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New Zealand law explained for everyone

Companies Act 1993

Amalgamations

221: Approval of amalgamation proposal

You could also call this:

“How companies get approval to join together”

When companies want to join together, which is called amalgamation, they need to follow certain rules. The board of directors of each company that wants to join must agree that it’s a good idea for their company. They also need to be sure that the new, combined company will be able to pay its bills.

The directors who agree to this must sign a paper saying why they think it’s a good idea. They need to explain their reasons.

At least 20 working days before the companies plan to join, the board of each company must send some important information to all of their shareholders. This includes:

  • A copy of the plan to join the companies
  • The signed papers from the directors
  • A summary of the main rules of the new company
  • A note saying shareholders can ask for a full copy of the new company’s rules
  • Information about shareholders’ rights
  • Any personal interests the directors might have in the plan
  • Any other information that would help shareholders understand what the plan means for them and the company

The board also needs to send a copy of the plan to anyone the company owes money to (if that debt is secured), at least 20 working days before the planned joining date. They must also put a notice in the newspaper about the plan. This notice should say that anyone can look at the plan at the companies’ offices, and that shareholders, people the company owes money to, or anyone the company has promised something to can ask for a free copy of the plan.

The shareholders of each company need to approve the plan. If the plan includes any changes that would normally need special approval from a certain group of shareholders, that group needs to give special approval too.

If a director doesn’t sign the paper explaining why they think the plan is a good idea, they might get in trouble with the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321145.

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220: Amalgamation proposal, or

“How to create a plan for combining companies”

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“Simplified process for combining wholly-owned or commonly-owned companies”

Part 13 Amalgamations

221Approval of amalgamation proposal

  1. The board of each amalgamating company must resolve that—

  2. in its opinion the amalgamation is in the best interest of the company; and
    1. it is satisfied on reasonable grounds that the amalgamated company will, immediately after the amalgamation becomes effective, satisfy the solvency test.

      1. The directors who vote in favour of a resolution required by subsection (1) must sign a certificate stating that, in their opinion, the conditions set out in that subsection are satisfied, and the grounds for that opinion.

      2. The board of each amalgamating company must send to each shareholder of the company, not less than 20 working days before the amalgamation is proposed to take effect,—

      3. a copy of the amalgamation proposal:
        1. copies of the certificates given by the directors of each board:
          1. a summary of the principal provisions of the constitution of the amalgamated company, if it has one:
            1. a statement that a copy of the constitution of the amalgamated company will be supplied to any shareholder who requests it:
              1. a statement setting out the rights of shareholders under section 110:
                1. a statement of any material interests of the directors in the proposal, whether in that capacity or otherwise:
                  1. such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed amalgamation.

                    1. The board of each amalgamating company must, not less than 20 working days before the amalgamation is proposed to take effect,—

                    2. send a copy of the amalgamation proposal to every secured creditor of the company; and
                      1. give public notice of the proposed amalgamation, including a statement that—
                        1. copies of the amalgamation proposal are available for inspection by any shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation at the registered offices of the amalgamating companies and at such other places as may be specified during normal business hours; and
                          1. a shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation is entitled to be supplied free of charge with a copy of the amalgamation proposal upon request to an amalgamating company.

                          2. The amalgamation proposal must be approved—

                          3. by the shareholders of each amalgamating company, in accordance with section 106; and
                            1. if a provision in the amalgamation proposal would, if contained in an amendment to an amalgamating company's constitution or otherwise proposed in relation to that company, require the approval of an interest group, by a special resolution of that interest group.

                              1. A director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).