Normally, conducting an M&A transaction in the Caymans involves formation of a company in the Cayman Islands for the purpose of merging with another company. The process is initiated by investors willing to provide funds for financing an M&A deal in the Caymans, managers/founders of listed entities or subsidiaries thereof.
After performing DD of an M&A deal in the Caymans & giving their consent, purchasers must get the approval of a target company’s BoD & stakeholders. That, in turn, requires appointing a special committee of independent directors responsible for looking into proposed terms & negotiating on a target company’s behalf.
The aforementioned committee is responsible for:
- analyzing an M&A deal in the Caymans;
- negotiating & concluding an M&A agreement in the Caymans;
- identifying alternatives to acquisition of a company in the Caymans;
- negotiating any AML agreements;
- informing a BoD about any proposals for acquiring a company in the Cayman Islands.
BoD members are to endorse the terms of an upcoming deal. For that to happen, they’ll have to be provided with information on:
- what is going to happen to the stakes of each company participating in the deal (whether they’ll be converted into new stakes or other property);
- which restrictions & rights are going to be assigned to stakes of a newly formed company;
- how an AoA & Memorandum of a newly formed company are going to change;
- how BoD members are going to be compensated.
Each of the companies participating in conclusion of an M&A deal in the Caymans must get the approval of their respective stakeholders. The latter, who have a right to be informed of the details of an upcoming deal & take part in a GM, must endorse a plan of an upcoming deal with a two-thirds vote.
Also, approval of lenders holding floating- or fixed-rate securities must be obtained. Apart from that, companies participating in a deal must get the endorsement of the relevantly authorised regulators.
Registering a Company in the Caymans: Documentation
Once the required permits are obtained, directors of companies participating in a deal must sign a merger plan on their behalf. Following that, the plan must be submitted to the Register of Companies which will then register a company in the Caymans & issue a merger certificate.
Unless a later date is stated, the date on which the deal will take effect is specified in the Merger Plan.
Should stakeholders of companies participating in a deal disagree with its terms, they’re entitled to sell shares at a fair price. The price can be negotiated between parties to a deal or set by a Caymanese court.
Interested in establishing a company in the Cayman Islands? Looking for information on regulation of M&A deals in the Caymans? Please consider contacting IQ Decision UK.