Cross Border Mergers

Author:Mr Matthew Ryan and Adrian Benson
Profession:Dillon Eustace
 
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Introduction Directive 2005/56/EC (the "CBM Directive") (implemented in Ireland on 27 May, 2008 by the European Communities (Cross-Border Mergers) Regulations, 2008 (the "CBM Regulations")) provides a harmonised platform for mergers within the European Economic Area ("EEA"). The CBM Regulations permit an Irish limited liability company (other than a company that is limited by guarantee) to be party to a cross-border merger with another such entity registered in an EEA member state. How to Effect a Cross-Border Merger A cross-border merger may be effected in one of three ways, as follows: (i) Merger by absorption, whereby an existing company acquires all the assets and liabilities of its wholly owned subsidiary. On being dissolved and without going into liquidation, the subsidiary transfers all of its assets and liabilities to its parent. (ii) Merger by acquisition, whereby a company (other than a company formed for the purpose of the operation) acquires all of the assets and liabilities of another company in exchange for the issue to the members of the transferor company of securities or shares in the acquiring company, either with or without any cash payment. The transferor company is then dissolved without going into liquidation. (iii) Merger by formation of a new company, whereby two or more companies (on being dissolved without going into liquidation) transfer all of their assets and liabilities to a successor company that they form in exchange for the issue to their members of securities or shares representing the capital of that new company, with or without any cash payment. The Benefits of a Cross-Border Merger The cross-border merger process provides legal certainty as once the merger is approved by the competent authority in a member state (in Ireland, the High Court) it cannot subsequently be deemed null and void. In addition, and provided the successor company complies with all filing requirements/any other special formalities required by law (including the law of any other relevant EEA member state) for the transfer of the assets and liabilities of the transferor companies to be effective in relation to other persons: (i) liquidation is avoided as the transferor company will be dissolved automatically once the merger is effected, thereby providing significant cost savings; and (ii) the assets and liabilities of the transferor companies transfer automatically by operation of law, thereby eliminating the need for any additional...

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