Division of companies

Abstract

In Malta, the Commercial Partnerships Ordinance did not regulate the concept of division of companies. Only the amalgamation of companies (commercial partnerships) was regulated. When the Companies Act, 1995 was in draft form, the provisions for the division of companies were introduced. These were based on the EU Sixth Council Directive that regulated the divisions of public companies. Unlike the Directive, our Act also provides for the division of private limited liability companies. Neither the EU Sixth Council Directive nor our Companies Act give a direct definition of division of companies. All they do is give the method of how a company may be divided. One could say that division of companies is the splitting-up of a company and the transfer of its assets and liabilities to more than one recipient company whether previously existing or newly formed, in consideration of the allotment of shares in the recipient companies to the shareholders of the company being divided. Division of a company may be effected either by acquisition, by the formation of new companies or by a combination of both. In the division of companies, whether by acquisition or by the formation of new companies, there are three distinct stages that should be followed, these are: 1. the preliminary acts comprising the draft terms of division, the directors' and experts' reports and the financial position of the companies involved in the division; 2. the approval of the draft terms of division and consequently the division itself by the members of the companies involved in the division; and 3. the drawing up of the instrument of division. Through a detailed examination of the provisions regulating division of companies, one might conclude that a couple of Articles require further consideration and might need to be reviewed.