Pre-Merger Notification Guide. TRINIDAD AND TOBAGO Hamel-Smith

Transcription

1 Pre-Merger Notification Guide TRINIDAD AND TOBAGO Hamel-Smith CONTACT INFORMATION M. Glenn Hamel-Smith and Colin Sabga Hamel-Smith Eleven Albion, Cor Dere & Albion Street Port of Spain, Trinidad & Tobago / 1. Is there a regulatory regime applicable to mergers and similar transactions? There are three regulatory regimes that apply to mergers and similar transactions in Trinidad and Tobago. They are: a. The Fair Trading Act (the FTA ): Note that although this legislation, which setsout pre-merger requirements, has been passed in Parliament, it will only become effective on issue of a proclamation by the President. Such Proclamation has not been issued to date save in respect of certain sections which are not material for the purposes of this Survey. Note that this legislation does not apply, inter alia, to banks and non-bank financial institutions which are covered by the FIA (see below). b. The Financial Institutions Act, 2008 (the FIA ). This legislation regulates the activities of banks and non-bank financial institutions and their holding companies and has been proclaimed and is fully in force to date. c. The Companies Act, 1995 (as amended Ch.81:01). This legislation regulates, inter alia, the amalgamation of Companies and reference to it is made in the FIA. d. The Securities Industry (Take-Over) By-Laws, 2005 (the By-laws ). This legislation governs take-overs (including mergers) of publicly-traded companies.

2 2. Identify Applicable National Regulatory Agency/Agencies. The applicable National Regulatory Agencies are: a. Fair Trading Commission b. Regulated Industries Commission c. Central Bank of Trinidad and Tobago d. Ministry of Finance e. The Trinidad & Tobago Securities & Exchange Commission 3. Is there a supranational regulatory agency (e. g., the European Commission) that has, or may have exclusive competence? If so, indicate. Although it does not have exclusive competence, the CARICOM Community Competition Commission exists to manage and monitor anti-competitive cross-border conduct. It has a number of powers in respect of anti-competitive business conduct and breaches of the rules of competition. Member states, of which Trinidad and Tobago is one, are required to enact legislation to ensure that the determinations of this Commission are enforceable in their jurisdictions. The FTA has since enacted such provisions, though as previously mentioned, it has not yet been fully proclaimed. 4. Are there pre-merger filing requirements; if so, where are they published? Save as set out below, there are no expressed requirements for pre-merger filings under the regime outlined above (see questions 1 and 2). However, where there is an intention to merge and one of the merging companies is a licensee or the financial holdings company of a licensee, the FIA requires an application to be made in writing to the Central Bank by all the companies proposing to merge (s.73 (2) FIA). The applicants are also required to furnish along with the application, the following: a. Proposed amalgamation agreement; and, b. Any other documents that the Central bank may require. Under the By-laws, Part 4 (By-Laws 15-17) requires any take-over bid circular, issuer bid circular and Directors circular with the SEC to be filed with the Commission on the day the bid is delivered to securities holders. Delivery of bids, notices and circulars may be effected by post, personal delivery, publication in the daily newspaper for five (5) consecutive days or such other manner as the Commission approves. Under By-law 17, if a report, formal appraisal, valuation or statement of an expert accompanies any of the circulars mentioned, same must also be filed concurrently with each circular or notice.

3 Under By-laws 19-21, every offeror who acquires beneficial ownership or control of securities which together with the offeror s securities constitute 10% or more of outstanding securities of a reporting issuer shall immediately issue and file with SEC a press release containing specific information about the offer. There are similar issue and filing requirements in respect of further share acquisitions. Under the FTA, where enterprises entering into a merger have assets that exceed $50 million dollars and at least one of the enterprises carry on or intends to carry on business in Trinidad and Tobago, permission must be obtained from the Fair Trading Commission (see response to question 6). In addition, before granting permission for a merger, the Commission shall consult with the TTSEC to ensure that the procedure required under the SIA for mergers has been followed. As a general prohibition, all anti-competitive mergers are prohibited. 5. What kinds of transactions are "caught" by the national rules? (Identify any notable exceptions) The FTA restricts anti-competitive mergers and regulates certain other mergers. Mergers are defined as the cessation of two or more enterprises from being distinct whether by purchase or lease of shares or assets, amalgamation, combination, joint venture or any other means through which influence over the policy of another enterprise is acquired. An enterprise is defined as an individual, partnership or body (corporate or incorporate) engaged in business. The following provisions of the FTA should be noted: a. It prohibits all anti-competitive mergers (those which restrict or distort competition in the market); b. Subject to certain threshold conditions, it prohibits enterprises from entering into a merger unless they obtain permission from the Fair Trading Commission; c. Subject to certain threshold conditions, it provides that where a director serves on the board of two or more companies that are competitors and the director is likely to weld together the policies of those companies in a way that would reduce or eliminate competition between them ( Interlocking Directorships ), the companies in which he serves as director must apply to the Commission for permission to merge. 6. Is there a "size of transaction" threshold? Under the FTA, Enterprises must not enter into a merger unless they obtain permission from the Commission where their assets (most likely the assets of all merging enterprises together) exceed TT$50 million dollars and at least one of the enterprises carries on or intends to carry on business in Trinidad and Tobago.

4 Note however that the Minster of Trade may by Order vary the assets limit specified in (a) above. Where the variation exceeds 50%, the relevant Order shall be subject to affirmative resolution of Parliament. 7. Is there a "size or turnover of the parties" test; if so, what is it and how are size and turnover to be calculated? Outside of the asset-value test identified in question 6 above, there is no express turnover test as regards the enterprises to be affected by the proposed merger. However, in considering the application for merger of banks/non-bank financial institutions, section 73 (4) (c) of the FIA requires the Central Bank to consider the size and concentration of economic power in the proposed merged company. In assessing the size and concentration of economic power, the Central Bank is required to consider: a. the size of the proposed merged company in terms of any combined market share that will be serviced or controlled by the proposed merged company in Trinidad and Tobago; b. the size of any of the affiliates of the proposed merged company; and c. Whether such size and concentration will prevent or lessen substantially, or is likely to prevent or lessen substantially, competition in the financial services industry in Trinidad and Tobago. 8. Is geographic scope/national market effect of transaction an issue with respect to filing or approval requirements? If so, specify. Yes, however geographic scope and national market effect is an issue only in respect to approval requirements. Under section 14 (1) of the FTA, the enterprises cannot enter into a merger until the approval of the Commission is given where at least one of the enterprises carries on or intends to carry on business in Trinidad and Tobago. Note however that this provision under the FTA has not yet been proclaimed and therefore is not in effect at present. Also, as indicated in our answers above in relation to banks/non-banking financial institutions, under the FIA the Central Bank has sole authority (in respect of banks and non-bank financial institutions which it regulates) to approve proposed mergers in certain circumstances (see answers to questions 4 and 7 above). 9. Is the filing voluntary or mandatory? What are the penalties for noncompliance? Except in so far as discussed in response to question 4 above, there are no voluntary or mandatory filing requirements specified in the legislation. However, in relation to our answer in question 8 above, approval requirements are mandatory, breach of which carries civil and criminal penalties ($600,000 penalty and $60,000 for each day continuing). Also note that a purported merger done in

5 contravention of the section shall be null and void, but shall be without prejudice to the accrued rights of any other bona fide party without merger. 10. Time in which a filing must be made. When approval is being sought in respect of mergers between entities subject to the FIA, there are no specific timing stipulations except that a merger shall not take place without the prior approval requirements from the Central Bank (see answers to questions 4, 7 and 8 above). However, it would be commercially prudent to notify the Commission in a timely manner of intention to merge the permission is required before the parties proceed with the merger. Under the FTA, where permission is sought in respect of mergers in which the enterprises involved have assets exceeding $50 million dollars (see response to question 6 above), the Commission shall make a determination whether to grant permission or not within one month of receipt of the application (or such other order as the Minister may prescribe). 11. Form and Content of Initial Filing. As above, no initial filing required. However, in a merger involving banks/nonfinancial banking institutions, an application to the Central Bank for permission to merge must be made in writing with accompanying documents (see answer to question 4 above). Also note that the Central Bank has discretion to request additional documents in support of each individual application. 12. Are filing fees required? No filing fees are required under FTA or FIA. In respect of a takeover involving a public company, the By-laws provide that a filing fee of $15,000 Trinidad and Tobago dollars must be paid for a take over bid circular or an issuer bid circular and $1000 for filing a notice of change or variation. 13. Is There An Automatic Waiting Period? If so, specify. No there is no automatic waiting period. However, the parties are barred from proceeding with any proposed merger until the relevant authority (e.g. under the FIA, the Central Bank, or under the FTA, the Fair Trading Commission) has provided written approval to proceed. 14. Are There Time Limits Within Which The Regulatory Agency Must Act? Can they be shortened by the parties or be extended by the regulatory agency? Under section 14 (2) of the FTA, the Commission must make a determination whether to approve or disprove the proposed merger within one month of receipt of the completed application. However, this time period may vary depending on any such time periods as the Minister may stipulate by Order.

6 15. What is the substantive test for clearance? While not quite a substantive test, section 14 (3) of the FTA (not proclaimed), requires the Commission to satisfy itself that the proposed merger would not affect competition or would not be detrimental to the consumer or the economy. Similarly, there is no substantive test under the FIA where the application is being considered by the Central Bank. The Central Bank is required to consider broadly: (a) the terms of the proposed amalgamation agreement; (b) the size and concentration of the of economic power in the proposed merged company; and, (c) Whether the merging companies have failed or are being conducted in an unlawful or unsound manner or are otherwise in an unsound condition. However, where the percentage of any combined market share in Trinidad and Tobago of the proposed merged company and any financial entity that will be affiliated with it would exceed forty per cent the proposed merger should be referred to the Minister for determination. The Minister is required to consider the public interest which shall include without limitation: a. the interest of financial services in Trinidad and Tobago; and, b. the interests of consumers of financial services in Trinidad and Tobago. 16. What are the common Post-Filing Procedures: Requests for further information, etc? Not directly applicable. However, in relation to the Central Bank approval requirements as set out in the FIA, post merger conditions, requirements or restrictions may be imposed which may include post merger filing requirements. 17. Describe the sanctions for not filing or filing and incorrect/incomplete notification. Not directly applicable. However, in submitting an application for approval to the Central Bank under the FIA, if the merging entities submit incorrect/incomplete information they run the risk of being denied approval or, of suffering delays in the determination of the application. 18. Describe the procedures if the agency wants to challenge the transaction? As indicated above, pre merger approval is required under the FIA. Failure to seek prior approval carries civil and criminal sanctions as well as a risk that the transaction be deemed null and void.

7 Under the FTA, if the Commission has reason to believe that two or more enterprises have merged and the enterprises have not obtained permission for the merger, the commission shall initiate an investigation into the matter. Where after such investigation, the Commission is of the opinion that the enterprises have structured themselves in such a way that they have merged without the permission of the Commission as required under this Act, the Commission may apply to the Court for an Order for divestment of the assets. 19. Describe the penalties applicable to the implementation of a merger before clearance or of a prohibited merger? Under the FTA, where an enterprise contravenes any provision of the FTA the Court may impose a fine not exceeding 10% on the annual turnover of the enterprise. Failing agreement by the enterprise to do so voluntarily, the Commission may apply to the Court for an order for divestment of assets if it is of the opinion that two or more enterprises have merged without permission. An enterprise which fails to keep the undertaking given voluntarily is liable upon summary conviction to a fine of TT$25,000 and to a fine of TT$1,000 for each day the offence continues; Under the FIA, a person who contravenes the provisions requiring permission for mergers and/or acquisitions commits an offence and is liable on summary conviction to a fine of TT$600,000 dollars and in the case of a continuing offence to a fine of TT$60,000 for each day during which the offence continues. 20. Describe, briefly, your assessment of the regulatory agency's current attitudes/activities. Although the Commission has been set up under the provisions in the FTA that have been partially proclaimed, this body has not engaged in any real active management over those to whom the Act applies as the operational parts of the FTA are not yet in force. In recent times, the Central Bank and other associated regulatory bodies have been very active in making substantial changes to the legislative framework governing, amongst other things, Mergers and affiliated transactions. This has been in light of Trinidad and Tobago s drive to meet global and international compliance standards as they apply to Financial Institutions and Securities legislation. Such international organizations have put deadlines on compliance, making the national regulatory overhaul an urgent issue. As a consequence, some of the provisions which have been adopted have, in the views of some, not meshed perfectly with common local practice which has proved, at times, somewhat burdensome to market actors. 21. Other Important Information: As mentioned previously, the Fair Trading Act (to which this Survey refers) has not been fully proclaimed and as such, its provisions as they apply to the regulation of

8 merger and pre-merger requirements are not legally binding. However, those to which it might apply are encouraged to comply (as far as practical) with its provisions so compliance is seamless if and when it does come into force. The Financial Institutions Act is fully in force and compliance with its provisions is mandatory.