Expansion Of The Cayman Islands Companies Law - Mergers And Consolidations

Introduction

New provisions of the Cayman Islands Companies Law (2007

Revision) (the "Law") to regulate the

merger and consolidation of companies have recently been approved

by the legislature. It is anticipated that the Companies

(Amendment) Law, 2009 (the "Amendment")

will come into effect around the end of April 2009. The new

provisions are a welcome enhancement to the Law.

Overview

The Amendment introduces a new Part XVA of the Law which allows

for the merger and consolidation of companies.

A "merger" involves the merging of two or more

constituent companies whereby one of such companies is the

surviving company. A "consolidation" involves the

combination of two or more constituent companies into a

consolidated company. In each case, the property and liabilities of

the constituent companies will be vested in the surviving or

consolidated company.

The new merger and consolidation provisions will sit alongside

the existing scheme of arrangement provisions in Sections 86 and 87

of the Law. The new provisions will offer a quicker, less onerous

system of achieving a merger or consolidation than is possible by

way of a scheme of arrangement. The scheme of arrangement mechanism

which requires (amongst other things) court approval will remain

relevant for more complicated combinations where the surviving

company is to be a foreign corporation.

Who can merge/consolidate?

Any two or more Cayman Islands companies limited by shares

(other than segregated portfolio companies) may merge or

consolidate in accordance with the Amendment.

The Amendment also allows one or more Cayman Islands companies

to merge or consolidate with one or more foreign companies

(provided that the laws of the foreign jurisdiction permit such

merger or consolidation), where the surviving or consolidated

company will be a Cayman Islands company.

What is the procedure for a merger/consolidation?

Step 1: Approve the plan of merger or

consolidation

The first step is for the directors of each constituent company

to approve a written plan of merger or consolidation (a

"Plan"). The Amendment specifies the

required content of the Plan, which includes (i) the terms and

conditions of the proposed merger or consolidation, including the

rights and restrictions to be attached to the shares issued in the

consolidated or surviving company, (ii) details of the memorandum

and articles of association of the surviving or consolidated

company, (iii) any amount or benefit paid or payable to the

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