Jersey: Merger Of Companies In Jersey

Last Updated: 11 February 2009
Article by Raulin Amy

Most Read Contributor in Jersey, September 2016

Mergers in General

The Companies (Jersey) Law 1991 (the "Law") permits two or more companies incorporated in Jersey to merge and continue as one company if none of them have unlimited shares or guarantor members. Currently, foreign companies cannot merge with Jersey companies although there are proposals to change the Law to permit this at some point in the future.

Following the completion of a merger:

(a) the merging companies are merged and continue as one merged company;

(b) all rights and property of each merging company before the merger will become those of the merged company;

(c) the merged company will become subject to all criminal and civil liabilities, contracts, debts and obligations of each merged company;

(d) all actions and other legal proceedings which were pending against each merged company continue; and

(e) each merged company, save for the continuing company in the case of a related merger, ceases to be incorporated.

Related Matters

Related mergers are those between:-

(a) a holding company and one or more of its wholly owned subsidiaries; or

(b) two or more wholly owned subsidiaries of the same holding company.

All other mergers are deemed to be unrelated.

Unrelated Mergers

An unrelated merger requires a special resolution to be passed by the members of each company and each class of members approving a merger agreement (a "Merger Agreement") to be entered into by each merging company. The members must be informed that they may object to the merger within 30 days of the passing of the special resolution approving the Merger Agreement. Objection is by application to the Court for an order on the ground that the merger would unfairly prejudice that member's interests.

The Merger Agreement need not be very detailed or protracted. However, it must include: (a) the proposed Memorandum and Articles of Association of the merged company;

(b) the details of proposed directors of the merged company;

(c) the manner in which the securities of each merging company will be converted into securities of the new merged company;

(d) if any securities of a merging company are not to be converted into securities of the merged company, what the holders will receive instead and in which manner and at what time they will receive it; and

(e) details of how the merger will be completed and how the merged company will be managed.

Approval of Related Mergers

The merger of related companies does not require a Merger Agreement but still requires the approval of the merger by special resolution passed by the members and each class of members of each company. In the case of a vertical merger (i.e. parent and subsidiary):

(a) the shares of each merging subsidiary shall be cancelled without any repayment of capital;

(b) the memorandum and articles of association of the holding company will be adopted unless otherwise agreed by special resolution passed by each merging company; and

(c) no securities shall be issued and no assets distributed by the merged company in connection with the merger.

With a vertical merger the parent is always the surviving entity and will continue with its existing company number. In the case of a horizontal merger (i.e. sister companies):

(a) the shares of all merging companies, except the surviving company, shall be cancelled without any repayment of capital;

(b) the memorandum and articles of association of the surviving company will be adopted unless otherwise agreed by special resolution passed by each merging company; and

(c) the issued share capital of the non-continuing companies shall be added to that of the surviving company.

With a horizontal merger the companies may elect which company will be the surviving entity and the elected merged company shall continue as the surviving entity with the same company number.

Notice to Creditors

Each merging company must give written notice within 28 days after a merger has been approved by the members of each merging company to all creditors with claims exceeding £5,000. The notice must inform the creditor of its right to object to the merger within 30 days of the date of the advertisement published in a newspaper circulating in Jersey.

Following the expiration of 30 day notice period the merging companies must make an application to merge and deliver to the Jersey Registrar of Companies which includes:

(a) a copy of the Merger Agreement;

(b) a copy of the Memorandum and Articles of Association of the merged company; and

(c) a statement signed by each director of each merging company and confirming: the solvency of the merging company; that there are no creditors of that merging company whose interests will be unfairly prejudiced by the merger; and that notice has been given to the creditors of the merging company.

Completion and effect of Merger

On delivery and registration of all documents required for a merger pursuant to the Law, the Jersey Register of Companies will issue a certificate of incorporation on merger. When the certificate has been issued the merger will be complete and the merged company will be in existence in its merged form.

In respect of an unrelated merger a certificate of incorporation bearing a new company number, not previously allocated to either or any of the merging companies, will be issued and a new company will be deemed to have been incorporated.

Schemes of Arrangement

In addition to the merger provisions referred to above the Law also contains almost identical provisions to those in the United Kingdom under the Companies Act 2006 which permit schemes of arrangement to be entered into by members of a company or its creditors.

Such schemes of arrangement can also be used to merge two or more companies although it is unlikely that a scheme would be used in such a way given the relative ease of using the other specific merger provisions under the Law.

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.

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