Public Offer Informative Regime - Relevant Matters

In re: "Comisión Nacional de Valores c/ Quickfood s/ denuncia de Carlos A. y Gaston A. Montagna s/ organismos externos”, on March 7, 2013, Division E of the Commercial Court of Appeals upheld the resolution issued by the Argentine Exchange Commission (CNV) against Quickfood S.A., its directors and statutory auditors for lack of compliance with the informative regime set forth in CNV’s regulations. The Court, agreeing with the CNV, sustained that negotiations by Quickfood’s controlling shareholders for the sale of its shares was deemed a relevant event under CNV´s regulations (NT 2001 y mod) since, in this particular case, information about this alleged transaction leaked to the media.

Proceedings were commenced by the CNV upon the filing by a minority shareholder of Quickfood who reported that Quickfood had failed to inform investors, minority shareholders and supervising entities about the existing negotiations over the controlling shareholdings of the company (approximately 70% of Quickfood’s stock capital).

In response, Quickfood argued that the obligation to inform this type of transactions only exists once the stock purchase agreement has been executed or once the particular terms and conditions of the transaction have been agreed on. There is no regulation that sets the obligation to inform about preliminary negotiations and the commencement of a due diligence is not deemed a relevant event. In this particular case, there only was a conditional offer for the acquisition of the controlling shareholdings of the company. Disclosure of such information would have entailed the disclosure of uncertain information which would have provoked market deviations and aggravated information asymmetry.

Both the Court and the CNV concluded that negotiations by Quickfood’s controlling shareholders for the sale of its shares constituted, in this particular case, a relevant event under CNV’s regulations.

The Court pointed out that, in this particular case, the media informed about certain rumors about the alleged offer for the acquisition of Quickfood’s controlling shareholding. In this line, the Court highlighted that not only Quickfood, its directors and statutory auditors omitted to disclose immediately and spontaneously this relevant information to the CNV but they also failed to respond in a rapid, clear and concrete manner when questioned by the Buenos Aires Stock Exchange. Thus, they created an unclear scenario around the terms and conditions of the sale of Quickfood’s controlling shareholders which lasted two months.

The Courts sustained that, upon the leak of the information to the media, Quickfood was required to either ratify or rectify the existence of negotiations for the sale of Quickfood’s controlling shareholders. It should have provided accurate and precise information on these negotiations, making all necessary disclosures and ratifications to prevent that the information disclosed could be confusing, deceiving or incomplete and, therefore, guarantee equality among investors with regards to their investments.