Business Law Article - Business Amalgamation

Hassan Elhais

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The decision to amalgamate the companies should be made in accordance with the provisions adopted for the amendment of the Memorandum and Articles of Association of the company, and will only be valid subject to the approval of the Competent Authority specified in the Company Law for that type of company.

The merging of companies can be achieved either by:

A. An acquisition, which may be described as the transferring of assets and liabilities to an existing company.

B. Merger through the dissolution of two or more companies and the incorporation of a new company to which assets and liabilities of the merging companies shall be transferred.

1. Amalgamation by acquisition

Firstly, a resolution must be issued to dissolve the company.

The net assets of the company being acquired must be evaluated. The acquiring company should make a resolution about increasing its capital in accordance with the evaluation made by the company being acquired. The increase in the capital should be distributed to the partners of the company being acquired in a manner proportionate to their shares in the company. After 2 years have expired from the incorporation of the acquiring company and when the shares have been represented in stocks, these shares may be considered negotiable immediately upon their issue.

2. Mergers

Each of the merging companies must adopt a resolution to dissolve itself; this will result in the incorporation of a new company. Stocks and shares in the capital of the new company are allocated proportionately to the merging companies. These shares are then distributed proportionately to the partners of the merging companies.

The decision to amalgamate will only be applicable 3 months from the date of registration in the Commercial Register. Company creditors may object to the amalgamation by means of registered letters addressed to the company. The formalities of amalgamation shall be stopped until the creditors withdraw their objection or a final award is made by the Court of Law.

On the other hand, the company could either settle the debts if they are due or present guarantees of the payment if they are deferred. If an objection is not made within the 3 month period the amalgamation would be considered final, and the new company will replace the amalgamating companies in all assets and liabilities.

Author: Mr. Hassan Elhais, along with his team of legal consultants and prominent local lawyers across the UAE, has made a name for himself as a renowned specialist in the fields of civil law, construction law, banking law, criminal law, family law, inheritance law and arbitration.


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