The merger of companies is a legal process whereby two or more companies are united to form one company, and thus the legal entity of the merging company ceases and it enters into the entity of the other merging company. Companies may be merged under Kuwaiti law even if the company is in the process of liquidation, where the merger is between two or more of the following companies:
- Solidarity Company
- Simple Recommendation Company
- Shares limited company
- one person company
- Limited Liability Company
- All types of joint stock company
- Not-for-Profit Companies
Methods of incorporation of companies in Kuwaiti law
There are three methods for companies to merge:
The first method is the merger by way of consolidation, and that is by dissolving one or more companies and then transferring their liability to an existing company.
The second method is the merger by way of mixing, and that is by dissolving two or more companies and then establishing a new company to which the financial receivables of the merged companies will be transferred.
The third method is the merger by way of division and consolidation, and this is by dividing the company’s liability into two or more parts, and then transferring each part of it to an existing company.
Conditions for company incorporation
In the event that the merger will lead to an increase in the financial burdens of the partners or shareholders or prejudice their rights, whether in the merging or merging company, all partners or shareholders in the company must agree to the merger decision. In the event that one of the partners or shareholders objects to the merger decision, he may request to withdraw from the company and recover the value of his share or shares.
For the merger of a joint-stock company that has issued bonds or sukuk, the approval of the bond holders or sukuk holders authority is required for the merger decision, with a majority of those who represent two-thirds of the bonds or sukuk, otherwise the company will make a debt settlement approved by the bond holders or sukuk holders panel with the same majority.
Objection of the merged company’s creditors to the merger decision
The merger decision may not be implemented except after the lapse of thirty days from the date of its publication in the Official Gazette. During this period, the creditors of the merged company have the right to object to the merger with the company with an official notice. In this case, the merger remains suspended unless the creditor waives his objection, or it is decided to reject this objection by a final judgment, or the company pays the debt if it is immediate, or provides sufficient guarantees to meet it if it is deferred, If no objection is submitted within the thirty-day period, the merger shall be considered final.
The effects of the merger of companies in Kuwaiti law
In the event of a merger by way of consolidation or amalgamation, this results in the merging company or the new company taking the place of the merged company in all its rights and obligations. In the event of a merger by way of division and consolidation, the merging companies shall jointly bear the obligations of the merged company.