholders necessarily lead to the prevailing interests of the latter.

Global and local corporate and accounting scandals have shown related party transactions (RPT) to be a major corporate governance problem. In 1997, the Chilean market was affected by a scandal that consisted in the takeover of a large listed energy company, where several of its key executives were found to have acted with a serious conflict of interest by cutting sweat deals for themselves to the detriment of the company's minority shareholders. Since then, Congress has passed several corporate governance laws in view of strengthening minority shareholder rights. In 2010, the Corporate Governance Law (Law No. 20,382) came into force, and made substantial improvements strengthening the corporate governance regime, and included, among other things, the addition of an entirely new chapter on RPTs for listed companies to the Corporations Act (Law No. 18,046). 

In this article, we shed light on corporate mergers in Chile and its interplay with the RPT rules. In particular, we examine a recent Court of Appeals' resolution that has provided a guideline on how mergers between related companies must be treated.

Related Party Transactions under the Corporations Act

Legal definition of RPT

In Chile, Chapter XVI of the Corporations Act is the law of RPTs of listed companies and their subsidiaries. Article 146 of the Corporations Act defines RPTs as any negotiation, act, agreement or transaction entered into by a listed company with any of the following persons: (i) one or more related persons of such listed company, as such term is defined by article 100 of the Securities Market Act (Law No. 18,045)2; (ii) board members, managers, executive officers or liquidators of the listed company, as applicable, whether acting directly or on behalf of any third party, or their respective spouses or relatives up to the second degree of consanguinity or affinity; (iii) the legal entities of which any of the abovementioned persons are direct or indirect owners of 10% or more of its capital, or are board members, managers or key executives; (iv) those persons established in the public corporation's bylaws, or which have been especially determined by the board committee as such; and (v) any legal entity in which a board member, manager, executive officer or liquidator of the public corporation has served as a board member, manager, main executive or liquidator, during the last 18 months.

Approval test for RPTs

Article 147 of the Corporations Act provides that listed companies can only enter into RPTs provided that the purpose of the transaction contributes to the corporate interest3, the transaction is conduct at arm's length as to its price, terms and conditions, and the following requirements are satisfied:

(i) The interested directors/managers/administrators/executive officers/liquidators must immediately disclose their 'interest' to the board of directors or the board's designated person. A violation to this obligation carries joint and several liability for all damages caused to company and shareholders.

(ii) A RPT must be approved by the absolute majority of board members, without counting the votes of the interested directors/liquidators. The interested directors must record their opinion of the transaction in the board minutes, if requested. Likewise, the board minutes must provide details as to the reasons for approving the transaction and excluding the interested directors.

(iii) The board resolutions that approve a RPT must be informed in the next shareholders meeting.

(iv) If the absolute majority of the board members are interested, the transaction can only be approved by either the unanimous vote of the disinterested directors or by two thirds of the outstanding voting shares at a special shareholders meeting.

(v) If the transaction is subject to the shareholders' approval, the board must appoint, at least, one independent appraiser to inform the shareholders of the transaction's condition, effect and potential impact on the company. The independent appraiser's report must also address any other matter requested by the board committee.

(vi) In case of discrepancies on the appointment of the independent appraiser, the disinterested directors may appoint an additional independent appraiser.

(vii) The independent appraisers' reports must be made available to the shareholders as from the following business day the board has received them and for a period of at least 15 business days. The listed company must notify the shareholders that the reports are available through a material event notice.  Within 5 business days from the date on which the board of directors received the last appraiser's report, the directors must provide their opinion as to the convenience of the RPT for the 'corporate interest' of the company

Breaches to the above-mentioned requirements will not void the transaction but will entitle the company and its shareholders to disgorge any profits obtained by the perpetrator plus claim applicable damages. Disgorged profits must be surrendered to the company. 

Transactions exempted from the approval test

Under Article 147 of the Corporations Act, the following RPTs are exempted from the approval test: (i) transactions that involve an immaterial amount4; (ii) transactions that are deemed to be ordinary considering the corporate purpose, according to general policies on regular transactions determined by the board; and (iii) transactions between legal entities in which the company owns directly or indirectly at least 95% of the property of its counterparty.

Corporate Mergers as RPTs

2015 featured a reorganization of a group of related listed energy companies, which sought to simplify the corporate structure of the group by separating the power generation and distribution activities in Chile from the other Latin American countries. Pension funds that owned stakes in these companies opposed the plan considering it detrimental to minority shareholder interests and subsequently filed claims with the Chilean authorities.

The pension funds initially submitted a list of queries to the SVS, which included a specific request to clarify whether a spinoff and merger among the related entities would be considered RPTs, and thus subject to the stricter scrutiny for approval provided under Chapter XVI of the Corporations Act. The SVS held that although the mergers involved in the reorganization qualified as RPTs, the merger approval was not governed by Chapter XVI of the Corporations Act but rather by the specific merger rules contained in the Corporations Act.

The pension funds subsequently filed a claim before the Courts of Appeal of Santiago requesting the court to quality the mergers involved in the reorganization as a RPT, and thus determine the application of Chapter XVI of the Corporations Act. The court held that the SVS's ruling incorrectly applied the law, stating that the respective mergers were in fact subject to Chapter XVI of the Corporations Act, and thus, required these transactions to go through the stringent process applicable to RPTs of listed companies.


In conclusion, the recent judicial ruling has provided a guideline for future mergers between related companies, making them subject to the stricter regulations provided under Chapter XVI of the Corporations Act.  This has certainly strengthened corporate governance standards towards protecting minority shareholders' rights, but has also raised questions among practitioners as to how to adequately combine the specific merger approval rules contained under Chapter IX of the Corporations Act with the RPT provisions provided under Chapter XVI. 


1 A study performed in 2000 showed that approximately 70% of the listed non-financial entities were controlled by a conglomerate, representing 91% of the assets of non-financial Chilean listed companies. See FERNANDO LEFORT & EDUARDO WALKER, Ownership and Capital Structure of Chilean Conglomerates: Facts and Hypotheses of Governance, ABANTE 3(1), at 15-16 (2000).

2 The following persons are considered related to a company: (i) the entities that belong to the same business group of such company; (ii) legal entities that are a parent company, an affiliated company or subsidiary company of such company; (iii) the directors, managers, executive officers or liquidators of such company, and their spouses or their relatives up to the second degree of consanguinity, as well as any legal entity directly or indirectly controlled by these persons; and (iv) any person who either individually or jointly with others acting through a joint participation agreement, are able to appoint at least one member of the management of such company or control at least 10% of its voting shares. Notwithstanding the foregoing, the Securities and Insurance Commission (SVS) may determine that any individual or legal entity is related to a company if, because of relationships of equity, management, kinship, responsibility or subordination, it may be presumed that: (a) individually or jointly with others acting through a joint participation agreement, said person has sufficient voting power to influence in the company's management; (b) his/her business with the company creates conflicts of interest; (c) its management is influenced by the company, if it is a legal entity; or (d) if he/she is an employee or has a position that can have access to company's information and its business that has not been disclosed to the market, which is capable of influencing the value of the company's securities. A person shall not be considered to be related to the company by the mere fact of holding up to 5% of the voting shares, or if he/she is only a company employee that lacks management responsibilities.

3 Although Chilean law does not contemplate a legal definition of 'corporate interest', the Supreme Court has held that corporate interest is the common interest among shareholders (as opposed to their individual interest), which must always relate to the company's purpose, whose primary goal is obtaining and distributing profit among shareholders. See Cuneo et al v. Superintendencia de Valores y Seguros, Supreme Court, Case No. 3,389 (2015).

4 Any act or agreement that exceeds 1% of the corporation's equity is deemed a material amount, provided that the act or contract surpasses 2,000 Unidades de Fomento (approximately US$80,000 as of March 30, 2017) and, in any case, when it surpasses 20,000 Unidades de Fomento (approximately US$800,000 as of March 30, 2017). Transactions consummated within a 12 consecutive month period through one or more similar or complementary acts that have party identity, including related persons or purpose, are deemed a single transaction.

Originally published by Terralex

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions