Part VII: Acquisition of
Companies
Chapter 1: Merger
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314. Merger shall require the approval of the board
of directors and of the general meeting, in each of the merging companies, in
accordance with the provisions of this Chapter.
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Approvals by a company
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315. (a) The board of directors of a merging
company, in considering whether to approve the merger, shall deliberate and
determine, taking into account the financial situation of the merging companies,
whether in its opinion there is a reasonable suspicion that the surviving
company will not be able to pay its debts to its creditors following the merger.
(b) Where the board of
directors determines that there is a suspicion as referred to in subsection (a),
it shall not approve the merger.
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Merger that prejudices a company’s ability to pay
its debts
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316. Where each of the boards of directors of the merging companies has
approved the merger, they shall jointly draw up a proposal for the
approval of the merger (hereinafter “the merger proposal”), and shall
sign it.
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Merger proposal |
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317. (a) A merging company shall forward the merger
proposal to the Registrar of Companies within three days of the date of
convening of the general meeting.
(b) A merging company
shall notify the Registrar of Companies of the resolution of the general
meeting, within three days of the date of passing of such resolution, shall
inform the Registrar of the giving of notice to creditors under section 318, and
shall provide him with a copy of any court ruling under sections 319 or 321,
within three (3) days from the date of such ruling.
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Notice to the Registrar of Companies
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318. (a) A merging company shall send its merger
proposal to the secured creditors of the company no later than three days after
the date of submitting of the merger proposal to the Registrar of Companies.
(b) A merging company
shall notify its unsecured creditors of the merger proposal and of the contents
thereof as shall be prescribed by the Minister.
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Notice to creditors
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319. The court may, on the application of a
creditor of a merging company, order the delay or prevention of the merger if it
finds that there is a reasonable suspicion that, following the merger, the
surviving company will not be able to pay the debts of the merging company, and
it may make orders ensuring the rights of the creditors.
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Objection bycreditors
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320. (a) Merger shall require the approval of the
general meeting of each of the merging companies.
(b) Where shares in the
absorbed company are divided into classes, the merger shall also require the
approval of class meetings of the absorbed company.
(c) In voting at the
general meeting of a merging company the shares in which are held by the other
merging company or by a person holding twenty-five percent or more of any kind
of means of control in the other merging company, the merger shall not be
approved if a majority of the shareholders present at the vote who are not
either part of the other merging company, the person so holding or anyone acting
on behalf of either of these, including relatives or corporations under their
control, are opposed to it.
(d) Where a person holds
twenty-five percent or more of any kind of means of control in a number of
merging companies, the merger proposal shall require approval in accordance with
the provisions of subsection (c) in each of the said merging companies.
(e) Shareholders taking
part in the vote shall notify the company prior to the vote, or, if the vote is
by way of voting paper, on the voting paper, whether their shares are held by
the other merging company or by a person set out in subsection (c), or not so
held; a shareholder who fails to notify as aforesaid, shall not vote and his
vote shall not be counted.
(f) The provisions of
section 275(a)(3) shall not apply to a merger proposal requiring approval as
provided in subsection (c).
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Approval of merger
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321. (a) Where the general meeting of a merging
company approves a merger proposal under section 320(a), the court may, on the
application of the shareholders holding at least twenty five percent of all the
voting rights in the company, rule that the company has approved the merger even
if the merger was not approved by the entire general meeting of the merging
company under section 320(b) or even if the merger proposal did not gain the
majority required in the general meeting of the merging company under section
320(c).
(b) The court shall not
confirm an application to approve a merger unless it is convinced that the
merger proposal is fair and reasonable, taking into account the estimation of
the value of the merging companies, and the consideration offered to the
shareholders.
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Confirmation by court
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322. Where a company receives a notice from the
Controller of Restrictive Business Practices, as defined in the Restrictive
Trade Practices Law, 5748-198810,
the company shall notify the Registrar, within three days of the date of receipt
of such notice, whether the notice may delay the effecting of the merger,
prevent it or remove such delay or prevention; where notice has been received by
the Registrar of Companies of a prevention or delay, the merger shall not be
effected so long as such prevention or delay has not been removed.
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Restrictive trade practices
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323. Where the Registrar of Companies has received
all the approvals required under this Chapter for merger from each of the
merging companies, and seventy days have passed since the date on which the
merger proposals were produced to the Registrar of Companies, the merger shall
be effected as follows:
(1) all the assets and
liabilities of the absorbed company, including conditional, future, known and
unknown obligations, shall be transferred to and vested in the surviving
company;
(2) the surviving company
shall be regarded as the absorbed company in respect of any legal proceedings,
including execution proceedings;
(3) the Registrar shall
transfer the register of charges, as defined in section 181 of the Companies
Ordinance, of the absorbed company, to the register of charges of the surviving
company;
(4) the absorbed company
shall be liquidated and the Registrar shall strike it from the Register;
(5) the Registrar shall
provide the surviving company with a certificate evidencing the merger and shall
register the fact of the merger in the records of the surviving company.
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Consequences of merger
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324. The provisions of this Chapter shall not
preclude a company from undertaking by contract or undertaking in its articles
of association to refrain from the effecting mergers or making the effecting of
mergers conditional.
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Freedom to impose conditions
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325. A floating charge over all or some of the
assets of one merging company imposing a limitation on the right of the company
to create charges shall not have preference over a charge created in the other
merging company prior to the merger.
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Floating charge in merging company
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326. The Minister may prescribe provisions for
implementing this Chapter, including provisions in respect of details to be
included in the merger proposal and regarding the additional rights in respect
of information to be provided to creditors or to classes of creditors, and in
respect of the registration of transactions stemming from the merger; regarding
a public merging company, such provisions shall be prescribed after consultation
with the Securities Authority.
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Regulations regarding merger
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327. (a) A company that was incorporated prior to
the commencement of this Law shall be deemed to have included a provision in its
articles of association to the effect that the approval of a merger requires a
majority of three quarters of the persons present and voting at the general
meeting of the company, and the provisions of section 20 shall apply.
(b) Where floating
charges have been imposed, at least one of which was created prior to the
commencement of this Law, over the assets of a number of merging companies, such
that after the merger it will not be possible to distinguish between the assets
subject to each floating charge, the floating charges shall crystallize upon the
merger, unless the consent of the creditors whose rights are secured by such
charges is obtained for the amendment of the charges in such a way as to create
a distinction between the assets subject to each charge, or a division of the
consideration from realization of the assets subject to such charges.
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Transitional provisions concerning merger
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