Whatever form of amalgamation you choose, there are some things you need to prepare or find out about before you apply.
Preparations before amalgamation
No matter what form of amalgamation you choose, you need to consider how the amalgamation will affect company operations and your stakeholders. The decisions you make help you get ready to apply to us for an amalgamation.
1. Check that the amalgamated company will be solvent
The directors of each company must certify that the amalgamated company will be solvent when the amalgamation comes into effect. This is called 'satisfying the solvency test'.
A company is solvent if:
- it will be able to pay its debts when they're due, and
- the value of its assets will be greater than the value of its liabilities — including contingent liabilities.
If the amalgamated company will be able to satisfy the 'solvency test', the directors of each company sign a certificate confirming this and giving the reasons for their opinion.
The minimum grounds are listed in Section 4(3) of the Companies Act 1993.
- The directors have reviewed the most recent financial statements of each amalgamating company and the accounting records of their company.
- There are no other circumstances that the directors know or ought to know that would or may affect the value of the amalgamated company's assets or the value of its liabilities, including contingent liabilities.
2. Consider the effect on creditors
An amalgamation will have a positive effect on some creditors and a negative effect on others. For example, if the liabilities of the amalgamated company will be greater than the company they have a claim against, creditors can be at greater risk of not being paid.
Before the companies amalgamate, the board of each company must notify all secured creditors about the proposed amalgamation.
The board of the intended amalgamated company must certify that the amalgamation will not prejudice creditors — that is, not put payment to them at risk.
3. Get the agreement of shareholders
For long-form amalgamations you need to tell shareholders about your plans and get their approval by special resolution.
4. Choose an effective date for amalgamating — optional
If the amalgamation is going to happen on a particular date, you can specify this date in:
- your amalgamation proposal, if you've chosen a long-form amalgamation
- resolutions of the boards of each company, for a short-form amalgamation — sometimes this is the same as the date that you sign the resolutions, but to be effective, you must file your amalgamation that day and it must be a working day.
The date you file your amalgamation documents with us will be the effective date if you:
- don't specify a date
- file your documents late — that is, after the date you've specified.
5. Decide who the directors will be
As part of your application, you must provide details of each director of the proposed amalgamated company. They must also give their consent and certify that they're not disqualified from being a director.
Include the name of the amalgamated company and, for each director, their:
- full legal name
- date and place of birth — the town or city, and the country.
Each director must complete and sign Form 13 which includes:
- their consent to being a director — even if they're continuing in the role
- confirmation that they aren't disqualified from being a director
- the name and postal address of the person presenting the amalgamation documents to the Companies Office.
6. Reserve the name if it's changing
You can change the name of the amalgamated company as part of the amalgamation.
If you're giving the company a new name
Before confirming the new name, you need to check it's available and reserve it. Include the name reservation notice as a supporting document when you file your amalgamation with us.Reserve a company name
If you're keeping an existing name
If you want to use the name of one of the companies that will be removed when the companies amalgamate, you can't reserve the name online. Instead, complete Form 4 and include this as a supporting document when you file your amalgamation. We'll reserve the name for you and apply it to the amalgamated company when we register your amalgamation.
If you're incorporating a new company as the amalgamated company
Very few amalgamations result in a new company becoming the amalgamated company, so contact us if you plan to do this. We can advise you about the documents you need and help you co-ordinate the registration of the amalgamation with incorporating the new company.
7. Cancel or allocate shares in the amalgamating companies
How you manage existing shares depends on whether you're doing a short-form or long-form amalgamation.
Short-form amalgamations — cancelling shares
How shares are managed in a short-form amalgamation is defined under Section 222 of the Companies Act 1993.
Under Section 222(1), the shares in subsidiary companies that will be removed from the register are cancelled without any compensation to the shareholders.
Under Section 222(2), any of the amalgamating companies can become the amalgamated company. In this case the companies can decide which shares continue in the future. This includes shares that shareholders currently have in the company or shares in another of the amalgamating companies. Any other shares are cancelled without any compensation to the shareholders.
Long-form amalgamations — future share structure
In a long-form amalgamation, the amalgamation proposal details how shares will be structured in the new company.
You need to decide:
- what the final shareholding will be
- the compensation shareholders of the companies that will be removed from the Companies Register will receive — often money or shares
- what formula you'll use to allocate the shares, if shareholders are to receive shares in the amalgamated company.
If the total number of shares is going to be the same but with different allocations, your board needs to write up your company's share register. You also need to notify us of the allocations:
- by using our online service at any time, or
- in your next annual return.
If the total number of shares will increase due to the amalgamation, the board of the intended amalgamated company must update the shareholding and notify us as you would for other share issues.
If the total number of shares is going to be reduced, then we'll update the shareholding information on the Companies Register. Your board is responsible for updating your company's share register.
Under the Act any cross-shareholdings — that is, shares an amalgamating company holds in another amalgamating company — must be cancelled on amalgamation.
8. Decide what to do about registered assets
If any of the amalgamating companies has registered property — for example land, vehicles, ships or shares in another company — then you need to decide what happens to that property as a result of the amalgamation. There are 3 ways to manage this.
- Do nothing for the time being.
- Record the amalgamated company as the owner of the asset when you need to file a document with the appropriate registrar.
- Prepare a certificate from the board of the amalgamated company that confirms the assets or interests now belong to the amalgamated company, and asks that they be put into the name of the amalgamated company. Send the certificate to the appropriate registrar. If the assets are shares in another company, send this to the directors who maintain that company's share register so they can update the Companies Register in their next annual return.
Next steps — preparing your documents
For both types of amalgamation, there are documents you need to prepare.