The BVI statutory merger process is recognized globally and has been used effectively for many years. However, today, more global entities increasingly use BVI statutory mergers in high-value cross-border transactions. This shift substantiates the BVI's corporate regime, which is valued for its ample flexibility in facilitating cross-border business combinations and restructurings, supporting the evolution of businesses over time.
Recent examples include a transaction where Pfizer Inc. (NYSE:PFE) used the BVI statutory merger process on its US $11.6 billion cash acquisition of Biohaven Pharmaceutical Holding Company Ltd (NYSE: BHVN). The transaction represented the largest-ever takeover of a publicly-listed BVI company by transaction value. Pursuant to the transaction, Pfizer acquired the outstanding shares of Biohaven that it did not already own for $148.50 per share. As a result of the acquisition, Biohaven became a wholly-owned subsidiary of Pfizer.
In another transaction, Maxpro Capital Acquisition Corp used the BVI statutory merger process in a reverse business combination with late-stage clinical biopharmaceutical company Apollomics Inc.
Prior to those transactions, Fredonia Management, whose business involves gold and silver exploration, completed a three-cornered BVI statutory merger with Fredonia Mining Corp., a BVI-incorporated subsidiary of Fredonia Mining Inc. (formerly Richmond Road Capital Corp.) in a Qualifying Transaction under TSX Venture Exchange guidelines. The reverse takeover resulted in the shareholders of Fredonia Management becoming shareholders of the listed entity, Fredonia Mining Inc., and Fredonia Management becoming a wholly-owned subsidiary.
BVI Statutory Merger Process
A BVI company may merge with one or more BVI companies or foreign entities pursuant to the BVI Business Companies Act, 2004 (as amended) (the Act). The Act defines a merger as merging two or more constituent companies into one of the constituent companies. The merger process must comply with the provisions of the Act regarding mergers, as summarized below.
Plan of Merger
In a BVI statutory merger, the directors of each constituent company that proposes to participate must approve a written Plan of Merger (the Plan). That Plan must contain information about the merging companies and the intended merger, including company names, details of the class of shares outstanding and the related voting rights, the merger's terms, including the conversion of existing shares, and any changes to the constitutional documents of the surviving entity required as part of a merger.
Notably, the Act gives merging entities flexibility in converting shares. Some or all shares can be converted into different assets and distributed or transferred to shareholders, or as is typical, all shares can be converted to different shares or other classes of shares.
Although only the directors and members of each company entitled to vote on the issue must approve the Plan, all members must be provided with a copy.
Required Filings
After the Plan is voted on and approved, each constituent company must execute the Articles of Merger.
The Articles of Merger must contain the following:
- The Plan of Merger
- The date the memorandum and articles of each constituent company were registered by the BVI Registrar, as applicable
- The way each constituent company authorized the merger
The Articles of Merger and any resolution to amend the constitutional documents of the surviving company must then be filed with the BVI Registrar. Upon the Registrar's satisfaction that the parties have complied with the Act, the Registrar will register the Articles of Merger.
If the surviving company is incorporated under the Act, the merger is effective on the date the Registrar registers the Articles of Merger or on such date, thereafter, not exceeding 30 days, as stated in the Articles of Merger. If the surviving company is incorporated outside the BVI, that jurisdiction's laws will effect the merger.
Effect of Merger
The Act provides that the surviving company assumes the constituent companies' assets, powers and liabilities. However, the merger does not affect any prior proceedings, whether against any one of the constituent companies, directors or officers. Additionally, in any proceedings, the surviving company can replace a constituent company and any judgment enforced against the surviving entity in place of the constituent company.
Conversion of Shares and Other Assets
An essential aspect of the BVI statutory merger process allows for the exchange of shares in the surviving company, as well as debt obligations or other securities, including money or other assets, or a combination of both. This mechanism allows constituent companies to convert shares, assets and liabilities to facilitate the merger plan.
In summary, the statutory nature of the BVI merger process provides certainty regarding the exchange of shares, other securities, assets and liabilities, which are critical elements in most business combinations and restructurings. As such, the BVI will remain an essential jurisdiction in the mergers and acquisitions market for small, medium and global players.
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.