Cross-Border Mergers: Still In Time To Complete A UK Cross-Border Merger?

Author:Mr Graeme Preston, Andrew Blacoe, Damien Roberts, Rebecca Davis, Filip Gavanski, Sarah Hawes and Antonia Kirkby
Profession:Herbert Smith Freehills

Following the UK's departure from the European Union on 31 January 2020 and much uncertainty as to the future of the cross-border merger regime in the UK, it has now been confirmed that the cross-border merger procedure will continue to be available between the UK and EU Member States until the end of the transition period, expected to be on 31 December 2020. For global companies looking to reorganise their group structure as a result of Brexit, this provides a welcome additional period in which to take advantage of the regime, which offers a useful way of migrating UK companies to Europe.

Cross-border mergers - an overview

Unlike many European jurisdictions, the UK does not have a domestic merger regime. In order to effect a UK 'merger', it is therefore necessary to complete either a share or business transfer, and then to dissolve or liquidate the transferor entity if this is no longer needed. The exception to this is the cross-border merger regime, derived from the European Union Directive 2005/56/EC (as subsequently repealed and codified by Directive 2017/1132/EU), which was implemented in the UK by The Companies (Cross-Border Mergers) Regulations 2007 (as amended) (the "CBMR"). Under the CBMR, a merger of one or more UK companies can be completed, providing the merger is with at least one company from a different EEA state.

One of the key advantages of the cross-border merger process is that upon completion of the merger: (i) all of the assets and liabilities of the transferor(s) pass automatically by operation of law to the transferee; and (ii) the transferor entities are dissolved and cease to exist. The regime therefore provides a useful way of amalgamating and migrating entities, either where the scope of their assets and liabilities is to some extent unclear, or where key assets such as licences or liabilities are desired to be transferred without having to complete an additional transfer process. The automatic dissolution of the transferring entities upon completion of the merger can also be a useful way of rationalising group entities which are no longer needed, without having to complete an additional liquidation or strike-off process.

Following the announcement of Brexit, the cross-border merger had a surge in popularity as companies sought to migrate their UK groups to Europe. Shortly before the UK's departure from the EU on 31 January 2020, it was confirmed that the regime would continue to be available for an additional 11...

To continue reading