When two companies amalgamate, all assets and liabilities of the two amalgamated companies will continue in the amalgamated company (“Amalco”). However, the pension plans of the two merging entities do not automatically merge just because the two companies themselves have merged. Each of the plans will continue to exist separate and apart from the other unless Amalco takes steps to merge the plans. As a result, Amalco may end up with more than one pension plan and all employees of the two amalgamated entities (both current and new) may end up being entitled to participate in one or more of Amalco’s plans because they may meet the definition of “employee” or “member” in more than one Amalco pension plan. For this reason, it is important for Amalco to take steps to amend its pension and other benefit plans prior to, or on, the amalgamation date to clarify which Amalco employees should participate in which plans (i.e. depending on their location, job description, division, etc.). Amendments should also be made to all of Amalco’s plans no later than the date of the amalgamation.
If Amalco wishes to merge the pension plans of the two merging entities, regulatory approval will be required. As noted above, such approval may be difficult to obtain. Before merging pension plans, the pre-merger plan and funding documents (both historical and current) must be reviewed in order to determine if a merger is legally permitted. Accordingly, a legal opinion should be sought before any steps are taken to merge two pension plans.
Additional posts from the blog
Last week the Canadian Government introduced amendments to the Investment Canada Act (ICA) to implement its revised policy towards state-owned enterprises (SOEs) which it announced in December last year. At that time, while it approved the acquisition by Chinese SOE, CNOOC, of Canadian oil and gas company, Nexen, the Government announced its intention to prohibit acquisitions of control of Canadian oil sands businesses by SOEs except on an exceptional basis. It also stated that joint ventures and minority investments were welcome. In addition, the government indicated it would closely monitor SOE acquisitions in other sectors of the economy and would distinguish between SOE and non-SOE investments when setting the ICA review threshold. (See Focus on Foreign Investment Review, December 2012)
The Autorité des marchés financiers Proposes An Alternative Approach to Securities Regulators Intervention in Defensive Tactics
On March 14, 2013, the Autorité des marchés financiers (“AMF”) published for comments a consultation paper (the “AMF Proposal”) pertaining to defensive tactics in response to take-over bids. This consultation is taking place concurrently with the one launched the same day by the Canadian Securities Administrator (“CSA”) with the release of proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). Unlike the CSA’s 62-105, the AMF Proposal addresses all defensive tacticsii, not only security holders rights plans.
The Canadian Securities Administrators published for comment a proposed new regulatory framework for rights plans under proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). If adopted, 62-105 would provide issuers with a game changing tool to respond to hostile take-over bids, where a target board will be able to use a rights plan as leverage to negotiate with a potential bidder.