Mergers & Acquisitions

Mergers & Acquisitions

Business combinations may be structured in a variety of ways under Maltese law, but the most common are the following:

  • transfer of shares;
  • subscription to a new issue of shares;
  • merger by acquisition;
  • merger by formation of a new company;
  • joint venture agreements; and
  • transfer of property upon the incorporation of a business.

In a merger by acquisition, the acquiring company succeeds to all the assets, rights, liabilities and obligations of the company being acquired, even with regard to third parties. In turn the shareholders of the company being acquired become shareholders of the acquiring company, following which the company being acquired ceases to exist.

The nature of a merger by formation of a new company is similar to a merger by acquisition, with the main difference being that two or more companies merge to create a new company altogether which will hold all the assets, rights, liabilities and obligations of the merging companies.

The consideration for a takeover bid may consist in securities, cash or a combination of both, but in all cases, a cash consideration must be offered. A bid must only be announced after the offeror ensures that he can fulfil in full any cash consideration and after taking all reasonable measures to secure the implementation of any type of consideration.

The Control of Concentrations Regulations (CCRs) regulate the concept of a ‘concentration’ under Maltese law. This refers to mergers and acquisitions, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more undertakings, whether occurring in Malta or outside Malta.

Concentrations must be notified to the DG prior to their implementation and following the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest, within 15 working days.

Notification is to be effected by the person or undertaking acquiring control of the whole or parts of one or more undertakings. Thus, in the case of the acquisition of a controlling interest in one undertaking by another, the acquirer must complete the notification; in the case of a public bid to acquire an undertaking, the bidder must complete the notification. However, where the concentration consists of a merger or the acquisition of joint control, the notification is to be made jointly by the parties to the merger or by those acquiring joint control as the case may be.

Following the submission of all the required information, the DG has to take a decision regarding the applicability of the CCRs to a concentration within six weeks. Where he or she finds that the notified concentration falls within the scope of the CCRs, he or she will initiate proceedings. If, following modifications, the DG finds that the concentration does not infringe the CCRs, the DG shall issue a decision declaring such concentration to be lawful. Where the DG finds that a concentration raises serious doubts as to its lawfulness in terms of the CCRs and decides to initiate proceedings, he or she shall, save in the case of modifications, issue a decision declaring that the concentration is unlawful within not more than four months from the date on which proceedings were initiated. In cases of concentrations deemed not to raise serious doubts as to their legality in terms of the CCRs and falling within the ambit of the simplified procedure, the DG shall issue a short form decision to that effect within four weeks of notification.