Amalgamation

Section 206 of the Barbados Companies Act, Cap. 308 while not defining the word “amalgamation” provides that two or more companies, including holding and subsidiary companies, may amalgamate and continue as one company.

The following judicial attempt at a definition was adopted by Lord Justice Romer in the English case of Re Walker’s Settlement [1935] Ch. 567 @ 583. According to Lord Justice Romer, “the word “amalgamation” has no definite legal meaning. It contemplates a state of things under which two companies are so joined as to form a third entity, or one company is absorbed into or blended with another company.”

The statutory requirements and procedural rules governing the circumstances in which companies, including holding and subsidiary companies, may amalgamate and continue as one company are set out in sections 206 to 212 of the Barbados Companies Act, Cap. 308.

The Companies Act, Cap. 308 provides three (3) distinct procedures for effecting company amalgamations in Barbados. Briefly these may be classified as follows:

• “Long-form amalgamation” procedure (i.e. requiring the adoption of an Amalgamation Agreement by special resolution of shareholders under sections 207 and 208);
• “Vertical short-form amalgamation” procedure (i.e. amalgamation between a holding company and one or more of its subsidiaries under section 209); and
• “Horizontal short-form amalgamation” procedure (i.e. amalgamation between two or more wholly-owned subsidiaries of the same holding company under section 210).

Sections 207 and 208 of the Companies Act govern the procedures to be followed to effect a “long-form amalgamation” in Barbados. Essentially, there are two (2) main statutory pre-conditions to be met before Articles of Amalgamation for a “long-form amalgamation” can be filed with the Registrar. The pre-conditions are as follows:-

• Each amalgamating company must enter into an Amalgamation Agreement setting out the terms and means of effecting the amalgamation, and, in particular, setting out the minimum statutory particulars identified in section 207(1) of the Act; and
• The Amalgamation Agreement must be adopted by special resolution by a meeting of the shareholders of each of the amalgamating companies and by the holders of each class or series of shares of an amalgamating company who are entitled to vote on the amalgamation in accordance with section 208 of the Act.

1. The amalgamation must be approved by a resolution of the directors of each amalgamating company;
2. The resolutions must provide that the shares of all but one of the amalgamating subsidiary companies will be cancelled without repayment of capital in respect of the cancellation;
3. The resolutions must provide that the articles of amalgamation will be the same as the articles of incorporation of the amalgamating subsidiary company whose shares are not cancelled; and
4. The resolutions must provide that the stated capital of the amalgamating subsidiary companies whose shares are cancelled will be added to the stated capital of the amalgamating subsidiary company whose shares are not cancelled.

• Articles of Amalgamation in the prescribed form (Form 15) and completed in accordance with the statutory Instructions printed at the back of the form and issued therewith;
• Request for Name Search and Reservation Form (Form 33). If a proposed name is not reserved under section 415 of the Act, the Articles of Amalgamation must be accompanied by a statement setting out the main types of business to be carried on by the amalgamated company;
• Statutory Declaration by a director or officer of each amalgamating company establishing to the satisfaction of the Registrar the matters identified in section 211(2) of the Act;(See below)
• Notice of Directors (Form 9);
• Notice of Registered Office (Form 4);
• If the amalgamation is a “long-form amalgamation” effected under section 208 of the Act, the Articles of Amalgamation must be accompanied by a copy of the Amalgamation Agreement and a copy of the required special resolution of shareholders of each amalgamating company;
• If the amalgamation is a “vertical short-form amalgamation” or a “horizontal short-form amalgamation” effected under section 209 or 210, the Articles of Amalgamation must be accompanied by a copy of the required directors resolution of each amalgamating company.

Section 211(2) of the Companies Act, Cap. 308 requires that the statutory declaration to be attached to the Articles of Amalgamation should establish the following matters “to the satisfaction of the Registrar”:-

1. 1. that there are reasonable grounds for believing that each amalgamating company is, and the amalgamated company will be able to pay its liabilities as they become due; and
   2. that there are reasonable grounds for believing that the realisable value of the amalgamated company’s assets will not be less than the aggregate of its liabilities and the stated capital of all classes;and
   3. that there are reasonable grounds for believing that no creditor will be prejudiced by the amalgamation; or
   4. that there are reasonable grounds for believing that adequate notice has been given to all known creditors of the amalgamating companies, and no creditor objects to the amalgamation otherwise than on grounds that are frivolous or vexatious. In effect, section 211(1) of the Act prescribes what amounts to a “solvency test” which is fulfilled by the director/officer of each of the amalgamating companies laying out in his Statutory Declaration the factual basis of his belief that the amalgamating companies and the amalgamated company are solvent and will be able to pay its liabilities, and that the realisable value of the assets of the amalgamated company will not be less than the aggregate of its liabilities and the stated capital of all classes.

In practice, the “solvency test” is fulfilled by the director expressly asserting in the Statutory Declaration that he has reviewed the financial affairs of the company and has satisfied himself as to the company’s solvency.

The director will also annex to the Statutory Declaration, inter alia, certified copies of the balance sheet of each amalgamating company as well as the pro forma balance sheet of the amalgamated company.

(N.B. The specimen Statutory Declaration usually accepted in amalgamation matters may be obtained from the Registry on request.)

• the amalgamation of the amalgamating companies and their continuance as one company becomes effective;
• the property of each amalgamating company becomes the property of the amalgamated company;
• the amalgamated company becomes liable for the obligations of each amalgamating company;
• any existing cause of action, claim or liability to prosecution is unaffected;
• a civil, criminal or administrative action or proceeding pending by or against an amalgamating company may be continued by or against the amalgamated company;
• a conviction against, or ruling, order or judgment in favour of or against, an amalgamating company may be enforced by or against the amalgamated company;
• the articles of amalgamation are the articles of incorporation of the amalgamated company.

• Articles of Amalgamation (Form 15) incompletely filled-in;
• Where the amalgamation is effected under section 208 (“long-form amalgamation”), the Articles are not accompanied by a copy of the Amalgamation Agreement or a copy of the special resolution;
• The Amalgamation Agreement required in connection with a “long-form amalgamation” does not contain the minimum statutory particulars identified in section 207(1) of the Act;
• Where the amalgamation is effected under section 209 (“vertical short-form amalgamation”) or under section 210 (“horizontal short-form amalgamation”), the Articles are not accompanied by a copy of the required director’s resolution of each amalgamating company;
• The Statutory Declaration attached to the Articles does not contain sufficient factual information to fulfill the “solvency test” established by section 211(2) of the Act;
• Notice of Directors (Form 9) missing or not properly filled-in;
• Notice of Registered Office (Form 4) missing or not properly filled-in.