Mergers of financial undertakings and related matters

The merger of a financial undertaking with another undertaking is governed by Article 106 Act No. 161/2002 (in Icelandic) on Financial Undertakings, cf. Act No. 2/1995 (in Icelandic) on Public Limited Companies.

A merger of a financial undertaking with another undertaking is permitted only with the consent of the Financial Supervisory Authority.

A merger of a financial undertaking with another undertaking is only authorised if a decision thereto has been approved by a shareholders' meeting or meeting of guarantee capital owners in the undertaking taken with at least 2/3 of the votes cast, and furthermore the approval of shareholders or guarantee capital owners in the undertaking taken over controlling at least 2/3 of the share capital or guarantee capital represented at the meeting of shareholders or guarantee capital owners. If the undertaking taken over is completely owned by the company taking it over, the aforementioned voting in the company taken over is not required.

Mergers of financial undertakings shall otherwise be subject to provisions of the Act on Public Limited Companies, as appropriate, and agreements between the parties concerned.

A financial undertaking, which is wound up as the result of a merger, is not obliged to issue a call to creditors or to keep their assets separate. Changes in ownership in mortgage registers resulting from mergers of financial undertakings shall be exempt from stamp duties.

The Financial Supervisory Authority shall announce mergers of financial undertakings in the Legal Gazette. The announcement must specify when a merger takes effect, the names of the undertakings concerned, the time limit for submitting objections to the transfer of deposits, conceivable changes to the payment locations for debt instruments and other aspects which are to be announced to customers in particular.

Upon the merger of two or more financial undertakings the own funds formed by the merger shall not be less than the combined own funds of the undertakings concerned at the time the merger took place, if the minimum provided for in Articles 14 and 14(a) has not been reached.

Attention is drawn to the fact that an hourly fee is charged in connection with the processing of applications for mergers, divisions or transfers of business units in accordance with the Act on Financial Undertakings, cf. Tariff list of the Central Bank of Iceland due to projects related to financial supervision.

The division or transfer of individual operating units of a financial undertaking to another undertaking is governed by Article 106 of the Act on Financial Undertakings, cf. Act on Public Limited Companies.

The division or transfer of individual operating units of a financial undertaking to another undertaking by other means, such as sale, is also subject to the approval of the Financial Supervisory Authority. For the purposes of this provision, operating units shall mean viable units of a financial undertaking, e.g. branches.

The Financial Supervisory Authority shall announce the division or transfer of operating units of financial undertakings in the Legal Gazette.

The merging of savings banks in general is governed by Article 72 of the Act on Financial Undertaking.

A savings bank that is a self-governing foundation may be merged with another savings bank or financial undertaking so that the self-governing foundation is dissolved.

If a savings bank that is a self-governing foundation is merged with another self-governing foundation, reimbursement to the guarantee capital owners shall be in accordance with the share of guarantee capital in the savings bank's own funds, according to the balance sheet at the time of the merger.  If the savings bank has own funds exceeding its guarantee capital, so-called retained earnings, this shall be used in full to augment the retained earnings of the merged savings bank. In a case where a savings bank which merges with another self-governing foundation has negative own funds, its guarantee capital shall be written down to offset this before the merger is effected. Upon the merger, the retained earnings of the merged savings bank may not be less than the combined positive retained earnings.

If a savings bank which is a self-governing foundation is merged with a public limited company through a takeover, where the public limited company is the takeover company, the self-governing foundation shall be wound up. Reimbursement to the guarantee capital owners of the acquired savings bank shall be in accordance with the share of guarantee capital in the savings bank's own funds. If the savings bank taken over has positive retained earnings, reimbursement for this shall be placed in a special self-governing foundation. The board of directors of a savings bank which has been taken over may, instead of establishing a self-governing foundation, propose a disposition of the reimbursement of the savings bank's retained earnings directly to the savings bank's social projects.

The merger and winding-up of the savings bank taken over cannot be approved until the board of the self-governing foundation has been appointed or a proposal for the disposition of retained earnings has been confirmed.

In other respects the merger of savings banks shall be governed by the provisions of Article 106, including cases where a savings bank which is a self-governing foundation takes over a financial undertaking which is a public limited company.

The conversion of the legal form of a savings bank from a self-governing foundation to a public limited company is governed by Article 73 of the Act on Financial Undertaking.

Acting on a motion from the board of directors, a meeting of guarantee capital owners may decide, with a 2/3 majority of votes cast, and the consent of guarantee capital owners controlling at least 2/3 of the guarantee capital represented at the meeting, to change the legal form of a savings bank from a self-governing foundation to a public limited company.

The conversion of the self-governing foundation to a public limited company shall be effected by the former merging with a public limited company which it has previously established for the purpose. Upon the merger the public limited company shall take over the savings bank's operations, all its assets and liabilities, rights and obligations and the self-governing foundation shall be wound up.

The public limited company established by the savings bank must fulfil the provisions of Article 61 of the Act. The provision of the Act on Public Limited Companies on the minimum number of shareholders shall not apply to a limited liability company until the conversion of the savings bank to a limited liability company has taken place.

When a self-governing foundation is converted to a public limited company, the savings bank's operating licence shall remain valid.

A merger in connection with the conversion of a self-governing foundation to a limited liability company shall in other respects be subject to the provisions of the third paragraph of Article 72 and Article 106 of the Act on Financial Undertaking and the Act on Public Limited Companies.