Ireland Implements EU Cross Borders Mergers Directive

by Amanda Banks, for LawAndTax-News.com, London

30 May 2008

Mary Coughlan TD, Tanaiste and Minister for Enterprise, Trade and Employment signed into Irish law on Wednesday the European Communities (Cross-Border Mergers) Regulations 2008, which have immediate effect.

The Regulations transpose into Irish legislation Directive 2005/56/EC on Cross-Border Mergers.

The Tanaiste explained that:

“This Directive forms part of a package of measures in the EU Financial Services Action Plan designed to facilitate corporate restructuring. It, along with measures such as the Takeovers Directive and European Company Statute, offer a broad range of mechanisms, and provide flexibility regarding the ways by which European companies may choose to restructure."

Under this Directive, limited liability companies across the EEA are allowed to merge cross border, provided that these companies are allowed to merge in their own jurisdictions, thus providing a mechanism for corporate re-constitution across EEA frontier.

“This innovative provision can be availed of by companies without undue cost or administrative complexity, in a process that affords legal certainty," the Tanaiste continued.

The framework providing for these cross-border mergers are clearly set out in the Regulations, and include the categories of processes by which they can be effected.

These are by acquisition, by formation of a new company, or by absorbtion, which relates to assimilation of a wholly-owned subsidiary.

An Irish company wishing to participate in any one of the three categories of cross-border merger must be eligible to merge under our national legislation, and must involve at least one company formed and registered in an EEA State other than Ireland.

The Cross Border Mergers Directive is facilitative, in that it provides a legal mechanism and framework within which companies located in differing EEA jurisdictions may chose to merge.

If they prefer, however, companies may choose to restructure through recourse to takeovers instead.

In line with the Directive, the Regulations require that provision be made under any cross-border merger for obligations regarding employee participation in the new company to be adhered to.

In cases where employee participation is already a feature in one or more of the companies involved in the merger, the companies must first negotiate with employees on their involvement in the successor company, depending on the relevant circumstances.

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