Student Companion | Amalgamation Company | The Companies Act

law articles for llm phd students

Amalgamation of companies under either Part 13 or Part 15 of the Companies Act 1993 takes effect as if the new company has succeeded to the property of the amalgamating companies without any distinct transfer or other disposition of property required. The new company is in law a continuation of the amalgamating companies. In so holding, the Supreme Court affirmed Carter Holt Harvey Ltd v McKernan [1998] 3 NZLR 403 (CA) and rejected the pre-1993 understanding of the effect of amalgamation as espoused in Nokes v Doncaster Amalgamated Collieries Ltd [1940] 3 All ER 549 (HL).

The case arose upon the amalgamation of Wrightson Ltd and Pyne Gould Guiness Ltd into PGG Wrightson in 2005. Prior to the merger, Wrightson was joint owner of several stockyards with Elders NZ Ltd, under arrangements that gave each a right of preemption if the other wished to “transfer, sell, lease or otherwise dispose of” its interest. The appellant claimed that the amalgamation necessarily involved a disposition of Wrightson’s interests in the stockyards to PGG Wrightson and thus triggered its preemption rights.

The issue that concerned the Supreme Court was therefore the precise legal effect of the amalgamation. The amalgamation was achieved by a scheme approved by the High Court under Part 15. The Companies Act provides two procedures for amalgamation. Part 13 requires a special resolution of at least 75 per cent of the shareholders of each of the amalgamating companies following disclosure of relevant information.

Under this procedure, s 219 provides for the statutory concepts of continuance and fusion; that is, the amalgamated company stands in the same position as each of the amalgamating companies in respect of their rights and obligations and is not to be treated as a different or new entity in relation to burdens and benefits enjoyed by the prior companies. Had the amalgamation been carried out using this procedure, the pre-emption rights would clearly not have been triggered. Under Part 15, amalgamation is effected by approval of the court, a process which avoids the more prescriptive procedural and voting requirements of Part 13.

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