KEY TAKEAWAYS
- Guernsey's flexible corporate regime allows all types of Guernsey companies to amalgamate (including non-cellular companies, protected cell companies and incorporated cell companies)
- Amalgamations can also be carried out with overseas companies, provided this is permitted by the laws of the overseas territory
- This guide sets out the requirements to effect an amalgamation
The Companies (Guernsey) Law, 2008, as amended (the "Law") provides a modern, simple and flexible amalgamation regime for two or more bodies corporate to amalgamate and continue as one body corporate, whilst also protecting shareholder and creditor interests.
An amalgamation results in two or more bodies corporate combining to become a single amalgamated body corporate, with all the assets and liabilities of the amalgamating bodies corporate becoming the assets and liabilities of the single amalgamated body corporate on completion of the amalgamation. This can make amalgamations an attractive option when structuring deals – and amalgamations are often used as alternatives to conventional company acquisitions, takeovers or schemes of arrangement.
Which entities (bodies corporate) may amalgamate?
The Law provides that two or more bodies corporate are capable of amalgamation. A body corporate means a Guernsey company or an overseas company. At least one of the amalgamating bodies corporate must be a Guernsey company.
A Guernsey company includes:
- a non-cellular company;
- a protected cell company;
- an incorporated cell company; and
- an incorporated cell of the same incorporated cell company.
An overseas company means a body of persons registered or incorporated under the law of any district, territory or place outside Guernsey. Importantly, for an overseas company to be amalgamated with a Guernsey company, the overseas company must be permitted to amalgamate under the local laws to which it is subject.
The surviving amalgamated body corporate
The amalgamation process will result in a single remaining entity, which can either be one of the amalgamating bodies corporate that continues in existence as the single entity on completion of the amalgamation or, if all of the amalgamating bodies corporate cease to exist, a new body corporate created as part of the amalgamation.
The amalgamation process
The process for approving and effecting an amalgamation generally involves (amongst other things):
- preparing an amalgamation proposal setting out the terms of the amalgamation;
- obtaining board and shareholder consent;
- giving statements as to the amalgamating bodies corporate's solvency; and
- the giving of notice to creditors.
Where the amalgamation is between a body corporate and its
wholly owned subsidiary, a short form amalgamation procedure may be
used if certain requirements are met. Where the short form
amalgamation procedure is available, there is no requirement to
prepare an amalgamation proposal.
In summary, the process includes the following steps, prior to
submission of an amalgamation application:
- unless the short form amalgamation procedure is available, the amalgamating bodies corporate prepare an amalgamation proposal in compliance with the Law setting out, among other things, the terms of the amalgamation and details of the proposed amalgamated body corporate, including the name, registered office, directors and share capital;
- the directors of each amalgamating company must approve the amalgamation and confirm that:
- in their opinion, the amalgamation is in the best interests of the relevant body corporate; and
- they are satisfied on reasonable grounds that the amalgamated body corporate will, immediately after the amalgamation becomes effective, satisfy the solvency test (being that the amalgamated body corporate will be able to meet its debts as they become due and that the value of its assets will be greater than the value of its liabilities);
- the directors must sign a certificate confirming the conditions above are met, and setting out the grounds for that opinion;
- the amalgamation proposal must be approved by a special resolution of the shareholders of each amalgamating company; and
- written notice of the intention to amalgamate must be sent to every member and creditor of each body corporate, not less than 28 days before the amalgamation is proposed to occur.
Are any regulatory approvals required to complete the amalgamation?
Amalgamations of bodies corporate under the Law requires a joint
application by the amalgamating bodies corporate to the Guernsey
Registrar of Companies.
Amalgamations involving overseas companies must also be approved by
the Guernsey Financial Services Commission (the
"GFSC"), who will have particular regard
to the interests of any creditors, the public and the reputation of
Guernsey, including matters such as countering financial
crime.
In addition, consent of the GFSC is required where any of the
amalgamating bodies corporate is a supervised company, a protected
cell company, an incorporated cell company or an incorporated
cell.
Completion and effect of amalgamation
On the completion of an amalgamation, as a matter of Guernsey law:
- the amalgamating bodies corporate are amalgamated and continue as one amalgamated body corporate (being one of the amalgamating bodies corporate or a new body corporate); and
- any amalgamating Guernsey body corporate that is not a survivor body will be removed from the Register of Companies.
All assets and liabilities of each amalgamating body corporate transfer to the amalgamated body corporate so that:
- all property and rights to which the amalgamating bodies corporate were entitled immediately before the amalgamation become the property and rights of the amalgamated body corporate;
- the amalgamated body corporate is subject to all criminal and civil liabilities, and all contracts, debts and other obligations, to which the amalgamating bodies were subject immediately before the amalgamation;
- all actions and other legal proceedings which could have been instituted or continued by or against the amalgamating bodies corporate may be instituted or continued by or against the amalgamated body; and
- a conviction, ruling, order or judgment in favour of or against the amalgamating bodies corporate may be enforced by or against the amalgamated body corporate.
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.
