Mergers & Acquisitions

There are numerous ways in which a company may be restructured. These include merging, acquiring and dividing a company. Their effects generally result in the transfer of a company’s assets, rights, liabilities and obligations as may be required for business purposes.

Under Maltese law the amalgamation of two or more companies, merger, may occur in two ways, either by merger by acquisition or merger by formation of a new company.

In a merger by acquisition, the acquiring company steps into the shoes of the acquired company or companies and acquires all the assets, rights, 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, following which the company being acquired ceases to exist.

In a merger by formation of a new company two or more companies merge to create a new company. This new company will hold all the assets, rights, liabilities and obligations of the merging companies.

It is also possible to divide a company into two or more separate companies. Under Maltese law, the options for the division of companies are threefold: division by acquisition, division by the formation of new companies or a combination of both these options.

In a division by acquisition, the company to be divided delivers to two or more existing companies all its assets and liabilities in exchange for the allocation of shares of the recipient companies to the shareholders of the divided company.

In a division by the formation of new companies, two or more companies are formed for the purpose of taking part in the division. These new companies will hold all the assets, rights, liabilities and obligations of the dividing company.

When dividing a company by a combination of both scenarios, the assets, rights, liabilities and obligations of the dividing company may be transferred to already existing companies and to companies which are newly formed for the purpose of the division.

Legal Notices 26, 27 and 28 of 2023 transposed into Maltese Law Directive (EU) 2019/2121, amending Directive (EU) 2017/1132 in relation to cross-border conversions, mergers and divisions. This Directive provides a harmonised process across the EU for the cross-border division and conversion of companies, while amending the regime relating to cross-border mergers. However, Malta went a step further by widening the Directive’s scope and applying it to third-countries as long as cross-border operations are allowed under their legislative framework.

Cross-border merger procedures are similar to local mergers. However, it is now possible for Maltese companies to merge with companies located in third-country jurisdictions. While it is also possible to have a merger by acquisition and a merger by the formation of new companies as under the local regime, the cross-border regime introduces the possibility of merging a company with its parent company and the merging of companies which have the same members.

When a company merges with its parent company, the merging company would transfer all its assets and liabilities to the company holding all the shares representing its capital.

In the merger of companies under the same ownership, one or more companies would transfer all their assets and liabilities to the acquiring company, without issuing any new shares so long as one person holds directly or indirectly all the shares in the merging companies or the members of the merging companies hold their shares in the same proportion in all merging companies.

Contrary to local divisions, the regulation specifies that recipient companies must be newly formed in the course of a cross-border division – already existing companies may not be considered as recipient companies under the new regime. In addition, it is also possible for the dividing company to continue to exist following the division, which can be either a full division, partial division, or division by separation.

Under a full division, a company being divided transfers all its assets and liabilities to two or more recipient companies in exchange for the allocation of shares of the recipient companies to the shareholders of the divided company.

Through a partial division, the dividing company transfers part of its assets and liabilities to one or more recipient companies in exchange for the issuance of shares to the members of the company being divided in the recipient companies, in the company being divided or in both the recipient companies and the company being divided.

A division by separation results in the company being divided transferring part of its assets and liabilities to one or more recipient companies in exchange for the allocation of shares in the recipient companies to the company being divided.

A cross-border conversion is defined as an operation whereby a company converts its legal form under the departure jurisdiction into a legal form of the destination jurisdiction, and transfers at least its registered office to the destination jurisdiction, while retaining its legal personality.

While the effects of this conversion are similar to the re-domiciliation process of companies under the Continuation of Companies Regulations, the aim of the Directive is to facilitate cross-border movement of companies. By having both, the transposition of the Directive providing for cross-border conversion and the Continuation of Companies Regulations, companies are provided with several options to re-domiciliate and move in or out from Malta.

Gonzi & Associates, Advocates can assist you with all your corporate re-structuring needs, aiding sellers, buyers and any other parties involved in acquisition transactions, whether its assistance at the negotiations stage, up to the drafting and finalisation of the transaction. We provide advice and counsel when assisting in such transactions, even ones which may be complex in nature.

Having vast experience in the field of corporate law, we can also assist in additional matters which are ancillary to these transactions, including advising on any regulatory and financial requirements, governance, structuring and any other corporate matter or matters linked with other legal fields such as financial, litigation and tax as may be required.