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Requirements for Mergers and Amalgamations
The Companies Act, 71 of 2008 (“the Companies Act “), has brought a significant change in the manner South Africa implements and perfects mergers and amalgamations. With a complete paradigm shift, it aligned South Africa with international best practices and the statutory merger provisions adopted a U.S. style approach in relation to the requirements and procedures. This article takes a look at the requirements as set out in section 113 read with section 115 of the Companies Act.
MERGERS AND AMALGAMATIONS DEFINED
Any two or more companies (including holding and subsidiary companies) may, subject to satisfying the solvency and liquidity test, merge by entering into a transaction which results in either:
- the formation of one or more new companies which together hold all of the assets and liabilities that were previously held by the merging companies immediately prior to the implementation of the merger, and the dissolution of each of the merging companies; or
- the survival of one or more merging company/ies, with or without the formation of one or more new companies, which acquire all of the assets and liabilities previously held by the merging companies immediately prior to the implementation of the merger.
REQUIREMENTS FOR A MERGER
The requirements for a merger by a company with any other company are the following:
- Merger agreement: the terms and means of effecting the merger, and certain other prescribed matters, must be set out in a written agreement between the merging companies;
- Solvency and liquidity test: the board of directors of each merging company must reasonably believe that each merged entity will satisfy the solvency and liquidity test upon implementation of the merger;
- Requisite approvals of the merger: the merger need be approved by special resolution of the shareholders of each merging company, may require TRP approval as well Competition Commission approval (if required).
- Notice to creditors: Once all requisite approvals have been obtained each merging company need to provide written notice of the merger to all known creditors.
- Implementation of the merger: the fifth and last step is the implementation or ‘perfection of the merger. In order to do this, a notice of merger must be filed with the Companies and Intellectual Property Commission. In the event that that the offering company is a regulated company as stipulated in section 117 of the Act, the Takeover Regulation Panel must be requested to provide a ruling on whether an independent expert need to be appointed.
Contact O’Reilly Law for more information on Mergers and Amalgamations requirements.
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