NAVIGATING mergers and acquisitions (M&As) in Jamaica is not just about sealing the deal — it is also about mastering the legal landscape to ensure a smooth and successful transaction. M&As play a crucial role in the growth and restructuring of businesses, allowing companies to expand, consolidate or enter new markets.

The Legal Framework

As it currently stands there is no one piece of legislation which deals with M&As. Rather, depending on the type of entity and/or the sector the business operates in, provisions of various pieces of legislation or rules/guidelines would govern such activity. For example, a merger or acquisition of a listed company requires that entity to comply with the rules of the stock exchange on which it is listed; any merger or acquisition of a commercial bank (i.e. a deposit taking institution licensed by the Bank of Jamaica) requires compliance with the Banking Services Act; any merger or acquisition of an entity licensed in the pharmaceutical sector requires the approval of the Pharmacy Council of Jamaica.

In Jamaica, the primary legislation that regulates antitrust and/or anti-competitive behaviour and which would be applicable to business combinations is the Fair Competition Act (“FCA”). The Fair Trading Commission (“FTC”) is the regulator established by the FCA and among its powers is the power to review mergers and other similar transactions to ensure that they do not breach provisions of the FCA. The FTC is also empowered to obtain necessary information to assist with such investigation. If the FTC finds that an M&A lessens competition substantially in a market, the FTC may seek an interim injunctive order from the Supreme Court of Jamaica to prohibit the transaction from being completed. Where the M&A has been consummated, the FTC may request that the court declare the agreement void. In which event, the parties to the merger could be required to separate themselves or divest the areas that have anticompetitive effects on the market.

Legal Considerations in M&AS

To ensure that all legislative and regulatory requirements are complied with when undergoing an M&A, entities should consider the following:

1) Conducting due diligence — legal, financial and operational assessments of the target company. This will assist in identifying potential liabilities, tax obligations and regulatory concerns and whether these are curable.

2) Obtaining regulatory approval — requesting and receiving the required regulatory approval/no objection in the prescribed period is important to the timeline for completion of an M&A and reducing the risk of the transaction being set aside. The necessary regulatory approvals would be identified in the legal due diligence.

3) Shareholder Disclosure — whether disclosures are required, the timing of same and whether a confidential disclosure can be made in the interim, depends on the nature of the entities involved. For example, a listed company would be required to disclose and the timing of same is governed by the rules of the stock exchange on which it is listed.

4) Obtaining Shareholder/Board approval — receiving the necessary directors’ and shareholders’ approval for the M&A and ensuring same is done in accordance with the Companies Act (where it is a Jamaican company) and the constituent documents of the company. What approvals may be required for an M&A may be guided by the Articles of Incorporation of the entity and/or any agreements between the shareholders.

5) Assessing tax and other costs implications — the transaction may include costs such as stamp duty and transfer tax and may also impact financials of the surviving or acquiring entity after the transaction. This is generally highlighted in the financial due diligence.

6) Impact on Employees — depending on the form the M&A takes it may impact employees, as such provisions of the applicable legislation and employment contracts should be reviewed and the impact assessed.

All the above should also form a part of the terms of the transaction documents for the M&A.

Pending Change in Legal Framework

Currently there are no pre-merger notification requirements under the FCA, however it is good governance and has become common for parties to an M&A to seek the approval or no-objection from the FTC prior to any potential investigation by the FTC in relation to the M&A. This reduces the risk of the FTC finding the transaction to be in breach of the FCA and thereby declaring the agreement void. Where the agreement may be in breach of the FCA (without cure), the parties may apply to the FTC for authorisation. This authorisation may be granted where the FTC determines that the transaction is likely to promote public benefit.

In 2024, it was reported that the FTC hopes that all companies proposing to merge, will be required by law to give a pre-merger notification and that the FTC will also have the power to approve or object to proposed M&As before the transaction takes place. It has further been reported that the FTC is in the process of creating a formal merger review framework which would involve the merger of the Consumer Affairs Commission with the FTC. The decision to merge the agencies was made by the Cabinet on June 4, 2018. To date draft guidelines or proposed amendments to the legislation have not been made public.

By adhering to best practices and working with experienced professionals, companies can successfully execute M&A deals that (i) comply with all legal/regulatory requirements, (ii) reduce the risk of investigation which provides an unfavourable response, and (iii) foster economic growth and business expansion in Jamaica. In the world of business, growth often comes through strategic mergers—understanding Jamaica’s legal framework is the key to making them seamless and successful.

Shaniel May Brown is a Partner at Myers, Fletcher & Gordon, and is a member of the firm’s Commercial Department. Shaniel has acted in numerous mergers and acquisitions of private and public-listed companies and those which take the form of either a share sale/purchase or an asset sale/purchase. Shaniel may be contacted via shaniel.maybrown@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.