The M&A market in Jamaica continues to be very active. Though the COVID-19 pandemic negatively impacted some entities, others prospered. This provided a fertile landscape for M&A. During the pandemic, it appeared that many foreign investors maintained their interest in Jamaica albeit their activities may have been postponed.

Economic uncertainties, fears of a global recession and of higher interest rates slowed the pace of certain deals post pandemic. Some investors opted to wait for a more favourable economic climate. However, there have been positive indicators that suggest that there will be several M&A transactions in 2024.

While M&A activity can generally take the form of a share or asset acquisition, in the last 12 months it appears that most M&A activity has taken the form of an acquisition of the assets of the target. These M&A transactions, while carried out by Jamaican companies, include targets located both in Jamaica and overseas.

While the Fair Competition Act (FCA) does not require companies to obtain pre-merger notification from the Fair Trading Commission (FTC), and there is no notification threshold, it has become common practice for parties to the transaction to approach the FTC for its approval or no-objection prior to entering into or concluding an M&A, so as to reduce any risk of an adverse finding by the FTC. If the FTC finds that a merger lessens competition substantially in a market, it may seek an interim injunctive order to prohibit the transaction from being completed. Where the merger has been consummated, the FTC may request that the court declare the merger agreement void. In this case, the parties to the merger could be required to separate themselves or divest the areas that have anti-competitive effects on the market.

The primary industries which have seen M&A activity in the past 12 months are tourism via hotel acquisitions, manufacturing and distribution, fuels/gas and telecommunications/technology. During the pandemic, tourism and hospitality industries were particularly affected.

Generally, companies are acquired by way of share purchase. In other instances, the purchaser will opt to acquire the business by way of purchase of all the assets of the business as a going concern.

The FCA is the primary legislation that regulates anti-competitive activity in Jamaica and established the FTC. The primary regulators for M&A activity in Jamaica include the Jamaica Stock Exchange if it involves a listed entity, the Bank of Jamaica if it involves an entity regulated under the Banking Services Act or Microcredit Act, and the Financial Services Commission if the entity is regulated under the Securities Act, the Insurance Act, the Pensions (Superannuation Funds and Retirement Schemes) Act or the Trust and Corporate Services Providers Act. Depending on the industry in which the target operates, other regulators may be involved. The FTC may be involved in M&A transactions generally.

In general, there are no restrictions on foreign investments in Jamaica and generally no requirements for companies to be owned by Jamaicans, except for certain regulated sectors, where a particular licence can only be held by a company owned or controlled by a Jamaican or other Caricom national.

In Jamaica, the primary legislation that regulates antitrust and/or anti-competitive behaviour and which would be applicable to business combinations is the FCA. The FTC is the regulator established by the FCA and among its powers is the power to review mergers and other similar transactions to ensure that they do not substantially lessen competition or have or are likely to have the effect of substantially lessening competition for goods and services in Jamaica. The FCA also sets out provisions in relation the abuse of dominance, exclusive dealing, market restriction, price fixing and misleading advertising.

The pieces of labour law legislation that acquirers should primarily be concerned with include:

• The Employment (Termination and Redundancy) Payments Act and Regulations Labour Relations & Industrial Disputes Act;
• Holidays with Pay Act and Orders;
• Minimum Wage Act;
• Factories Act;
• Occupational Safety and Health Bill (pending enactment, draft in circulation);
• Maternity Leave Act;
• Sexual Harassment (Protection and Prevention) Act;
• Protected Disclosures Act (the Whistle Blower Act); and
• Foreign Nationals and Commonwealth Citizens (Employment) Act.

The authors are not aware of any national security review of acquisitions in Jamaica.

There has not been a significant court decision in Jamaica in the past three years relating to M&A. However, in 2017, in the case of Fair Trading Commission (Appellant) v Digicel Jamaica Limited and another (Respondents) (Jamaica) [2017] UKPC 28 the Privy Council considered the question of whether the FTC had the power to intervene in a merger in the market. The Privy Council found that the FTC had the power to review any transaction, including any merger or acquisition, which is likely to substantially lessen competition in the market.

The FTC is a very active regulator and frequently circulates reports regarding matters and transactions reviewed. Three reports presently appear on the FTC’s website for 2023, two of which relate to transactions handled by authors of this questionnaire.

In 2024, it was reported in local media that by 2026, the FTC hopes that all companies proposing to merge, will be required to give a pre-merger notification and that the FTC will also have the power to approve or object to proposed M&As before the transaction takes place.

Recently, it was reported that the FTC is in the process of creating a formal merger review framework which would involve the merger of the Commission with the Consumer Protection Commission. Although draft guidelines are actively being reviewed by the FTC, these draft guidelines have not been made public. In the financial services sector, Jamaica is pursuing a “twin peaks” model of regulation which is not expected to be before Parliament before 2025.

It is not customary (but not unheard of) for a bidder to build a stake in the target prior to launching an offer. There are no rules or procedures, per se, as it relates to stakebuilding strategies, save that if the target is a listed or regulated entity, acquisitions of certain amounts of shares, whether alone or acting in concert with others (as that term is defined), will trigger certain reporting requirements and may trigger the making of mandatory offers.

The Securities Act and its Regulations and the Jamaica Stock Exchange (JSE) Rules (which apply to companies listed on the JSE) require any person who acquires 20% or more (directly or indirectly) of a listed company to file, inter alia, a declaration of intention as to whether it is intended to acquire control of the company within ten days of such acquisition. Any person who has acquired 20% or more of the shares of a listed company must also send a similar declaration at each instance in which the person acquires a further 5% of the company’s shares, until such person has acquired 50% of the shares in the company. The declarations should be sent to the FSC, the JSE and to the registered office or principal place of business of the listed company. If a person acquires, whether by a series of transactions over a period or not, shares which (taken together with shares held by a person acting in concert with them) carry 50% or more of a listed company, the person is required to make a mandatory takeover offer to the other shareholders. The offer is to be made within 30 days of acquiring control. The FSC may in writing exempt a person who acquires 50% or more from making a mandatory takeover offer in certain limited circumstances.

Companies incorporated or registered under the Companies Act are required to identify its beneficial owners (who must be an individual) in certain filings made with the Companies Office of Jamaica (COJ). The shareholding threshold for beneficial ownership based on direct ownership is 25%. However, other circumstances may also cause an individual to be determined to be a beneficial owner of shares and named as such in the filings with the COJ.

A company can introduce certain rules, as a hurdle to stakebuilding, provided it does not contravene existing laws or regulations and once the reporting requirements to the regulator are still maintained. The Articles of a company may also contain provisions that operate effectively as a hurdle to stakebuilding by placing limits on ownership.

Dealings in derivatives are allowed in Jamaica. A local derivatives market is however not well developed, and derivatives are not traded over the local exchange.

There are no specific reporting requirements per se regarding dealings in derivatives, as distinct from other forms of securities. The filing/reporting obligations that would apply to an issuer of a security (which includes derivatives) would apply to the issuer. These include the filing of annual reports, including audited financial statements and quarterly financials, and notices of relevant events for the issuer to ensure that the regulator and investors have access to issuer-specific information on an ongoing basis.

Shareholders in acquiring 20% or more of the equity in a company, and further interests of 5% or more are required to declare the purpose of such acquisition as well as whether further purchases of equity are intended and if the shareholder intends to acquire control of the company’s business of majority shareholding or both. Where control of a company is acquired, in making a mandatory takeover offer, the shareholder is required to indicate the intention regarding the employees of the target company and the continuation of the business. See response to 4.2 Material Shareholding Disclosure Threshold, as it relates to the disclosure and filing obligations.

A target which is regulated by the Securities Act (eg, a public company) is required to disclose an offer to its shareholders without delay, when any firm intention to make an offer is notified to a board of directors, whether or not it views the offer as favourable.

Where the target is a public listed company trading on the Jamaica Stock Exchange, the target is to immediately disclose material information which would include a major corporate acquisition, merger or takeover, as this is information relating to the business and affairs of the company that may reasonably be expected to result in a significant change in the market price or value of the company’s listed securities or which may create a false market.

In some instances, disclosure of material information may be delayed and kept confidential temporarily where immediate release would be unduly detrimental to the company’s interest.

The market practice on timing of disclosure generally does not differ from legal requirements, subject to the delay of disclosures where a matter is kept temporarily confidential. The Rules recommend that the JSE be consulted for guidance where disclosure is not made or delayed.

The scope of legal due diligence in Jamaica for negotiated business combinations is fairly standard. The information typically requested and reviewed will include information regarding assets, charges and liens, material contracts, employees, shareholder agreements and rights, potential and existing litigation, intellectual property, licences and permits in relation to the business, company structure, tax filings, etc. Information received from the seller, where possible, is then verified via public registers and all publicly available information. For instance, searches at the Companies Office of Jamaica, the National Security Interests in Personal Property Register, Jamaica Intellectual Property Office, the Office of the Supervisor of Insolvency, the National Land Agency, and the Supreme Court Registry will be requested. Clients may request a “red flags” due diligence report, and only ask their attorneys to highlight problematic issues, while some clients will request full-scale legal due diligence reports. Depending on the nature of the business being acquired, attorneys may recommend additional technical due diligence also be undertaken, such as by engineers, land surveyors or environmental consultants. Save in periods of no-movement during the pandemic it was not found that the pandemic influenced the scope of due diligence being requested by clients.

Standstills and/or exclusivity are fairly common in this jurisdiction.

It is common for tender offer terms and conditions to be documented and finalised in definitive agreements. In most instances, tender offer terms and conditions are subject to definitive agreements and the due diligence process.

The process of generally acquiring/selling a business can vary. However, on average for the due diligence exercise, closing, that is signed definitive agreements, perfecting of securities, transfer of shares (in the case of private companies or companies not traded on the Exchange) to be signed and assessed for stamp duty and transfer tax, all filings with the relevant agencies such as the Companies Office of Jamaica, can take two to four months. However, if the transaction involves a financial institution or a regulated entity, approval by the various regulators will be required, and this could extend the process for the acquisition/sale. The authors have not found that governmental measures taken to address the pandemic are the current cause of any major practical delays or impediments to the deal-closing process.

The Securities Act and its regulations and the JSE Rules include provisions which require any person who acquires a controlling interest in a public company – ie, shares representing 50% or more of the voting rights of a company, whether alone or acting in concert with another, to make a mandatory offer to the other shareholders of the same class.

The FSC may in writing exempt a person who, by a transaction or a series of transactions, acquires control of a company in the following circumstances:

• where the company’s shares were charged as security for a loan the enforcement of which would require the lender to make a general offer, provided that the security was not given at a time when the lender had reason to believe that enforcement of the loan was likely;
• the shares are acquired by that person for the purpose of recapitalising or rehabilitating the company in order to restore it to solvency and to enable it to continue to carry on its business as a going concern; or
• where:
1. for the purpose of the restructuring of a group, one or more members of the group acquires 50% or more of the shares of another member of the group (the “target company”);
2. there is no change in the ultimate control of the voting rights in the target company; and
3. in the opinion of the FSC, the acquisition is not likely to prejudice the minority shareholders of the target company.

The JSE may in writing waive the requirement for a mandatory offer to be made in relation to companies listed on both the main and junior market of the JSE, in the following circumstances:

• enforcement of security for a loan – ie, where the shares in a company are charged by their holder as security for a loan and, as a result of enforcement, the lender would otherwise incur an obligation to make a mandatory offer, the JSE may grant a waiver to the lender provided that the lender is able to prove that the security was not given at a time when enforcement was reasonably likely; or
• if a company is experiencing serious financial difficulty, and an urgent rescue operation involving the acquisition of the shares by a rescuer carrying 50% or more of the voting rights, or an equivalent level of control in the company in question is proposed to save it, the JSE may grant a waiver of the requirement for the rescuer to make a mandatory offer, on the recommendation of the board of directors and professional advisers of the company in question.

Particularly for a company listed on the junior market of the JSE, the JSE may waive the requirement for a mandatory offer where any receiver, administrator or liquidator of a company appointed under the Companies Act or any other applicable legislation takes control of a holding of 50% or more of the voting shares of that company.

Both cash and non-cash considerations (such as shares and real property) are used as consideration in Jamaica, although cash is more commonly used in Jamaica as consideration. The most common tools used to bridge value gaps between parties are seller financing or earn-out arrangements. Spin-off transactions or share exchanges do occur from time to time but may occur less frequently.

The most common conditions include take-up thresholds such as the minimum number of shares to be received for acceptance or the maximum number of shares that will be accepted. The regulators do not restrict the use of offer conditions but do require the disclosure of such conditions in the takeover bid circular.

The minimum acceptance condition is generally the maximum number of shares that will be accepted. This generally occurs for companies listed on the JSE to avoid the company being at risk of being de-listed or in breach of the terms of its Listing Agreement.

A business combination may be conditional on the bidder obtaining financing. Where the shares in the offeree company are to be paid for in whole or in part in cash, details of the arrangements that have been made to ensure that the required funds are available to carry out the offer must be contained in the takeover offer.

Some common deal security measures that bidders can seek include lock-up agreements with existing shareholders, non-solicitation provisions, right to match and force voting provisions. The authors are not aware of new contractual considerations or tools for managing “pandemic risk”. There have not been any changes to the regulatory environment that have impacted the length of interim periods. Break-up fees are not common.

If a bidder does not seek 100% ownership of a target, outside of its shareholdings, a bidder can try to get a shareholders’ agreement in place to achieve additional governance rights.

It is required that shareholders be given an opportunity to vote by proxy in Jamaica. The proxy does not need to be a shareholder of the company. Proxies should be duly stamped in accordance with the Stamp Duty Act and delivered to the registered office within the timeline stated in the Articles in order to be relied on.

Section 209 of the Companies Act provides for the use of a squeeze-out mechanism to buy out small minorities if the proposed scheme is approved by holders of not less than 9/10ths in value of the shares and not less than 3/4ths in number of the holders of the shares being acquired (other than those already held). The scheme will require approval by the Jamaican Courts.

Lock-up arrangements are fairly common. They do not usually provide an out for the shareholder to take a better offer. Negotiations, however, are generally undertaken with great care to ensure that the equal treatment principle is not offended and to maintain confidentiality so that a false market is not created.

When any firm intention to make an offer is notified to a board of directors of a target company which is a listed entity from a “serious source” (irrespective of whether the board views the offer favourably or otherwise), shareholders of the target must be informed without delay by press notice. Generally, a listed company is required to disclose material information concerning its business and affairs forthwith upon the information becoming known to management, or in the case of information previously known forthwith upon it becoming apparent that the information is material. Otherwise, a deal will generally be disclosed once it is signed or upon receipt of any applicable prior approvals (if any).

Where shares are issued in a public listed company on the JSE, the additional shares should be indicated to the JSE and a supplemental application for listing be submitted to admit the new shares to the exchange.

Additionally, the new shares issued should be disclosed to the COJ by filing a Return of Allotment within one month of the date of issue. The disclosure is to include the number of shares issued, the names, addresses and descriptions of the persons to whom the shares were issued, the amount, if any, paid or due payable on each share along with information on the beneficial owner of the shares issued.

The issuance of shares would result in a change in shareholding and as such require that the COJ also be notified of this change in shareholding within 14 days after the change occurs. This however does not apply to changes in relation to the membership of a public company.

Generally, bidders do not need to produce financial statements in the takeover bid circular, but the directors of the target company will need to include such statements in the directors’ circular to be issued following the receipt of a takeover bid. The bidder must however indicate the particulars of the method of payment for the shares of the offeree company such as a confirmation letter/comfort letter issued by its financial institution of its ability to pay if the offer is accepted.

Where the consideration for an offer includes, in whole or in part, the securities of a company, the takeover bid circular shall contain the audited financial statements for the previous year, the company’s profit and loss statements for the previous five years of operation and the unaudited financial statements for the company’s last quarter. 

In Jamaica, financial statements are required to be prepared in accordance with IFRS.

Transaction documents do not have to be disclosed in full, however, the following details will need to be disclosed in a takeover bid circular:

• particulars of any arrangement made or proposed between the bidder and any holders of more than 210% of the target’s shares, officers or directors of the target or persons who, within the period of nine months before the offer was made, were holders of more than 10% of the offeree’s shares; and
• details of special arrangements relating to the offer between the offeror or any parties acting in concert and any of the directors, immediate past directors or shareholders of the target.

Under the Companies Act of Jamaica, directors must act honestly and in good faith with a view to the best interest of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, including, but not limited to the general knowledge, skill and experience of the director or officer. In determining what are the best interests of the company, a director or officer may have regard to the interests of the company’s shareholders and employees and the community in which the company operates. The directors however owe their duties only to the company.

A board, which receives an offer, is entitled to be satisfied that the offeror company is, or will be, in a position to implement the offer in full. Directors of an offeror or offeree company shall always, in advising their shareholders, act only in their capacity as directors and not have regard to their personal or family shareholdings or their personal relationship with the companies. It is the shareholders’ interests taken as a whole which must be considered together with those of employees and creditors.

It is common for directors to establish special committees in relation to an anticipated business combination. Often these committees are established with a view to ensuring that an offer or approach (especially if from the majority or due to some other conflict of interest) is considered by a special committee of independent directors established for the purpose. Some companies, particularly listed or regulated companies, will have standing Conduct Review Committees comprised solely or in the majority by independent directors in order to better ensure fairness. Additionally, the board will often seek and rely on competent outside advice as needed. 

Courts in Jamaica will generally give due respect and regard to the judgement of the directors where the actions of the directors appear reasonable, having regard to the information known to the directors or relied upon by the directors. The Companies Act expressly provides that a director or officer of a company will not be in breach of their duty if they exercised due care, diligence and skill in the performance of that duty or believed in the existence of facts that, if true, would render the director’s or officer’s conduct reasonably prudent. Further it goes on to expressly provide that the director or officer is deemed to have acted with due care, diligence and skill where, in the absence of fraud or bad faith, the director reasonably relied in good faith on documents relating to the company’s affairs, including financial statements, reports of experts or on information presented by other directors or, where appropriate, other officers and professionals.

Directors usually seek independent legal advice as needed and advice from auditors as to fair value.

In the late 1990s there were a few cases raising issues of conflicts of interest. Currently, minority oppression-type claims seem to be more on the rise than conflicts of interest per se.

Hostile tender offers, although permitted, are not common in Jamaica.

The Companies Act of Jamaica does not expressly restrict the use of defensive measures by directors. Further, the takeover rules under the JSE Rules and the Securities Regulations require the directors to issue a directors’ circular to shareholders indicating whether they recommend acceptance or rejection of an offer. At no time after a bona fide offer has been communicated to the Board of an offeree company or after it has reasonably come within the contemplation of the Board of an offeree company that a bona fide offer is likely to be forthcoming, shall any action be taken by the Board of the offeree company in relation to the affairs of the company, without the approval in a general meeting of the shareholders of the offeree company, which could effectively result in any bona fide offer being frustrated or in the shareholders of the offeree company being denied an opportunity to decide on its merits.

The use of defensive measures is not prevalent as hostile takeovers are not common.

The duties owed by directors to the company remain unchanged even when enacting defensive measures. The directors must act in the best interests of the company.

Pursuant to the Take-over Rules under the JSE Rules and the Securities Regulations, when any firm intention to make an offer is notified to the board of directors from a serious source (irrespective of whether the board views the offer favourably or otherwise) the shareholders must be informed without delay by press notice. Directors cannot “just say no” or, otherwise, they might find themselves sued for dereliction of duty. Directors of an offeree company must recommend acceptance or rejection of an offer.

Litigation is not common in connection with M&A deals in Jamaica. However, there have been a few instances where the minority shareholders bring oppression actions against majority shareholders.

Litigation is not common but in the rare instances when brought it is most commonly brought prior to closing and may seek injunctions to prevent or hamper closing.

Broken deals are not common and disputes in relation to them even less so.

Shareholder activism, in the view of the authors, is not an important force in Jamaica albeit companies strive to avoid reputational damage by negative reports in the media by or on behalf of shareholder interests.

The authors have not seen activists seeking to encourage companies to enter into M&A transactions, spin-offs or major divestitures.

The authors have not seen activists seeking to interfere with the completion of announced transactions in Jamaica, except in the rare cases of shareholder objections to M&A transactions being carried out by way of schemes of arrangement.