Mergers and acquisitions in Palestine are governed by two legal frameworks that address the same transaction from different perspectives. The Companies Law (Decree-Law No. 42 of 2021) establishes the corporate mechanics of a merger: how it is structured, the merger plan and reports that must be prepared, the approvals required, creditor protections, and when the transaction becomes legally effective. The Competition Law (Decree-Law No. 11 of 2025) addresses the transaction from a market perspective, which requires regulatory clearance where an economic concentration is involved.
The two frameworks create separate requirements, timelines, and consequences for non-compliance, and the sequence in which the requirements are addressed matters. This article sets out how the two frameworks intersect, what each requires, and the key considerations for parties planning an M&A transaction in Palestine.
The Same Transaction, Two Legal Definitions
The Companies Law and the Competition Law address overlapping transactions, but they do so for different purposes. Under Article 288 of the Companies Law, a merger may take one of two forms. In a merger by absorption, one company is absorbed into another, dissolving by operation of law, with its rights and obligations transferred to the surviving entity. In a merger by consolidation, two or more companies combine to establish an entirely new entity.
The Competition Law approaches the transaction differently. Article 1 defines mergers and acquisition, as well as economic concentration in terms of the transfer of ownership, usufruct rights, shares, or obligations from one entity to another. The definition expressly includes mergers, acquisitions, and joint management arrangements.
The result is an overlap between the two frameworks. A merger that falls within the Companies Law’s merger provisions may also constitute an economic concentration under the Competition Law. The corporate requirements and competition requirements therefore need to be simultaneously considered.
Why Sequencing Matters for Mergers and Acquisitions in Palestine: Competition Clearance Comes First
For an M&A transaction that constitutes an economic concentration, timing of competition clearance is crucial. Article 22(1) of the Competition Law requires prior written approval from the General Directorate of Competition (the Administration) before any steps are taken in relation to an economic concentration. Article 26 reinforces the requirement by providing that no competent authority may license the entity resulting from the concentration until the required approval has been obtained.
The Companies Law establishes its own point of legal effectiveness. Under Article 304, a merger becomes legally effective upon registration with the Companies Registry. Read together with Article 26 of the Competition Law, this indicates that competition clearance must be secured before the resulting entity can proceed through the relevant licensing and registration process to legal effectiveness.
In practical terms, the transaction should therefore be structured around a clear sequence beginning with competition clearance, leading to completion of corporate merger requirements, and registration and legal effectiveness. The two workstreams can be planned in parallel, but competition clearance cannot simply be left until after the corporate process has been completed. Attempting to proceed without the required clearance can prevent the resulting entity from being licensed and expose the parties to the penalties applicable under the Competition Law.
The Corporate Track: What the Companies Law Requires
Alongside competition clearance, the Companies Law establishes a structured process for completing a merger.
The merger plan
Article 290 requires the management of the merging entities to prepare a joint merger plan. The plan must address, among other matters, the legal form, name, and address of each entity, share exchange ratio, cash payments, the conditions governing the allocation of shares, the accounting effective date, and for a consolidation merger, draft foundational documents for the resulting entity. The plan must be made available at least 30 days before the extraordinary general assembly.
Management’s explanatory report
Under Article 292, the management of the merging and surviving companies must prepare a detailed written report explaining the merger plan and setting out its legal and economic basis. In particular, the report must address the proposed share or membership-interest exchange ratio and describe any difficulties encountered in the valuation process. The provision also allows the members, shareholders, or holders of other voting securities of the merging and surviving companies to unanimously agree not to prepare the report required under Article 292(1).
Independent auditor review
Article 293 requires an independent auditor to review the merger plan and provide shareholders or members with a written report addressing the fairness of the exchange ratio and the adequacy of protections available to creditors following the merger.
Shareholder approval
Under Article 296, the merger plan must be approved by an extraordinary general assembly of each merging entity.
Creditor protections
The Companies Law also provides specific protection for creditors. Under Article 299, creditors whose debts predate publication of the merger plan and are not yet due may demand adequate guarantees within one month of publication where the auditor’s report indicates that their protection is insufficient.
Wholly-owned subsidiaries
Article 300 provides a streamlined route for certain mergers involving wholly-owned subsidiaries. In such cases, the management report and auditor report requirements do not apply, and shareholder approval is not required, provided that the merger plan is published at least one month before effectiveness and no shareholder holding 5% or more of the voting capital demands an assembly.
These requirements form the corporate track of the transaction. They address how the merger is approved, documented, and ultimately given legal effect within the corporate registry framework.
The Competition Track: Filing, Review, and Timelines
The competition clearance process operates on a separate timetable and should be incorporated into transaction planning from the outset.
Filing deadline
Article 22(2) requires notification to the Administration within 60 days of the agreement between the entities on the concentration.
Required documentation
Article 23 sets out the information and documents to accompany the notification. These include foundational documents, a list of branches, the concentration agreement, a statement of products and annual sales, a statement of the economic dimensions of the concentration, three years of audited financial statements, a shareholder list showing holdings, a list of board members and directors, and any additional documents requested by the Administration. The breadth of the filing requirements means that competition clearance is part of the transaction process.
Public notice
Following notification, Article 22(3) provides for publication of a summary in two local daily newspapers at the applicant’s expense. Interested parties then have a 30-day period in which to submit objections.
Review period
Under Article 24, the Director General has 45 days to approve, conditionally approve, or reject the application. The period may be extended by a further 45 days where information exists that may affect the likely outcome, provided that the applicant is notified before the original period expires. The review clock may also pause while additional documents are being provided or while an objection from a third party is pending.
For transaction planning, these timelines matter. Competition clearance can affect the overall timetable for completing the transaction and should therefore be reflected in the transaction documents and conditions precedent.
Deemed rejection
Article 24(4) provides that where the Director General does not issue a decision within the applicable period, the application is deemed rejected. This has direct implications for the drafting of transaction agreements, particularly provisions dealing with regulatory approvals and the conditions that must be satisfied before closing.
Minimum capital
Article 22(4) further requires the resulting entity to have a minimum capital of USD 150,000.
What the Competition Law Adds: Assessing the Transaction Beyond Corporate Formalities
The Companies Law addresses the legal and corporate structure for mergers and acquisitions in Palestine. It does not, however, assess the transaction by reference to its effect on competition or the position of the resulting entity in the relevant market. That is where the Competition Law adds a separate layer of analysis.
Dominance and market position
Article 20 provides for an assessment of dominance based on an entity’s ability to control or influence prices or supply in the relevant market, together with a market-share threshold of more than 35% by asset value or annual sales.
The 35% threshold is not necessarily determinative in isolation. Article 20(3) allows dominance to be found below that threshold where the Administration determines that the entity has the capacity to cause harm to the market. The competition analysis therefore concerns the substance and potential market effects of the transaction, rather than whether the corporate steps required for a merger have been properly completed.
Revocation of approval
The regulatory risk can also continue after approval. Article 25 allows an approval to be revoked where it was based on incorrect or incomplete information, or where the applicant fails to comply with conditions attached to the approval.
The accuracy and completeness of the competition filing therefore matter beyond the initial application process.
Challenges and appeals
The Competition Law also establishes mechanisms for challenging decisions. Under Article 27, an interested party may submit an administrative complaint to the Administration within 15 working days of a decision. Following rejection of the complaint, an appeal may subsequently be brought before the Administrative Court within 30 working days.
These mechanisms add another consideration to transaction planning where a concentration is subject to regulatory review or challenge.
Legal Consequences of Non-Compliance
The two legal frameworks for mergers and acquisitions in Palestine carry separate consequences for non-compliance. Under Article 34 of the Competition Law, proceeding with an economic concentration without the required approval may result in a fine of USD 15,000 to USD 75,000, in addition to any applicable criminal penalties. Submitting false or incorrect information may result in a fine of USD 1,500 to USD 15,000 under Article 33. Under Article 37, fines are doubled for repeat violations. There is also a transitional dimension to the Competition Law. Article 38 required entities with existing arrangements that did not comply with the Law to rectify their position within six months of its entry into force.
The Companies Law creates separate exposure in relation to the merger process. Article 305 provides for personal civil liability on the part of directors and auditors for losses suffered by shareholders or creditors as a result of violations of the merger provisions. The consequences can also extend to the validity of the merger itself. Under Article 304(5), a completed and registered merger may be nullified by court order for failure to comply with the applicable legal requirements, subject to the one-year period running from the merger assembly and registration.
Conclusion
The legal framework for mergers and acquisitions in Palestine now requires transaction parties to navigate two distinct but overlapping regimes. The Companies Law determines how a merger is structured and completed from a corporate perspective, including the merger plan, shareholder approvals, auditor and management reports, creditor protections, and registration. The Competition Law adds a separate regulatory assessment where the transaction constitutes an economic concentration, including prior approval, notification requirements, market assessment, potential conditions, and review and appeal mechanisms. The intersection of the two frameworks makes sequencing particularly important. Competition clearance must be addressed before the resulting entity can be licensed, while the corporate process must satisfy the requirements for the merger to become legally effective.
Understanding the two tracks at the outset allows transaction documents, conditions precedent, regulatory filings, shareholder processes, and closing timelines to be structured around the applicable requirements rather than addressed piecemeal. Kurdi & Co. advises on the full M&A transaction lifecycle in Palestine, from transaction structuring and merger plan preparation under the Companies Law to competition clearance filings and regulatory engagement with the General Directorate of Competition. For advice on how Palestine’s dual approval framework may affect a proposed transaction, contact our team.
This Article was researched and written on September 20th, 2026 by Samer Kurdi.
