Jonathan Heaney
Managing Partner
Jersey
KEY TAKEAWAYS
Put simply, a merger results in two or more merging entities combining to become a single merged entity, with all the assets and liabilities of the merging entities becoming the assets and liabilities of the single merged entity on completion of the merger. This can make mergers an attractive option when structuring deals and mergers are often used as alternatives to conventional company acquisitions, takeovers or schemes of arrangement
The Law provides that all "relevant Jersey companies" are capable of mergers. Broadly speaking, this includes all Jersey incorporated companies which are not:
Relevant Jersey companies may merge with one or more:
The merger process will result in a single remaining entity, which can either be (a) a "survivor body" if one of the merging entities subsumes all the others and continues in existence as the single merged entity on completion of the merger; or (b) a "new body" if all of the merging entities cease to exist and a new entity is created by the merger.
The single remaining merged entity can either be (a) a Jersey entity; or (b) in the case of a cross-border merger, an overseas entity incorporated in the same jurisdiction as one of the merging entities.
The process for approving and effecting a merger generally involves (amongst other things) obtaining board and shareholder consent, giving statements as to the merging entities' solvency, in most cases the approval of a merger agreement and the giving of notice to creditors.
In summary, the process includes the following steps, prior to submission of a merger application:
The directors who authorise the merger must make a statement (a "Solvency Statement") that they have formed the opinion that:
until the first to occur of the expiry of the period of 12 months immediately following the date of the merger, or the company is wound up on a solvent basis.
A director who makes a Solvency Statement without having reasonable grounds for the opinion expressed in it is guilty of an offence and, upon conviction, is liable to a fine, imprisonment for up to two years or both.
If any of the merging entities are insolvent, Royal Court approval is required in order to protect the interests of any creditors of the merging entities.
Mergers between Jersey companies involve a joint application by the merging companies to the Jersey Registrar of Companies.
Cross-border mergers or mergers involving any bodies other than Jersey companies must also be approved by the Jersey Financial Services Commission (the "JFSC"), who will have particular regard to the interests of any creditors, the public and the reputation of Jersey.
In considering a cross-border merger application, the JFSC will require (amongst other things) evidence that:
On the completion of a merger, as a matter of Jersey law:
Where the merged body is incorporated in Jersey, all assets and liabilities of each merging body transfer to the merged body so that:
Where the merged body is an overseas body, the JFSC, in granting approval of the merger, will have been satisfied that the relevant jurisdiction's laws will provide for an equivalent result.
Key Contacts
Managing Partner
Jersey
Partner, Walkers (CI) LP
Jersey