Drafting Merger Contracts and Agreements in Saudi Arabia

What is a Merger?

A merger is a legal process wherein two or more companies unite to form a single entity, aiming to enhance market strength, achieve higher operational efficiency, and expand business scope. In the Kingdom of Saudi Arabia, mergers are governed by the regulations and guidelines of the Ministry of Commerce and the Capital Market Authority to ensure compliance with commercial laws and protect the rights of the involved parties.

Importance of Drafting Merger Contracts and Agreements: A merger contract is a crucial legal document that outlines all terms and obligations between the parties, including:

• Details of the parties involved in the merger (companies or institutions).
• Merger structure (complete merger or partial acquisition).
• Assets and liabilities to be transferred to the new entity.
• Shareholders’ and partners’ rights in the merged entity.
• Legal and financial implications for the concerned parties.
• Implementation mechanism and merger timeline.

Types of Mergers in Saudi Arabia:

• Horizontal Merger: Between companies operating in the same sector to enhance competitiveness.

• Vertical Merger: Between companies in the same supply chain to achieve strategic integration.

• Conglomerate Merger: Between companies from different sectors to diversify business scope.

• Acquisition: One company purchasing another entirely or acquiring a certain percentage of its shares.

Steps in Drafting Merger Contracts and Agreements:

1. Legal and Financial Feasibility Study:

    

   • Reviewing the financial and legal status of each company before the merger.
   • Ensuring compliance with Saudi regulations, including the Companies Law.
   • Identifying existing obligations or debts that may affect the deal.

2. Negotiation Between Parties:

    

   • Defining the terms and conditions of the agreement, including the mechanism for share exchange or asset transfer.
   • Agreeing on the future management of the merged company.
   • Determining the rights and duties of new shareholders.

3. Preparation and Drafting of the Merger Agreement:

    

   • Incorporating all agreed legal and commercial terms.
   • Including legal protection clauses for both parties, such as debt and liability warranties.
   • Clarifying the mechanism for resolving potential legal disputes.

4. Obtaining Official Approvals:

    

   • Submitting the agreement to the Ministry of Commerce, the General Authority for Competition, and the Capital Market Authority for approval.
   • Publishing an official announcement of the merger in newspapers by Saudi regulations.

5. Merger Execution and Asset Transfer:

    

   • Updating commercial records and legal documents for the new company.
   • Completing the transfer of assets, contracts, and human resources per the agreement.

Why Choose “Dag Law Firm and Legal Consultations” for Drafting Merger Agreements?

• A legal team specialised in mergers and acquisitions in Saudi Arabia.
• Ensuring full compliance with commercial and investment regulations.
• Preparing clear and precise agreements that protect the rights of all parties.
• Professionally managing negotiations and contract drafting.
• Following up on all legal procedures until the successful completion of the merger.

Contact us today for specialised legal consultations on mergers and acquisitions in Saudi Arabia!