Lawyer Monthly Magazine - April 2019 Edition

24 BREXIT www. lawyer-monthly .com APR 2019 higher costs of notarisation, it was more attractive for German businesses seeking limited liability to set up an English company and carry on business through a branch in Germany. Brexit has created a high number of mergers of English limited companies with EEA limited companies. One barrister even noted that he has completed more cross- border mergers in the last year compared to the last decade. The mechanics of the application are fairly regimented as follows: the first stage requires the English merging company to apply to the court for an order certifying that it has completed the pre- merger acts and formalities properly. The second stage is the approval of completion of a cross-border merger by the court in the country of the transferee company. Although absorption of a wholly owned subsidiary ought to be straightforward, the preparation requires a meticulous approach. In summary, regulations 7 and 8 of the UK Regulations require the directors of the UK merging company to draw up draft proposed terms of the cross- The Cross-border Mergers Regulations (2007), as amended (SI 2007/2974) (“the UK Regulations”) established a framework for cross-border mergers between English limited companies and those governed by the law of another EEA state. The framework is derived from the EU Directive 2005/56/EC on cross-border mergers of limited liability companies. This framework sets out three different structures which fall under the definition of a “merger”: (i) merger by acquisition; (ii) merger by formation of a new company and (iii) merger by absorption of a wholly owned subsidiary. In the case of a merger by absorption of a wholly owned subsidiary, this typically comprises the merging of a dormant English company with its main branch located in another EEA state which carries out all of the business of the company and where all the company’s employees are based. This structure has been popular as, until recently, the capital requirements for incorporating a limited company under certain EEA jurisdictions were considerably more onerous than in the UK. For example, in Germany, together with The Companies (Cross-Border Mergers) Regulations 2007 established a framework for cross- border mergers between UK companies and those governed by the law of another EEA state. Below Amanda Lathia, Associate at Hunters, examines how Brexit may well have an impact on the ability of UK companies to continue to benefit from this framework. B R E X I T CROSS - BORDER MERGERS VS BREX I T