Simplified Merger by Acquisition

  Simplified Merger by Acquisition

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Malta is considered a reputable jurisdiction for Mergers and Acquisitions (hereinafter “M&A”) activity and has proved to be a highly attractive forum through which M&A transactions are structured.

The Process of Simplified Merger by Acquisition

The legislative framework for M&A activity in Malta, as is the case in many other jurisdictions, is composed of various laws and regulations that seek to regulate a number of aspects that may feature in M&A transactions which include both local and cross-border activities.

However, the principal legislation regulating Mergers and Acquisitions of companies in Malta is the Companies Act (Chapter 386 of the Laws of Malta) (hereinafter “Act”).

The Companies Act predominantly regulates the amalgamation of private and public limited companies. It provides for the amalgamation of companies in the form of a merger by the formation of a new company and a Merger by Acquisition of a company by another company.

It is important to note that a company may only be amalgamated with other companies and therefore it is not possible to have an amalgamation of a company with any other kind of commercial partnership. Throughout the course of this article, we shall mainly be delving into the operation of the amalgamation of two or more companies by means of a Merger by Acquisition.

Merger by Acquisition

A Merger by Acquisition refers to the process whereby the acquiring company acquires all the assets, liabilities and obligations of the company (or companies) being acquired. In turn the shareholders of the company being acquired become shareholders of the acquiring company and ultimately, the company being acquired will cease to exist.

The company being acquired can be dissolved without having to be wound up in accordance with the provisions of the Act and the dissolution will be deemed to take place as soon as the amalgamation becomes effective.

The amalgamation of companies becomes effective once the Registrar of Companies at the Malta Business Registry (hereinafter “Registrar”) has struck the name of the company being acquired off the register and issues a new certificate of registration reflecting the new merger for the acquiring company.

Prior to the Registrar striking off the acquired companies, there are a number of requirements which must be satisfied which shall be discussed hereunder.


The directors of the acquiring company and each of the companies being acquired are obliged to draw up the Draft Terms of Merger in writing which shall specify, inter alia, the status, name and registered office of the amalgamating companies, and the terms relating to the allotment of shares in the acquiring company.

The completed draft terms of the Merger are to be signed by at least one director and the company secretary of each of the amalgamating companies and subsequently forwarded to the Registrar who will register them provided that all the requirements are satisfied.

Moreover, a Merger by Acquisition must be approved by means of an extraordinary resolution of each of the amalgamating companies which resolution must be reached at least one month after and not later than three months from the publication of the Draft Terms of Merger.

The directors of each of the amalgamating companies are entrusted with the drawing up of a detailed written report explaining the Draft Terms of Merger and setting out the legal and economic grounds for them. The directors must also inform the general meeting of their company and the directors of the other amalgamating companies so that they may inform their respective general meetings, of any material change in the assets and liabilities between the date of preparation of the draft terms of the Merger and the date of the general meetings which are to decide on the Draft Terms of Merger.

Having said that, the obligation to draw up a report and to provide information as aforementioned, will not be required if all the shareholders and holders of other securities conferring the right to vote of each amalgamating company have so agreed.

A written report to the shareholders is to be drawn up by one or more experts (which shall be approved by the Registrar) acting on behalf of each of the amalgamating companies. The report shall specify whether the share exchange ratio is fair and reasonable and to this effect it shall:

  1. indicate the method or methods used to arrive at the share exchange ratio proposed; and
  2. state, whether such method or methods are adequate in the case in question, indicating the values, arrived at using each such method and giving an opinion on the relative importance attributed to such method or methods in arriving at the value decided on.

The report shall describe any special valuation difficulties which have arisen, and each expert shall be entitled to obtain from the amalgamating companies all relevant information and documents and to carry out all necessary investigations.

One or more independent experts may be appointed to draw up a joint report for all the amalgamating companies by the Registrar at the joint request of the companies involved. Once again, the above shall not apply if all the shareholders of all the companies involved in the amalgamation have so agreed.

Right to inspect documents

The shareholders of the amalgamating companies are entitled to inspect the following documents at the registered office of each company at least one month before the date fixed for the general meeting which is to decide on the Draft Terms of Merger:

  1. the Draft Terms of Merger;
  2. the annual accounts and the directors’ reports of the amalgamating companies for the preceding three accounting periods;
  3. where required, an accounting statement drawn up as at a date which shall not be earlier than the first day of the third month preceding the date of the draft terms of the merger, if the latest annual accounts relate to an accounting period which ended more than six months before that date;
  4. where required, the reports of the directors of the amalgamating companies relating to the amalgamation;
  5. where required, the reports of the experts relating to the amalgamation; and
  6. for the purposes of paragraph (c), an accounting statement shall not be required if the company publishes a half-yearly financial report in accordance with listing rules issued in terms of the Financial Markets Act and governing such reports, and makes it available to shareholders in accordance with this sub-article. Furthermore, an accounting statement shall not be required if all the shareholders and all holders of other securities conferring the right to vote of each of the companies involved in the Merger have so agreed.

Notwithstanding the above, interim depreciation and provisions as well as material changes in actual values not shown in the accounting records shall be taken into account.

Furthermore, the shareholders are entitled to obtain, on request and free of charge, full or partial copies (which may be provided in electronic form) of the documents mentioned above. A company will not be required to make the documents referred to above available at its registered office if it makes such available on its website for a continuous period beginning at least one month before the day fixed for the general meeting which is to decide on the Draft Terms of Merger and ending not earlier than the conclusion of that meeting.

Rights of Creditors

The amalgamation of two or more companies will not take effect until three months from the date of the last publication of the statement published in the Gazette or on a website maintained by the Registrar. During this period, any creditor of any of the amalgamating companies whose debt existed prior to the publication of the Draft Terms of Merger may, by sworn application, object to the amalgamation giving reasons as to why the amalgamation not take effect.

Key Contacts

Sacha J. Farrugia

Senior Manager - Corporate Services

Edward Meli

Business and Corporate Advisor



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