Lawyer Monthly Magazine - April 2019 Edition

25 Cross-Border Mergers Vs Brexit www. lawyer-monthly .com APR 2019 Written By Amanda Lathia, Associate at Hunters border merger and a directors’ report respectively, both of which must fulfil specified requirements. In particular, the directors’ report must explain the effect of the cross- border merger for members, creditors and employees of the company as well as inform the court as to how these documents were delivered to the employees. Regulation 9 requires an independent expert’s report which does not apply toamerger byabsorption of a wholly owned subsidiary. Regulation 10 requires the members of the UK merging company and its employees or their representatives to be able to inspect the draft terms of the merger, the directors’ report and independent expert’s report (if there is one). Regulation 12 deals with public notice of receipt of registered documents, with a requirement to file them at Companies House, which then must publish confirmation of receipt in the London Gazette at least two months before a hearing for an application for a pre-merger certificate. Regulation 13 deals with the need for approval of the draft terms of the merger by members of the company, which again does not apply to a merger by absorption of a wholly-owned subsidiary. Regulation 14 deals with approval by creditors and applies only where the court has ordered a meeting of creditors. Finally, Regulation 15 deals with the provision of documents where a meeting of members takes place. If a company in an EEA state has not yet begun the process, there may still be time depending on whether the UK reaches an agreement with the rest of the EU on the European Union (Withdrawal) Bill. Ideally, the advisors instructed should speak both English and the language of the other EEA state to check the translation of the documents. Thankfully, the Companies Court is aware of the urgency of mergers of subsidiaries and may be able to set a hearing date with little notice and in some cases before the Brexit deadline. All being well, the English court will issue the pre-merger certificate on the same day as the hearing. It is impossible to predict the outcome of an EEA pre-merger process which starts before Brexit, but is not completed by the exit date. If Brexit does go ahead without a withdrawal agreement, the Cross-Border Merger Regulations 2007 will be revoked in their entirety and the whole cross-border merger regime, as it applies to the UK, will cease to apply. In any case, it is essential to at least begin the process of stage 1 before exit day. The withdrawal agreement may still be agreed or alternatively the UK might apply for an extension of Article 50 to allow more time for politicians to negotiate a change to the agreement. If we do manage to reach a withdrawal agreement, there will be a transitional period during which EU law will continue to apply in the UK and any cross-border merger process that has begun before 29th March can be completed. LM “Although absorption of a wholly owned subsidiary ought to be straightforward, the preparation requires a meticulous approach.”