The Companies (Cross-Border Mergers) Regulations 2007

PART 2 U.K. PRE-MERGER REQUIREMENTS

Modifications etc. (not altering text)

C1 Pts. 1-3 applied (with modifications) (1.10.2009) by The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 (S.I. 2009/1804), regs. 2(3), 46

Court approval of pre-merger requirements U.K.

6.—(1) A UK merging company may apply to the court for an order certifying for the purposes of Article 10.2 of the Directive (issue of pre-merger certificate) that the company has completed properly the pre-merger acts and formalities for the cross-border merger.

(2) The court must not make such an order unless the requirements of regulations 7 to 10 and 12 to 15 (pre-merger requirements) have been complied with.

Draft terms of merger U.K.

7.—(1) The directors of the UK merging company must draw up and adopt a draft of the proposed terms of the cross-border merger.

(2) The draft must give particulars of at least the following matters—

(a) in relation to each transferor company and transferee company—

(i) its name,

(ii) its registered office, and

(iii) its legal form and the law by which it is governed;

(b) the share exchange ratio and the amount of any cash payment;

(c) the terms relating to the allotment of shares or other securities in the transferee company;

(d) the likely effects of the cross-border merger for employees of each merging company;

(e) the date from which the holding of shares or other securities in the transferee company will entitle the holders to participate in profits, and any special conditions affecting that entitlement;

(f) the date from which the transactions of the transferor companies are to be treated for accounting purposes as being those of the transferee company;

(g) any rights or restrictions attaching to shares or other securities in the transferee company to be allotted under the cross-border merger to the holders of shares or other securities in a transferor company to which any special rights or restrictions attach, or the measures proposed concerning them;

(h) any amount or benefit paid or given or intended to be paid or given to the independent expert referred to in regulation 9 (independent expert's report) or to any director of a merging company, and the consideration for the payment of benefit;

(i) the transferee company's articles of association, or if it does not have articles, the instrument constituting the company or defining its constitution;

(j) information on the procedures by which any employee participation rights are to be determined in accordance with Part 4 of these Regulations (employee participation);

(k) information on the evaluation of the assets and liabilities to be transferred to the transferee company; and

(l) the dates of the accounts of every merging company which were used for the purpose of preparing the draft terms of merger.

(3) Particulars of the matters referred to in sub-paragraphs (b), (c) and (e) of paragraph (2) may be omitted in the case of a merger by absorption of a wholly-owned subsidiary.

(4) The draft—

(a) must not provide for any shares in the transferee company to be allotted to—

(i) a transferor company (or its nominee) in respect of shares in the transferor company held by the transferor company itself (or its nominee); or

(ii) the transferee company (or its nominee) in respect of shares in the transferor company held by the transferee company (or its nominee); and

(b) must provide that where any securities of a UK transferor company (other than shares) to which special rights are attached are held by a person other than as a member or creditor of the company, that person is to receive rights in the transferee company of equivalent value, unless—

(i) the holder has agreed otherwise; or

(ii) the holder is, or under the draft is to be, entitled to have the securities purchased by the transferee company on terms which the court considers reasonable.

Directors' report U.K.

8.—(1) The directors of the UK merging company must draw up and adopt a report.

(2) The report must—

(a) explain the effect of the cross-border merger for members, creditors and employees of the company; and

(b) state—

(i) the legal and economic grounds for the draft terms;

(ii) any material interests of the directors (whether as directors or as members or as creditors or otherwise);

(iii) the effect on those interests of the cross-border merger, in so far as it is different from the effect on the like interests of other persons.

(3) Where the cross-border merger affects the rights of debenture holders of the company, the report must state—

(a) any material interests of the trustees of any deed for securing the issue of the debentures (whether as trustees or as members or as creditors or otherwise);

(b) the effect on those interests of the cross-border merger, in so far as it is different from the effect on the like interests of other persons.

(4) It is the duty of any trustee for the company's debenture holders to give notice to the company's directors of such matters relating to himself as may be necessary for the purposes of paragraph (3).

(5) The directors of the UK merging company must deliver copies of the report to its employee representatives (or if there are no such representatives, the employees) not less than 2 months before the date of the first meeting of the members, or any class of members, of the company (see regulation 13).

(6) If the employee representatives deliver an opinion on the report to the company's registered office not less than 1 month before the date of the first meeting of the members, or any class of members, of the company, every copy of the report issued after the date on which the opinion was delivered must be accompanied by the opinion.

(7) Any person who makes default in complying with paragraph (4) commits an offence.

(8) A person guilty of an offence under this regulation is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

Independent expert's report U.K.

9.—(1) A report must be drawn up in accordance with this regulation, unless—

(a) the cross-border merger is a merger by absorption of a wholly-owned subsidiary;

(b) the cross-border merger is a merger by absorption where 90% or more (but not all) of the relevant securities of the transferor company (or, if there is more than one transferor company, of each of them) are held by or on behalf of the transferee company; or

(c) every member of every merging company agrees that such a report is not required.

(2) The report must be prepared by—

(a) an independent expert who has been appointed for the UK merging company by its directors;

(b) an independent expert who has been appointed for all the merging companies by the court in accordance with paragraph (3); or

(c) a person who has been appointed for all the merging companies for the purposes of Article 8 (independent expert's report) of the Directive by a competent authority of another EEA State.

(3) The court may, on the joint application of all the merging companies, order the appointment of an independent expert to prepare a report for those companies in accordance with this regulation.

(4) Where it appears to an independent expert that a valuation is reasonably necessary to enable him to draw up the report, and it appears to him to be reasonable for that valuation, or part of it, to be made by another person who—

(a) appears to him to have the requisite knowledge and experience to make the valuation or that part of it, and

(b) is independent,

he may arrange for such a valuation (or accept one which has already been made), together with a report which will enable him to prepare his own report in accordance with this regulation.

(5) In the report the independent expert must—

(a) indicate—

(i) the methods used to arrive at the share exchange ratio; and

(ii) the values arrived at using each such method;

(b) describe any special valuation difficulties which have arisen;

(c) give an opinion—

(i) as to whether the methods used are reasonable in all the circumstances of the case;

(ii) if there is more than one method, on the relative importance attributed to each method in arriving at the value decided on; and

(iii) as to whether the share exchange ratio is reasonable;

(d) in the case of a valuation made by another person in accordance with paragraph (4)—

(i) state that fact and the date of the valuation;

(ii) state the person's name and what knowledge and experience he has to carry out the valuation;

(iii) describe so much of the assets and liabilities as was valued by the other person, and the method used to value them; and

(iv) state that it appeared to himself reasonable to arrange for the valuation to be so made or to accept a valuation so made.

(6) The independent expert has the right—

(a) of access to all such documents of every merging company; and

(b) to require from the companies' officers all such information,

as he thinks necessary for the purpose of making his report.

(7) In this regulation, “independent expert” means a person who—

(a) is eligible for appointment as a statutory auditor in accordance with section 1212 of the Companies Act 2006 M1 (eligibility for appointment as statutory auditor), and

(b) is independent.

(8) For the purposes of this regulation—

(a) a person is not independent if, by virtue of section 1214 of the Companies Act 2006 (independence requirement for statutory auditor), he would not be able to act as statutory auditor of all the merging companies; and

(b) section 1214 of the Companies Act 2006 applies in relation to all the merging companies as if they were companies in respect of which a person must be appointed as auditor under Part 16 of that Act (audit of companies).

(9) In this regulation “relevant securities”, in relation to a transferor company, means shares or other securities carrying the right to vote at general meetings of the company.

Marginal Citations

M1 2006 c.46.

Inspection of documents U.K.

10.—(1) The members of the UK merging company and its employee representatives (or if there are no such representatives, the employees) must be able, during the period specified in paragraph (2)—

(a) to inspect at the registered office of the company copies of the documents listed in paragraph (3);

(b) to obtain copies of those documents or any part of them on request free of charge.

(2) The period referred to above is the period—

(a) beginning one month before, and

(b) ending on the date of,

the first meeting of the members, or any class of members, of the company (see regulation 13).

(3) The documents referred to above are—

(a) the draft terms of merger;

(b) the directors' report;

(c) the independent expert's report, if such a report is required by regulation 9 (independent expert's report).

Power of court to summon meeting of members or creditors U.K.

11.—(1) The court may, on an application under this regulation, order a meeting of—

(a) members or a class of members, for the purposes of regulation 13 (approval of members in meeting);

(b) creditors or a class of creditors, for the purposes of regulation 14 (approval of creditors in meeting);

to be summoned in such manner as the court directs.

(2) An application under this regulation may be made by—

(a) the UK merging company,

(b) any member of the UK merging company in the case of a meeting of members or a class of members,

(c) any creditor of the UK merging company in the case of a meeting of creditors or a class of creditors, or

(d) in the case of a UK merging company in administration, the administrator.

(3) Section 323 of the Companies Act 2006 (representation of corporations at meetings) applies to a meeting of the creditors summoned under this regulation as to a meeting of the company (the references in that section to a member of the company being read as references to a creditor).

Public notice of receipt of registered documents U.K.

12.—(1) The directors of the UK merging company must deliver to the registrar of companies particulars of the date, time and place of every meeting summoned under regulation 11 (power of court to summon meeting of members or creditors) together with—

(a) a copy of the order made under that regulation;

(b) a copy of the draft terms of merger; and

(c) documents giving the following particulars in relation to each merging company—

(i) its name;

(ii) its registered office;

(iii) its legal form and the law by which it is governed;

(iv) in the case of a UK company, its registered number;

(v) in the case of an EEA company to which the First Company Law Directive applies, particulars of the register in which the company file mentioned in Article 3 of that Directive (file for each registered company to be kept in national register) is kept (including details of the relevant State) and its registration number in that register;

(vi) in the case of any other EEA company, particulars, if any, of the register in which it is entered (including details of the relevant State) and its registration number in that register.

(2) The directors must deliver these documents to the registrar not less than two months before the date of the first meeting of the members, or any class of members, of the company (see regulation 13).

(3) If the documents are delivered to the registrar in accordance with paragraphs (1) and (2), he must publish—

(a) in the Gazette, or

(b) if regulations have been made under section 1116 of the Companies Act 2006 (alternative to publication in the Gazette), in accordance with those regulations,

notice of his receipt of the documents.

(4) The notice must be published by the registrar at least one month before the date of the first meeting of the members, or any class of members, of the company (see regulation 13).

(5) The notice must include—

(a) the date of receipt of the documents;

(b) the particulars referred to in paragraph (1)(c);

(c) in relation to each UK merging company, a statement that information related to the company is kept in the UK register;

(d) a statement that regulation 10 (inspection of documents) requires copies of the draft terms of merger, the directors' report and (if there is one) the independent expert's report to be kept available for inspection;

(e) the date, time and place of every meeting summoned under regulation 11 (power of court to summon meeting of members or creditors).

(6) The following provisions of the Companies Act 2006 apply to the documents delivered to the registrar in accordance with paragraph (1) in the same way as they apply to documents subject to the Directive disclosure requirements (as defined in section 1078(1) of that Act)—

(a) section 1068 (registrar's requirements as to form, authentication and manner of delivery);

(b) section 1080 (the register);

(c) section 1086 (right to copy of material on the register);

(d) section 1089 (form of application for inspection or copy);

(e) section 1090 (form and manner in which copies to be provided);

(f) section 1091 (certification of copies as accurate); and

(g) section 1098 (public notice of removal of certain material from register).

Approval of members in meeting U.K.

13.—(1) Except as provided in paragraphs (3) and (4), the draft terms of merger must be approved by a majority in number, representing 75% in value, of each class of members of the UK merging company, present and voting either in person or by proxy at a meeting summoned under regulation 11 (power of court to summon meeting of members or creditors).

(2) The approval of the members may be made subject to—

(a) ratification of any arrangements adopted for employee participation in the transferee company in accordance with Part 4 of these Regulations (employee participation);

(b) an order of a competent authority of another EEA State which amends the share exchange ratio in accordance with Article 10.3 of the Directive (national procedure for amendment of share exchange ratio).

(3) The approval of the members is not required in the case of a transferor company concerned in a merger by absorption of a wholly-owned subsidiary.

(4) The approval of the members is not required in the case of an existing transferee company if—

(a) the publication of the notice required by regulation 12 (public notice of receipt of registered documents) took place in respect of the company at least one month before the date of the first meeting of members of the transferor companies;

(b) the members of the transferee company were able during a period beginning one month before, and ending on, the date of the first such meeting—

(i) to inspect at the registered office of the transferee company copies of the documents listed in regulation 10(3) (inspection of documents) in relation to all the merging companies, and

(ii) to obtain copies of those documents or any part of them on request; and

(c) (i) one or more members of the transferee company, who together held not less than 5% of the paid-up capital of the company which carried the right to vote at general meetings of the company (excluding any shares held as treasury shares), would have been able, during that period, to require a meeting of each class of members to be called for the purpose of deciding whether or not to agree to the scheme, and

(ii) no such requirement was made.

Approval of creditors in meeting U.K.

14.  If a meeting of creditors or a class of creditors is summoned under regulation 11 (power of court to summon meeting of members or creditors), the draft terms of merger must be approved by a majority in number, representing 75% in value, of the creditors or class of creditors (as the case may be), present and voting either in person or by proxy at the meeting.

Documents to be circulated or made available U.K.

15.—(1) Where a meeting is summoned under regulation 11 (power of court to summon meeting of members or creditors)—

(a) every notice summoning the meeting that is sent to a member or creditor must include copies of the documents referred to in regulation 10(3) (inspection of documents), and

(b) every notice summoning the meeting that is given by advertisement must—

(i) include copies of those documents, or

(ii) state where and how members or creditors may obtain copies of those documents.

(2) Where a notice given by advertisement states that copies of the documents referred to in regulation 10(3) (inspection of documents) can be obtained by members or creditors entitled to attend the meeting, every such member or creditor is entitled, on making application in the manner indicated by the notice, to be provided by the company with a copy of the documents free of charge.