M&A (Public & Private)
Mergers and Acquisitions (‘M&As’) are broadly regulated by the Maltese Companies Act (Chapter 386 of the Laws of Malta). The process for M&As generally differs for public listed companies and for private limited liability companies or public non-listed companies. There are also specific types of companies which have particular legislation governing them. Therefore, for example, SICAVs are governed by the Companies Act (SICAV Incorporated Cell Companies) Regulations (S.L. 386.14 of the Laws of Malta) and thus such legislation must also be taken into consideration when an M&A in this regard is taking place. The Investment Services Act (UCITS Mergers) Regulations (S.L. 370.19 of the Laws of Malta) regulate mergers for UCITS (Undertakings for Collective Investment in Transferable Securities) specifically. Similarly, M&As within certain fields, such as in gaming or financial services, further require regulatory clearance from their relevant regulatory authority or licensing authority and this is also an important point to take into consideration when contemplating an M&A. Therefore, it is important to note from the beginning that some M&As within specific fields require regulatory authorization in order to conclude the procedure and this usually takes a significant period of time which might need to be factored in.
Acquisitions in the case of private companies or public non-listed companies broadly occur by way of a purchase of shares via a share purchase agreement or by an asset acquisition. There may also be an amalgamation under a process which is governed by the Companies Act (Chapter 386 of the Laws of Malta). It states that there are two main manners in which a merger may take place and these are the merger by acquisition and the merger by the formation of a new company.
In the case of a merger by acquisition, the merging companies draft the terms of the merger which shall include all the relevant details and must be approved by the Registrar of Companies before being registered. A merger by acquisition may only be made by an extraordinary resolution of each amalgamating company. In order for such merger to take place, the law provides that an expert report regarding the potential merger must be prepared for all the shareholders. Therefore, an approved independent expert shall inspect the draft terms and provide his opinion on such terms which would include the share exchange ratio’s reasonableness and any special valuation difficulties which may have been encountered. Special rules apply in the case of acquisition of a company by another of more than 90% of its shares. Some obligations such as approval in a general meeting may not be required in the case of acquisition of all shares. Additionally, in the case of an acquisition of 90% or more (but less than 100%) of the voting shares of a company, the dissenting minority shareholders of the company being acquired have the rights to have their shares purchased by the acquiring company for a consideration corresponding to the fair value of the shares. In the case of a merger by formation of a new company, the terms of the merger are drafted and drawn up by each of the merging company and then the memorandum and articles of association of the newly formed company is registered with the authority.
Generally an M&A for a private company by way of a transfer of shares by private agreement takes less time to conclude since it is completely based on private negotiation between the parties involved. In the case of an amalgamation under the Companies Act (Chapter 386 of the Laws of Malta), there are certain timeframes which must be respected. As an example, the law states that an amalgamation in this regard, whether by acquisition or the formation of a new company, may not take effect until three months after the date of publication of a notice in the Government Gazette and a Maltese newspaper. In this time period, any creditor of each of the companies may come forward and oppose the amalgamation.
Acquisition for a public listed company generally takes place by way of a takeover offer or by a takeover bid which may be mandatory or voluntary. These bids are in actual fact public offers made to the shareholders of a public listed company to acquire all or some of its securities in order to achieve the acquisition of control of that company. These types of acquisitions are significantly regulated under our law by way of EU regulations
and directives which protect the company and the shareholders, including the minority shareholders of such companies throughout the acquisition process. Malta also has Listing Rules which provide further guidelines. A merger may also take place for public listed companies and this is heavily regulated.
The Listing Rules stipulate several steps which must take place within certain timeframes and which must be respected. As an example, the bidder has twenty-one days to make public his offer document following the announcement of the bid. The offer document must present a certain level of information which is disclosed publicly and also includes an independent expert report on the consideration being offered.