EU cross border mergers | structuring to fall within the EU cross-border merger regime
The United Kingdom Court of Appeal (“Court of Appeal”) has confirmed in a judgement (January 2018) that a company was entitled to use and benefit from the EU cross border mergers regime* for its corporate reorganisation. This is notwithstanding the fact that the only cross-border element was the inclusion of a dormant foreign entity which was in place solely to allow the UK structure to benefit from the cross-border rules.
The Court of Appeal looked at the purpose of the underlying EU directive dealing with the cross border merger regime.
It determined inter alia that the EU cross border regime exists in order to facilitate corporate freedom of establishment in any EU member country and the Courts should not be restricting this right. The object of the law was to facilitate cross-border mergers “for whatever purpose”. The structure under scrutiny, was for a legitimate commercial objective and was structured in order to take advantage of the right to use the cross border merger regime. It found that there had been no abuse of rights in organising the transaction to fall within this regime.
Main Contact| David Hill
Head | Cross Border & International Transactions, Corporate/M&A
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*Cross Border Mergers Directive 2005/56/EC, implemented in the United Kingdom through the Companies (Cross Border Mergers) Regulations 2007. These rules were consolidated in EU Directive 2017/1132.