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.

According to Lord Justice Romer in Re Walker’s Settlement [1935] Ch. 567 @ 583: “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 distinct procedures for effecting company amalgamations in Barbados:

• Long-form amalgamation — requiring the adoption of an Amalgamation Agreement by special resolution of shareholders under sections 207 and 208
• Vertical short-form amalgamation — amalgamation between a holding company and one or more of its subsidiaries under section 209
• Horizontal short-form amalgamation — 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 long-form amalgamation. There are two main statutory pre-conditions:

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

Section 209 of the Companies Act governs vertical short-form amalgamation. There are four main statutory pre-conditions:

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 each amalgamating subsidiary company will be cancelled without repayment of capital
3. The resolutions must provide that the articles of amalgamation will be the same as the articles of incorporation of the amalgamating holding company
4. The resolutions must provide that no shares or debentures will be issued by the amalgamated company in connection with the amalgamation

Section 210 of the Companies Act governs horizontal short-form amalgamation. There are four main statutory pre-conditions:

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
3. The resolutions must provide that the articles of amalgamation will be the same as the articles of incorporation of the subsidiary company whose shares are not cancelled
4. The resolutions must provide that the stated capital of the cancelled subsidiaries will be added to the stated capital of the subsidiary whose shares are not cancelled

Following the adoption of an amalgamation, the following documents must be sent to the Registrar in duplicate together with the prescribed fee:

• Articles of Amalgamation in the prescribed form (Form 15)
• Request for Name Search and Reservation Form (Form 33)
• Statutory Declaration by a director or officer of each amalgamating company
• Notice of Directors (Form 9)
• Notice of Registered Office (Form 4)
• For long-form amalgamations: a copy of the Amalgamation Agreement and a copy of the required special resolution of shareholders
• For short-form amalgamations: a copy of the required directors’ resolution of each amalgamating company

Section 211(2) requires the statutory declaration to establish the following matters to the satisfaction of the Registrar:

1. That there are reasonable grounds for believing each amalgamating company is, and the amalgamated company will be, able to pay its liabilities as they become due
2. That the realisable value of the amalgamated company’s assets will not be less than the aggregate of its liabilities and stated capital
3. That no creditor will be prejudiced by the amalgamation; or
4. That adequate notice has been given to all known creditors, and no creditor objects on grounds that are not frivolous or vexatious

In practice, the director expressly asserts solvency in the Statutory Declaration and annexes certified copies of balance sheets of each amalgamating company and the pro forma balance sheet of the amalgamated company.

On the date shown in the certificate of amalgamation issued by the Registrar:

• The amalgamation becomes effective and the companies continue as one
• 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
• Pending civil, criminal or administrative proceedings may be continued by or against the amalgamated company
• Convictions, rulings, orders or judgments may be enforced by or against the amalgamated company
• The articles of amalgamation become the articles of incorporation of the amalgamated company

The following are frequent filing defects noted by the Corporate Registry:

• Articles of Amalgamation (Form 15) incompletely filled in
• Long-form amalgamations not accompanied by a copy of the Amalgamation Agreement or special resolution
• The Amalgamation Agreement does not contain the minimum statutory particulars from section 207(1)
• Short-form amalgamations not accompanied by the required directors’ resolution
• The Statutory Declaration does not contain sufficient factual information to fulfil the “solvency test”
• Notice of Directors (Form 9) missing or improperly completed
• Notice of Registered Office (Form 4) missing or improperly completed