In certain companies, permits are essential for the exercise of its activities. Consider building permits for a property developer or permits for taxi transport. In the event of a merger or demerger of such a company, it is often desirable for the existing licences to pass ownership to the acquiring company. You can read exactly how this works below.
Complete transfer of assets
Typical of a legal merger or demerger is the transfer of assets by universal title. This means that the legal successor takes over the entire assets of the legal predecessor, including the associated rights and obligations. In such a case, the legal (delivery) requirements for transfer do not have to be complied with for a valid transfer of assets to take place. This compared to acquisition by special title, which must be done using the requirements for transfer, prescription, expropriation or other provisions laid down by law.
Permits have been labelled as property rights in case law, which would mean that they are part of the transfer of assets. Nevertheless, it cannot be assumed that licences are automatically part of the asset package. Case law shows that this depends on the purpose, rationale and nature of the licence decision and, finally, the regulations on which the licence is based. In practice, we see that a number of scenarios exist.
The Environmental Law (General Provisions) Act and the Water Act are examples of laws that contain a clear provision regarding the transfer of permits in the event of a merger or demerger. For example, the Environmental Law states that the permit rests with each person carrying out the project to which the permit relates. The permit is not person-specific, but tied to the project. An environmental permit is thus part of the asset transfer. Another scenario occurs when the law requires that the administrative body that granted the permit must first give its consent before the permit can be transferred to another legal entity.
No legal ground
Where there is no licensing provision in a law, it may be assumed that only property-related licences can pass through a merger or division. Thus, the basic assumption is that personal rights cannot transfer unless there is a statutory exception. Think of the example from the discussed environmental permit above.
Expiry and exclusion
The law may also require existing licences to lapse at the time of merger or demerger. The transferability of licences may also be excluded altogether. In both cases, the acquiring company will have to reapply for a licence. It is therefore wise to be aware of which scenario applies to your company and whether existing licences are transferable if a merger or demerger is in the offing.