Current Regime applicable to mergers
Under the European Communities (Cross-Border Mergers) Regulations 2008 (the “CBM Regulations”) Irish private companies are currently only permitted to merge with a company incorporated in another state within the European Economic Area (the EEA). Such mergers provide for the transfer by operation of law of the assets and liabilities of a company located in one EEA state to a company located in another EEA state. All applications by Irish companies to effect a cross-border merger are made to the High Court.
New regime applicable to mergers
Part 9 of the Act now provides for a new regime whereby two Irish private companies can merge. The procedure is modelled on the CBM Regulations applicable to cross-border mergers and allows for merger by:
Acquisition – One company acquires the assets and liabilities of one or more companies which is/are dissolved without going into liquidation. The acquiring company issues shares to the members of the dissolved company/companies in consideration of the transaction.
Absorption – a parent company absorbs the assets and liabilities of a wholly owned subsidiary, which is dissolved without going into liquidation.
Formation of a new company – a newly incorporated company acquires the assets and liabilities of one or more companies, which is/are dissolved without going into liquidation. The acquiring company issues shares to the members of the dissolved company/companies in consideration of the transaction.
Effecting Mergers under the New Regime
Mergers under Part 9 of the Act can be effected by either court order confirming the merger or by using a new Summary Approvals Procedure (the SAP) established under the Act. Under the SAP, the directors (or a majority of them) of each merging company swear a declaration in respect of the post merger solvency of the successor company. No later than 30 days thereafter, the members of each merging company must pass a unanimous special resolution approving the common draft terms of the merger.
The availability of the SAP is a welcome development to corporate restructuring, as it will lead to a reduction in the costs and time taken to implement the merger. The SAP is not available where one of the companies is a plc and in such instance an application must be made to the High Court.