When sales or mergers of banks and trust companies begin, the process can seem complicated. There are many moving parts to ensure a successful transition. If you work for a bank or trust company planning a sale or merger, here are a few thoughts to consider.
- Is the Merger or Sale a Good Idea?
First, as with directors of any other company, the directors of banks and trust companies have a duty to act in the company's best interest. This duty extends to major changes such as sales or mergers. In some cases, you may need the shareholders to approve the sale or merger. In other cases, the sale or merger may have been triggered by a shareholder's actions, as when a majority shareholder sells all its shares to another company.
To make a sound decision about the sale or merger, research the potential buyer or merging company. Investigate its financial position, its long-term prospects, and any industry insight on its operations.
- Will the Merger or Sale Put Customers, Shareholders, and Creditors in the Same Position?
Second, consider the effect of your planned merger or sale on customers, shareholders, and creditors. Proposed legislation in The Bahamas suggests that protections should be in place so that banks in trouble treat their shareholders and creditors fairly in the transition. While your bank may be doing well, the effects of the sale or merger should be on your mind.
For example, everyone should receive notification of the sale or merger as soon as possible after it is confirmed. Customers will want reassurance that their accounts will stay the same or plenty of notice if anything will change. Shareholders will want to know how the value of their shares in the bank or trust company will be affected. Creditors will want to know about the new company's financial position, cash flow, and other debts.
- Are You in Compliance with Bahamian Laws and Regulations?
Third, before the sale or merger begins, you should verify which laws and regulations affect the transition. For example, you may need to show the Central Bank of The Bahamas or another government entity that there will be sufficient reserves available in the bank once the sale or merger is complete. If the merger will create a new entity, it may need to go through lengthy approval processes. These requirements could take months and potentially could stall a sale or merger for much longer than expected. It is important to plan ahead.
To find out more about sales and mergers of banks and trust companies, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.