CHANCERY DIVISION
COMPANIES COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
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IN THE MATTER OF EASYNET GLOBAL SERVICES LIMITED |
Claimant |
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- and - |
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IN THE MATTER OF THE COMPANIES (CROSS-BORDER MERGERS) REGULATIONS 2007 |
Defendant |
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Hearing dates: 18 October 2016
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Crown Copyright ©
Birss J:
INTRODUCTION
a) that there is jurisdiction ultimately to confirm the merger;b) that there is no reason apparent at this stage why the court should not exercise its discretion to sanction the merger; and
c) that the arrangements for the waiver of consideration are capable of being approved by the court.
The problem
Regulation 2 of the UK Regulations
"2 Meaning of "cross-border merger"
(1) In these Regulations "cross-border merger" means a merger by absorption, a merger by absorption of a wholly-owned subsidiary, or a merger by formation of a new company.
(2) In these Regulations "merger by absorption" means an operation in which—
(a) there are one or more transferor companies;
(b) there is an existing transferee company;
(c) at least one of those companies is a UK company;
(d) at least one of those companies is an EEA company;
(e) every transferor company is dissolved without going into liquidation, and on its dissolution transfers all its assets and liabilities to the transferee company; and
(f) the consideration for the transfer is—
(i) shares or other securities representing the capital of the transferee company, and
(ii) if so agreed, a cash payment,
receivable by members of the transferor company."
Article 2 of the EU Directive
"Definitions
For the purposes of this Directive:
[…]
2. 'merger' means an operation whereby:
(a) one or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company, the acquiring company, in exchange for the issue to their members of securities or shares representing the capital of that other company and, if applicable, a cash payment not exceeding 10% of the nominal value, or, in the absence of a nominal value, of the accounting par value of those securities or shares; or
(b) two or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to a company they form, the new company, in exchange for the issue to their members of securities or shares representing the capital of that other company and, if applicable, a cash payment not exceeding 10% of the nominal value, or, in the absence of a nominal value, of the accounting par value of those securities or shares; or
(c) a company, on being dissolved without going into liquidation, transfers all its assets and liabilities to the company holding all the securities or shares representing its capital."
"16 It can be seen from this that: (a) a merger by absorption in regulation 2(2) of the 2007 Regulations is derived from article 2(2)(a); (b) a merger by formation of a new company in regulation 2(4) is derived from article 2(2)(b); and (c) a merger by absorption of a wholly-owned subsidiary in regulation 2(3) is derived from article 2(2) (c). It is also important to note that the only description of the transferee in the first form of merger is that it is "another existing company, the acquiring company". The language is descriptive, not purposive. It says nothing about the intentions of the participating companies, or the reasons why the transferee company exists. Nor does it lay down any conditions that the existing company has to satisfy."
Postscript
"It is not the case that BV's only purpose in this transaction is to bring it within the scope of the Regulations. It is intended that BV should be dissolved without going into liquidation with the consequential effects on its assets and corporate status under the Regulations."
Annex 1 – the structures diagrammatically
Before:
After: