Bermuda companies listed on stock exchanges outside of Bermuda that wish to demonstrate to those exchanges that formal takeover provisions have been adopted in Bermuda can do so by way of a private act of the Bermuda Parliament, or by introducing takeover provisions in their bye-laws.
Businesses in certain industries have regulatory restrictions which require prior consent of regulators for M&A transactions, telecoms and insurance being the most prominent.
Identify the applicable national regulatory agency/agencies.
The Registrar of Companies (“RoC”) and the Bermuda Monetary Authority (“BMA”).
Is there a supranational regulatory agency that has, or may have exclusive competence? If so, indicate.
Are there merger filing requirements? If so, where are they set out?
There are four key statutory methods for acquiring a Bermuda company: scheme of arrangements, compulsory acquisitions by way of tender offers, amalgamations and mergers.
Sections 99 to 101 of the Companies Act 1981 (“Companies Act”) deal with takeovers by way of shareholder schemes of arrangement.
Compulsory acquisition procedures are set out in sections 102 and 103 of the Companies Act.
The requirements for amalgamations and mergers (“business combinations”) are set out in sections 104 to 109 of the Companies Act inclusive.
What kinds of transactions are “caught” by the national rules?
A scheme of arrangement under section 99 of the Companies Act is a compromise or arrangement between the Company and its members that, with the sanction of the court, allows a Company to implement such a compromise or arrangement which will be binding on all affected members.
An acquiring company supported by 90% in value of the shares, or shares of a class, of a company, that were the subject of the acquiring company’s offer may force a scheme of arrangement or merger on the holders of the remaining 10% of shares or shares of that class under section 102 of the Companies Act. Under section 103 of the Companies Act, holders of 95% of the shares of a company may compulsorily acquire the remainder. Two or more Bermuda companies may amalgamate or merge pursuant to sections 104 and 104H respectively of the Companies Act. The companies involved in a business combination which continues into Bermuda may include foreign corporations (bodies incorporated outside of Bermuda) provided that the foreign law permits such cross-border business combinations. A business combination made up of one or more exempted companies, and one or more foreign corporations, may also continue as a foreign corporation provided that the requirements set out in section 104B are met.
Is notification required for minority investments?
Are foreign-to-foreign transactions captured by the merger control regime, and is there a local effects test?
What are the relevant thresholds for notification?
Under section 99 of the Companies Act, when a scheme of arrangement is proposed to the court, and is subsequently approved by a majority in number representing three-fourths in value of the creditors or shareholders of a Bermuda company or any class thereof, where these shareholders are present in person or by proxy at a meeting, then it is binding on the remaining creditors, shareholders or shareholders of that class (as the case may be), subject to such orders as the court may make.
Under section 102 of the Companies Act, the purchaser may compel the acquisition of the shares of shareholders dissenting to the offer to acquire the shares of the target company, where the scheme or contract has received the approval of 90% in value of the shareholders of the target company (excluding from the calculation shares already held by the purchaser, or a nominee or subsidiary of the purchaser).
Under section 103 of the Companies Act, the holders of 95% or more of the shares of a company may compulsorily acquire the remainder. The principal difference between section 103 and section 102 is that a dissentient in section 103 can only apply to a court to appraise the value of its shares. It cannot seek to vitiate the compulsory acquisition.
For amalgamations and mergers, each share shall have the right to vote whether or not it otherwise carries the right to vote. Unless the by-laws provide otherwise, the resolution of the shareholders or class must be approved by 75% of those voting at a meeting and holders of 33% of the target company’s shares must be present at the meeting.
Is the filing voluntary or mandatory?
Provide the time in which a filing must be made.
Court orders made under subsection 99(2) of the Companies Act have no effect until a copy of the order has been delivered to the Registrar for registration. Court orders must be delivered to the Registrar within seven days of the making of the order.
Under section 102 where a purchaser makes an offer to acquire the shares of the target company and in pursuance of that offer has transferred to it more than 90% of the shares of the target company, the purchaser must, within one month of the date of the transfer which caused it to exceed the 90% threshold, give notice of that fact to the holders of the remaining shares who have not consented to the scheme or contract. Any such holder may, within three months from receiving the notice from the purchaser that the purchaser has acquired 90% of the shares of the target company, himself give notice compelling the purchaser to acquire his shares. Where a remaining shareholder gives such a notice, the purchaser is entitled and bound to acquire those shares on the same terms as set out in the scheme or contract or on other terms as may be agreed or as the court, on application by either party, thinks fit to order.
Under section 103 of the Companies Act, any shareholder who has received notice of the intention to acquire their shares may, within one month of receiving the notice, apply to the Court to appraise the value of the shares to be purchased. Within one month of the Court appraising the value of any shares, the purchasers shall acquire all the shares at the price fixed by the Court or cancel the notice to acquire shares.
An exempted company shall not amalgamate or merge unless on or before the effective date of the business combination such company files with the RoC a notice of the amalgamation or merger.
Within 30 days following the date of issue, the amalgamated company or surviving company shall file with the RoC a copy of the certificate of amalgamation or merger (or other documentary evidence) issued by the appropriate authority of the foreign jurisdiction.
Is there an automatic waiting period?
Are filing fees required?
The fee for registering a scheme of arrangement is $90.
The fee for the application to amalgamate or merge two companies is $180 and each additional company involved in the business combination is $80.
The fee to register the amalgamated or merged company is $90.
What decisions can the agency make in relation to a notified merger ?
Bermuda has no established tender offer rules. Rules, as there are, relate to changes of control of Bermuda companies. A change of control of the target company may require the approval of the BMA. Listed companies, where the effect of a change of control is to result in a delisting of the target company concerned, must obtain the permission of the BMA in respect of the acquiring company, or the ultimate beneficial owner(s) of the bidder where the bidder is a company.
A prospective acquiring company may approach the BMA confidentially and gain approval of its share ownership of the company prior to announcing or engaging in any transaction involving the acquisition of the company’s shares and the subsequent delisting.
The prior consent of the BMA must be obtained for the transfer of the beneficial ownership of any interest in an exempted company, except where a general consent to free transferability between persons who are non-resident for exchange control purposes has been obtained. Companies with securities listed or admitted to trade on an appointed stock exchange are exempt from the requirement to deliver a written instrument of transfer and the appointed agent provisions.
Can parties pro-actively offer commitments to the agency to remedy identified competition concerns?
We do not have merger control regulations in Bermuda in relation to competition.
Describe the sanctions for not filing or filing an incorrect/incomplete notification.
If the company has failed to deliver a Court order made under section 99(2) to the Registrar, the company and every officer of the company who knowingly or wilfully authorizes or permits the default shall be liable to a fine of ten dollars for each copy in respect of which default is made.
Under section 100(4) of the Companies Act, where a company makes default in complying with the requirements of section 100 regarding information required to be given to creditors and members, the company and every officer of the company who knowingly or wilfully authorises or permits the default is liable for a fine of $1,000.
Under section 101(4) of the Companies Act, failing to deliver a copy of the Court order regarding a compromise or arrangement to the Registrar within seven days of the making of the order will result in a fine of $200.