There are situations where merging two or more existing companies may provide a cost and time effective solution to corporate restructuring.
The amendments to the Companies (Jersey) Law 1991 (the “Law”) in 2011 incorporated simple merger procedures that enabled local companies to merge directly with a wide range of corporate bodies, including companies incorporated elsewhere. The Law now allows mergers between a Jersey company and any foreign incorporated body provided it is not an “excluded body” or a body prohibited from such a merger under the laws of the jurisdiction in which it is incorporated.
Pinel Advocates is pleased to have advised on a number of both local and overseas mergers including the first merger between a Jersey company and a New York company.
However, there are a number of Jersey companies that are not entitled to merge, such as companies which have either a guarantor, or unlimited members, and cell companies.
When carrying out the merger process, the assets and liabilities of the merging companies are carried forward into the merger company. This may be advantageous for clients when structuring deals.
The merger process can also offer other advantages over other restructuring procedures. By way of example, “squeeze out” provisions under Jersey law require 90% shareholder approval. The approval process for a merger typically requires only the passing of a special resolution, which can require the consent of as few as holders of 2/3 of the shares in each relevant company.
The consent of the Registrar of Companies in Jersey is required for any merger. Where any body other than a Jersey company is to be a party to a merger, the consent of the Jersey Financial Services Commission (the “Commission”) will also be required. When assessing the merger, the Commission must consider the interests of creditors, the public and the reputation of Jersey and has wide discretion, pursuant to the Law, to request additional documentation to enable a decision to be made.
Every merger which is not an internal group merger between subsidiaries and/or a parent company requires shareholder approval for a written merger agreement for each merging company. The merger agreement governs the terms of the merger.
The directors of each merging company must resolve that, in their opinion, the merger is in the best interests of the merging company, and each must sign a certificate confirming the solvency of such company.
Notice to creditors and registrar consent
Within 21 days of the approval of a merger by its members, each merging company must give written notice of the proposed merger to all creditors with claims exceeding £5,000 and must also publish notice in the local paper or on the Commission’s website.
Where the merging company is solvent, the notice must state that the creditor has the right to object to the merger and may provide notice of objection to the company within 21 days of the date of publication of the notice. Such creditor then has a further 21 days following such objection to lodge their objection with the Royal Court, which may issue any order it deems fit in the circumstances, including restraining the merger from proceeding.
Following the expiration of such notice period, provided that the merger provisions of the Law have been followed and no insolvent company is involved in the merger, the merging companies can make the application to merge to the Registrar whose consent will usually be forthcoming in one to two weeks.