Companies Act 2014 section 1131

Common draft terms of merger

Section 1131 sets out the requirements for preparing, approving, and signing the common draft terms of merger when companies propose to merge.

• Directors of all merging companies must draw up and approve common draft terms of merger in writing, covering essential details such as company names, types, share exchange ratios, profit participation dates, and any special conditions attaching to shares in the successor company.
• Certain requirements — such as the share exchange ratio, share allotment terms, and profit participation dates — do not apply where the merger is by absorption (i.e. where an existing company absorbs another rather than a new company being formed).
• The draft terms must not provide for shares in the successor company to be exchanged for shares in an acquired company that are held by the successor company itself, the acquired company itself, or any nominee acting on behalf of either.
• The common draft terms must be signed on the same date by two directors of each merging company (or the sole director where a company has only one), and this signing date becomes the official date of the common draft terms.