The European Communities (Cross-Border Mergers) Regulations 2008 (implementing Directive 2005/56/EC on Cross-Border Mergers) facilitate mergers between Irish companies and those located elsewhere in the European Union (and those EEA States that have implemented the Directive). European limited companies that are capable of merger under national law can merge into Irish registered companies or vice versa, with the merging company ceasing to exist on completion of the merger. The Regulations permitted true "mergers" for the first time under Irish law, providing a new way for Irish public and private limited companies to make or receive a transfer of assets and liabilities to or from companies in other European/EEA jurisdictions.

What types of merger are permitted?

  • Merger by Absorption: where a subsidiary is absorbed into its parent company.
  • Merger by Acquisition: where an existing company acquires all the assets and liabilities of one or more transferor companies in exchange for the issue to the shareholders of the transferor companies of shares or securities in the acquiring company (with or without a cash payment).
  • Merger by Formation of a New Company: where two or more companies transfer all their assets and liabilities to a successor company formed for that purpose in exchange for the issue to their shareholders of shares or securities in the successor company (with or without a cash payment).

What are the benefits of a cross-border merger?

  • The Cross-Border Mergers Directive creates a harmonised and simplified procedure for cross-border mergers eliminating the need for individual transfer documents typical under the traditional business sale and purchase model.
  • A cross-border merger results in each transferor company being dissolved without going into liquidation, thus avoiding the publicity, delay and expense of a liquidation.
  • All of the assets and liabilities (including legal proceedings, employment contracts and other contracts, agreements or instruments) of the transferor companies are transferred to the surviving company by operation of law.
  • A cross-border merger can be used to reduce the number of legal entities and streamline corporate governance obligations and compliance costs within a corporate group.
  • The transfer of assets and liabilities under a cross-border merger should be broadly neutral from an Irish tax perspective and may have the advantage of increasing the possibility of claiming tax relief for losses that might otherwise be unavailable where the losses are losses of an overseas subsidiary.
  • In the case of merger by acquisition or by formation of a new company, the shareholders in the transferor companies can become shareholders in the surviving company when the merger becomes effective.
  • The merging companies may select a date from which transactions of the transferor companies are to be treated for accounting purposes as being those of the surviving company.

What steps are involved in a

cross-border merger?

The procedures for a cross-border merger vary depending on the type of merger undertaken, but all involve the preparation of common draft terms of merger between the companies involved (the contents of which are prescribed by the Regulations), the drafting of an explanatory report by the directors that must be made available to the Irish company's shareholders and advertisement of the proposed merger. The Irish High Court must also review and approve both outbound and inbound mergers involving Irish companies. Where applicable, employee protection provisions must also be observed. In some cases, an auditor's report on the merger will be required.

Legislative Changes

The European Communities (Mergers and Divisions of Companies) (Amendment) Regulations 2011 (the "2011 Regulations") have implemented Directive 2009/109/EC (which amended Directives 77/91/EEC, 78/855/EEC and 82/891/EEC, as well as the Cross-Border Mergers Directive). The 2011 Regulations permit companies to publish merger documents on their website instead of delivering these to the Companies Registration Office in Dublin or making them available for inspection at the Irish company's registered office. They also permit the use of electronic communications to provide copy documents to shareholders upon request.

Proposed Greencore / Northern Foods Merger

The proposed merger of Northern Foods plc, an English company, into Greencore Group plc, an Irish company, was the first cross-border merger between public limited companies listed on regulated markets in Ireland or the United Kingdom. While a competing bidder emerged for, and eventually acquired, Northern Foods, this transaction demonstrates that the cross-border merger regime can be used beyond the realm of intra-group reorganisations. The proposed transaction constituted a merger by absorption under English law and a merger by acquisition under Irish law, and would have resulted in Northern Foods' shareholders receiving new Greencore shares in consideration for the transfer of Northern Foods' assets and liabilities to Greencore. The transaction was regulated by the Panel on Takeovers and Mergers in the United Kingdom, and was a Class 1 transaction for Greencore under the Listing Rules of the Irish Stock Exchange.

Why Arthur Cox?

Arthur Cox is one of Ireland's largest law firms and has a long established history of advising on cross-border transactions.

Our practice encompasses all aspects of corporate and business law, providing a comprehensive service to an international client base ranging from multinational organisations, banks and financial institutions and established global leaders to government agencies and new players in emerging industry sectors.

Our reputation is based on proven professional skills, a thorough understanding of client requirements, sound judgment and a practical approach to resolving commercial problems.

We offer breadth and depth across every facet of corporate, financial and business law and have the resources to successfully manage and drive forward transactions on schedule, helping our clients achieve their business objectives.

Arthur Cox has advised on the following cross-border mergers:

  • Merger of SachsenLB Europe plc in Ireland into a member of the Landesbank Baden-Württemberg group in Germany, the first cross-border merger completed in Ireland.
  • Merger of Thrombogenics Limited in Ireland into ThromboGenics NV in Belgium.
  • Merger of Eurco Finance Limited in Ireland into Dexia Insurance Belgium S.A. in Belgium.
  • Merger of Giorgio Armani Netherlands BV in the Netherlands into GA Corporation Finance Limited in Ireland.
  • Merger of Thermo King Belgium N.V. into Ingersoll- Rand International Limited.
  • Merger of IBM International Holdings B.V. into IBM Ireland Product Distribution Limited.
  • Merger of FGA Capital Lux S.A. into FGA Capital Ireland plc.
  • Proposed Merger of Northern Foods plc into Greencore Group plc.
  • Merger of Bank of Scotland (Ireland) Limited into Bank of Scotland plc.
  • Proposed Merger of Enel Re Limited into Enel Re N.V.
  • Proposed Merger of Electricidade de Portugal Finance Co. (Ireland) Limited into EDP Servicios Financieros Espana, S.A.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.