Merger provisions in the Companies Act (Act XXV, 1995) : a legal evaluation and comparative analysis

Abstract

Business strategists often say that it is cheaper to buy than to build a new business. This approach, together with the enabling climate in the local and global market place has encouraged many companies to explore the amalgamation venues as a means to win market share and increase revenue. In addition, as we approach the new millennium, and as technologies converge and business and home consumers increase their demands for truly integrated products and services, we are likely to see ever greater mergers and acquisitions in various industries. Even our domestic market is clearly experiencing certain industry consolidation through mergers and similar strategies, especially with the eventual accession of Malta within the European Union. In effect, local companies are striving to remain competitive in view of the changing circumstances, to maintain their market share and if possible have access to the larger European Market. The first chapter in this thesis deals with the subject of amalgamations from a general perspective, it analyses the options available in the context and the motivations behind such commercial transactions. This general analysis concludes with a brief examination of the beneficial or detrimental effects of amalgamation activity. The actual process of amalgamation and the mechanics involved in this process according the Maltese Companies Act 1995, are dealt with chapter two, starting from the pre-combination phase, moving on to the actual combination phase and the post combination phase. This Chapters incorporates also a detailed evaluation of the legal position in Malta on the matter. A brief analysis of the protection of shareholders and creditors afforded by the law is made therein. Chapter three deals with the comparative aspect of the subject, whereby the local position in the context is compared with that of other countries, namely those which form part of the European Union and with other countries which do not but which are members of other institutions namely the Commonwealth. Chapter four highlights the alternatives to amalgamations, which are available to those organisations wishing to form some kind of alliance with another organisation or organisations. A comparative analysis between amalgamation and such other equivalent measures is made therein. In conclusion, chapter five contains proposals submitted in view of the challenges, which lie ahead for the Maltese economy with the coming of the new millennium and the eventual accession of Malta within the European Union.