Division Legal and regulatory aspects

In the following countries a cross-border merger is not possible under commercial law:

• India, under a combination of Articles 3 and 391 to 394 of the relevant Indian legislation (1965 Companies Act),

• Australia, because neither the Corporations Act 2001 nor the Foreign Acquisitions and Takeovers Act 1975 recognise cross-border mergers, which are therefore not possible under Australian law,

• Japan, since, as confirmed by the Tokyo Legal Affairs Bureau (a department of the Japanese Ministry of Justice, which keeps the register of mergers carried out in Japan), the interpretation of Articles 2 and 748 of the Companies Act excludes the possibility of completing a cross-border merger,

• Canada, as Canadian law does not recognise cross-border mergers and the only similar operation recognised is ‘amalgamation’, which requires that both companies be governed by the same Canadian legislation (Sections 2 and 181 of the Federal Canada Business Corporations Act) and therefore, it is not possible to perform a cross-border merger as defined,

• Ecuador, in accordance with Articles 342 and 415 of the Companies Act, published in Official Register No 312 on 5 November 1999, whereby the acquiring company, in order to complete a merger, must have its domicile in Ecuador or must previously form a new company in Ecuador, precluding a cross-border merger such as the one proposed. This approach has also been confirmed by the administrative body that controls and oversees Ecuadorian companies (Companies Supervisor), which is responsible for approving company mergers and other operations in Ecuador,

• China, as reflected in regulations governing the acquisition of local companies by non-residents (specifically, Articles 2 and 55 of the Provisions on Acquisitions of Domestic Enterprises by Foreign Investors, issued by the Chinese Ministry of Commerce on 22 June 2009.

There are other countries in which cross-border mergers are not specifically regulated but where there are legal barriers that complicate them to such an extent that, in the opinion of the law firms consulted and/or relevant administrative or academic doctrine, such mergers are in practice impossible, particularly the countries listed below:

• Argentina, where the number of legal and practical obstacles (described in detail in the attached report on Argentina) prevent cross-border mergers being carried out. This same conclusion is drawn by most Argentinian doctrine, cited in the report, and by the Argentinian Justice Administration which, through the Pre-Classification Department of the Companies Supervisor (the body that controls legal entities in the Autonomous City of Buenos Aires), describes such mergers as ‘test cases’ for which there are no precedents,

• Brazil, where, in the opinion of the law firm consulted, cross-border mergers are almost impossible due both to the incompatibility of Brazilian laws for the purposes of registering the merger in Brazil and the need to open a branch into which the Brazilian company would be merged, which requires a large number of authorisations from political and economic bodies that are almost impossible to obtain (particularly the specific ‘Presidential Decree’ mentioned in the Brazilian report),

• Peru, because, according to the information provided by the local law firm, Peruvian public registers have in the past rejected the described cross-border mergers registering requests because they are reorganisation operations which do not fall under the scope of the applicable law (Ley n^o 26887 General de Sociedades),

• Colombia, a jurisdiction in which (i) the absence of a specific procedure for cross-border mergers; (ii) the need to open a branch in Colombia, following specific authorisation procedures; and (iii) legal and regulatory restrictions on certain activities in many business sectors, make it impossible to complete a cross-border merger in such sectors, in the opinion of the law firm whose report is attached.

Moreover, as explained in the report on Colombia, in some of the countries analysed the regulatory restrictions on foreign investments in certain business sectors prevent the completion of cross-border mergers since, if such mergers were implemented, the activities would be performed in each country directly by a non-resident, which would generate incompatibilities that would be fully outlawed or seriously restricted in those countries. Of the countries analysed, this is the case of the Latin American countries, particularly Colombia, which prohibits all investments by foreign entities in many business sectors; Brazil, with similar total prohibitions; Chile, with significant prohibitions and restrictions affecting the telecommunications industry, concession-holders, the electricity, healthcare and energy sectors, among others; Ecuador, with relevant restrictions affecting the financial and insurance sectors; Venezuela, particularly in the telecommunications industry; Mexico; and even the United States, with certain restrictions related to national security and the financial sector.