Jordanian Companies Law No. 22 for the year 1997 (JCL) provided for the merger and acquisition in Articles (222 – 239).

Merger

Article 222 (A) provides that the merged companies must have similar or complementary objectives. There are three types of mergers provided for in JCL:

  • Merger by the consolidation of one company or more (Merged Company) in one company or more (Merging Company) whereby the legal identity of the Merged Company dissolved and the right and obligations of it transfers to the Merging Company after cancellation of the Merged Companies registration.
  • Merger of two companies or more (Merged Companies) in order to establish a new company which is the result of the merger while the legal identity of the Merged Companies shall be dissolved.
  • Merger of the branches and agencies of foreign companies working in Jordan (Merged Branches/Agencies) in an existing Jordanian company or new company incorporated for this purpose whereby the legal identity of the Merged Branches/Agencies shall be dissolved.

Acquisition

Article 222 (B) provides that the company may own another company by owning the shares of this company. The following procedures must be followed:

- A decision is issued by the extraordinary General Assembly of the company wishing to purchase, approving the ownership of another Company's shareholders' shares.

- A decision is issued by the extraordinary General Assembly of the company wishing to sell, approving the selling of its shareholders shares to another company.

- Completion of the stipulated approval, registration and publication procedures to transfer the shares of the shareholders of the company that decided to sell to the purchasing company. This ownership shall not be recognised until its registration and authentication are completed in accordance with the provisions of Companies Law and the Securities Law.

- The purchasing company shall pay the shares' value that is agreed upon to the selling company. This will be deposited in a special account in order to be distributed among shareholders registered on the date of the General Assembly issuing the decision to sell their shares.

- The company which shares become owned by the new shareholders shall invite the General Assembly in accordance with the provisions of Companies Law to realise the necessary amendments to its Article and Memorandum of Association and to elect a new Board of Directors.

Due diligence

Due diligence is the process of conducting an intensive investigation of a corporation as one of the first steps in a pending merger or acquisition. In a company merger or acquisition, due diligence would include fully understanding all of the obligations of the company: debts, pending and potential lawsuits, leases, warranties, long-term customer agreements, employment contracts, distribution agreements, compensation arrangements, and so forth. Due diligence shall be performed by legal professionals and other transactions professionals whose collective responsibility is to ensure a complete and comprehensive investigation.

The methodology for acquiring the ideal due diligence shall take the form of listing the subjects and questions that firstly might target the company in question. These questions are usually set fourth by the diligence team which consists of legal and other professionals who have specialised expertise in a specific area of law or profession which may have an impact on the company in question of due diligence and secondly any other questions related to the company in question that might be relevant.

Evaluation

It is important for the merger and acquisition process to make a comprehensive evaluation of the companies' assets, debts and credits. Such evaluation is based on auditors' reports and a market evaluation of assets and real shares.

In an acquisition the purchasing company makes the evaluation before deciding to buy the shares of another company, and after signing non-disclosure agreement. If the purchasing company decides to buy the shares of the selling company, both companies shall execute an acquisition agreement based on which shares of the selling company shall be transferred to the purchasing company.

In mergers the merging companies shall apply to the companies' controller. If application is approved, the minister of Industry and Trade shall form a committee to evaluate assets and debts of the company to decide the net shares value of the shareholders. The merging companies shall also prepare accounting reports under the supervision of the accounting auditors.

Opposition

According to Article 235 of JCL, any person who has a legal interest will have the right to file a courts case to revoke the merger if the rules of the JCL are not complied with or the merger was conducted in violation of the public order.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.