The Court-Free Amalgamation Process in Hong Kong

An amalgamation is a legal process under which the assets and liabilities of two or more companies incorporated in Hong Kong merge and are brought under one of the original companies.  Tim Drew and Herman Pang from the Corporate and Commercial practice group of Tanner De Witt explain more.

Procedure

The Companies Ordinance (Cap 622) provides for a court-free statutory amalgamation procedure.  Court approval is not required for vertical amalgamation (a holding company and its wholly-owned subsidiaries) and horizontal amalgamation (involving wholly-owned subsidiaries of a body corporate).  The relevant procedure is relatively straight forward and mostly requires:

• all amalgamating companies passing certain special resolutions (general meeting(s) may be necessary) to approve the transaction;
   
• the directors issuing a solvency statement certifying that the amalgamating company is solvent;
   
• each director voting in favour of making the above solvency statement must issue a certificate stating the grounds for his/her opinion that the amalgamating company is solvent; and
   
• the directors of each amalgamating company circulating a notice to inform the creditors and the public of the proposed amalgamation.

Protections for creditors and members

Creditors and members are protected by requirements such as the need to give written notice to each secured creditor for consent, and to circulate a public notice. Any member, creditor or other person to whom an amalgamating company is under an obligation has the right to file with the Court an objection to a proposed amalgamation. The Court may then make an appropriate order for the amalgamation proposal if it is satisfied that the amalgamation would be unfairly prejudicial to the applicant.

Legal implications

Once the procedures are completed and the relevant documents filed, the Registrar must issue a certificate of amalgamation which will specify the effective date of the amalgamation.

Once the amalgamation is effective:

• each amalgamating company ceases to exist as an entity separate from the amalgamated company (i.e. the amalgamating companies will continue as one company);
   
• the amalgamated company succeeds to all the property, rights and privileges, and assumes all liabilities and obligations of each amalgamating company;
   
• any proceedings pending by or against an amalgamating company may be continued by or against the amalgamated company;
   
• any order or judgment in favour of or against an amalgamating company may be enforced by or against the amalgamated company; and
   
• any agreement entered into by an amalgamating company may be enforced by or against the amalgamated company unless otherwise provided in the agreement.

Before proceeding with the amalgamation, check whether any amalgamating company has entered into any contract still in force which contains restrictions in respect of an amalgamation with other companies. Likewise, if any amalgamating company is the registered owner of intellectual property rights or other assets overseas, then check to confirm whether relevant authorities recognise the effect of the amalgamation.

Although amalgamation is a relatively straightforward, court free process, it is always important to involve your legal adviser at the outset to guide you through the steps to ensure a successful outcome.

Tim Drew and Herman Pang

If you would like to discuss any of the matters raised in this article, please contact:

Eddie Look Partner | E-mail

Tim Drew Partner | E-mail

Edmond Leung Partner | E-mail

River Stone Partner | E-mail

Pádraig Walsh Partner | E-mail

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.