Mergers and Acquisitions in Iceland

Companies are constantly changing hands. It often happens that a company buys another company in the same sector in order to strengthen its position on the market. The two companies may merge. These are usually consensual mergers, where the management of both companies agree to the merger and complete the formalities. However, aggressive or so-called predatory takeovers can also occur. Whatever the situation, there are rules and regulations for mergers in all countries. The relevant laws also apply to merging companies in Iceland.

Mergers and Acquisitions Laws in Iceland

The following laws are crucial for companies merging or attempting to acquire another company in Iceland:

• The Act on Public Limited Companies
• The Act on Private Limited Liability Companies
• The Act on Securities Transactions
• The Income Tax Act and
• The Competition Act

It is possible that all of these laws will apply in every case of a corporate merger in Iceland. Each case can be examined on its own merits and the relevant law applied. The underlying principle is that the mergers should not lead to an unreasonable loss for the public investors in the companies. The government wants to protect the investor who would have invested his savings in the company based on certain factors. The decision to merge companies could be made in such a way that the investor has no say. If the merger results in a loss of value of the investment, the investor, an average citizen, is harmed. The laws are designed to prevent such indiscriminate mergers.

The other laws, such as the Income Tax Act and the Competition Act, have different objectives. The Income Tax Act applies to the business that is sold and receives consideration in return. If a tax is incurred and payable to the government, it is collected. The Competition Act scrutinises the merged company and checks that no monopoly is created. A monopoly can lead to price manipulation in any sector and customers are penalised.

Most Iceland Laws Adopted from Europe

Iceland has the advantage of being in Europe, although it is not a full member of the EU. There are two other European bodies to which Iceland belongs. These are the European Economic Area and the European Free Trade Association (EEA & EFTA). Many of the laws and regulations for company mergers in Iceland have been adopted by these organisations, and this suits Iceland very well.

Which Companies Are Covered by the Laws?

It should be noted that not all mergers of companies have to be completed by legal process. If a company is registered in Iceland and has its head office in Iceland, and if the company’s shares are listed and traded on a stock exchange in Iceland, then the merger or acquisition will be scrutinised under the law. There are other cases in which the laws may apply.

What About the Foreign Companies Operating in Iceland?

In general, foreign companies operating in Iceland are not subject to the above-mentioned laws on mergers in Iceland. However, there are some specific cases where the laws may apply. Foreign companies are also prohibited from owning companies in certain industries. These include energy, fishing and air transport. Iceland wants only domestic companies to operate in these sectors or hold a majority stake. Some restrictions will also apply to the ownership of companies in the insurance and financial sectors.

In most cases of mergers and acquisitions, there are advisors on both sides. These are legal advisors and also financial advisors. They know the laws and restrictions involved and guide the companies accordingly.

For any help, you require in Iceland, contact Swapp Agency .