Some 41 companies amalgamated (or merged) in Bermuda during 2005. The amalgamation process is often used to simplify an unnecessarily complex group structure or to effect a ?friendly? takeover of a company.

Of the 41 amalgamations, 34 involved exempted companies while seven related to local companies. (Source: Registrar of Companies).

The Companies Act 1981 (the ?Act?) governs amalgamations, with the procedures required to amalgamate depending on the type of companies involved.

The Act contemplates the amalgamation of: Bermuda registered companies; group companies; or Bermuda registered exempted companies with foreign corporations to form either a Bermuda exempted company or a foreign corporation that will continue and be registered outside Bermuda.

The time it takes to amalgamate will depend primarily on the type of companies involved.

The more complex procedure is known as the Long Form Amalgamation, and is required in all cases where there is no common ownership between the amalgamating companies (i.e. the amalgamating companies are neither a holding and wholly-owned subsidiary company, nor wholly-owned subsidiaries).

Long Form Amalgamation requires (in addition to other documentation) an amalgamation agreement to be entered into between the amalgamating companies, and consent of both the Board of Directors and the Shareholders of the amalgamating companies.

A Long Form Amalgamation can take approximately four to six weeks to complete.

An amalgamation agreement is necessary for a Long Form Amalgamation because the amalgamating companies may have different interests (e.g. share holdings) and it is necessary to determine and agree what will happen to the Shareholders? interests as well as making provision for various other issues in the agreement.

The Act specifies certain matters that must be addressed in the amalgamation agreement, which include the following: how the shares of each company are to be converted into shares (or other securities) of the amalgamated company; what the holders of shares of a company will receive if the shares of their company are not converted into shares or securities in the amalgamated company; which of the amalgamating companies? Bye-Laws are to apply, or if the Bye-laws are to be amended; and any other practical issues following the amalgamation including any management and operational considerations.

Short Form Amalgamations are permitted under the Act where there is common ownership between the amalgamating companies.

The process for this type of amalgamation is simpler without the need for an amalgamation agreement or shareholder approval.

A Short Form Amalgamation can take approximately two to three weeks to complete, however Board approval will still be required.

Various documents must be completed and submitted to the Registrar of Companies to support both Long and Short Form Amalgamations.

These documents include statutory declarations regarding the financial status of the companies and the future amalgamated company, and the position of creditors of the companies.

Additionally, where one of the amalgamating companies is a foreign corporation, consent must be obtained from the Minister of Finance for the amalgamation unless the jurisdiction where the foreign corporation is incorporated is an appointed jurisdiction under the Act.

Amalgamations requiring such consent may take longer to complete.

When the documentation has been completed, the relevant documents must be submitted to the Registrar of Companies with the applicable fee.

If the Registrar is satisfied that the documents are in order, in the case of an amalgamating company which continues to be registered in Bermuda, the Registrar will issue a Certificate of Amalgamation.

The Certificate of Amalgamation is deemed to be the certificate of incorporation of the amalgamated company. However, the date of incorporation of a company is its original date of incorporation and is not altered by the amalgamation.

Once an amalgamation has been completed, the companies will continue as one company, with the property of the companies becoming the property of the amalgamated company; however it should be noted that the amalgamated company will also be liable for the obligations of each of the former companies, including any existing claims against the companies.

When amalgamating companies, it is always wise to seek the advice of an attorney expert in the area.

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