UK: England and Wales: abuse of law and cross-border mergers

A belated note for the Court of Appeal decision Easynet Global Services Ltd, Re [2018] EWCA Civ 10, on appeal from [2016] EWHC 2681 (Ch). Handed down last month, the principal question was whether the Companies (Cross-Border Mergers) Regulations 2007 applied to a merger involving UK companies and a single Dutch company. The Dutch company was dormant and had never traded, but its inclusion meant that the merger would be a cross-border merger for the purposes of the Regulations (the Regulations implementing the Cross-Border Mergers Directive 2005/56/EC).

At first instance, the trial judge, Birss J., held that the merger did not fall within the Regulations. The cross-border character of the proposed merger was, in his view, "only the result of a device" (para. [20]). The Court of unanimously disagreed: the proposed merger constituted a cross-border merger within the scope of the 2005 Directive and Regulations and did not involve any abuse of law.

EU: Commission begins company law consultation

The European Commission has begun a consultation seeking views on how to promote the use of online tools throughout a company's life, as well as the problems that currently exist in cross-border restructuring and operations (including conflict of law rules): see here.

Singapore: MAS publishes updated takeover code

An updated edition of the Singaporean Takeovers and Mergers Code has been published by the Monetary Authority of Singapore: see here. The new Code takes effect on 25 March and has been amended to clarify, amongst other things, that a board's solicitation of a competing offer does not amount to the frustration of the existing offer.

UK: England and Wales: cross border merger approval - jurisdiction to make a conditional order

Judgment was given yesterday in Re International Game Technology Plc [2015] EWHC 717 (Ch). The trial judge, Mr Justice Birss, considered the operation of Regulation 16 ("Court approval of cross-border merger") of the Companies (Cross-Border Mergers) Regulations 2007 and held that the court had jurisdiction to make a conditional order.

UK: The Companies (Cross-Border Mergers) (Amendment) Regulations 2015

The Companies (Cross-Border Mergers) (Amendment) Regulations 2015 were laid before Parliament yesterday and come into force on 6 April 2015: see here or here (pdf). The Regulations seek to clarify the UK's implementation of Article 17 of the Cross-Border Mergers Directive 2005/56/EC by amending article 16(3) of the Companies (Cross-Border Mergers) Regulations 2007 in order to make explicit that a merger may not be declared null and void when it has taken effect. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Note: the operation of the Directive was the subject of a consultation by the European Commission that concluded last month: see here.

Europe: Commission consultation on cross-border mergers and divisions

The European Commission has begun a consultation on the EU legal framework for cross-border mergers and divisions: see here. The Commission is collecting information in order to assess the functioning of the framework and any potential need for changes in the current rules.

UK: England and Wales: delay and the issue of a pre-merger certificate

The ICLR has provided a summary for the recent High Court decision Re House-Clean Ltd [2013] WLR (D) 165: see here. The summary's headnote reads: "Delay was not relevant to the court’s consideration of whether the pre-merger requirements within Part 2 of the Companies (Cross-Border Mergers) Regulations 2007 had been satisfied and the court was obliged to issue a pre-merger certificate to a United Kingdom-based merging company if those requirements had been carried out." The decision is not, at present, available on the BAILII database.

UK: Government responds to Heseltine review recommendations

The Government has published its response to the recommendations made in Lord Heseltine's report "No Stone Unturned in the Pursuit of Growth": see here (pdf). The majority of Lord Heseltine's recommendations have been accepted. The Government has not accepted the seventy third of Lord Heseltine's recommendations: greater intervention with regard to takeovers and foreign ownership and engagement with potential foreign investors to secure commitments regarding research and skills and, exceptionally, to discourage unwanted investment (underpinned by a greater willingness to use existing powers under the Enterprise Act 2002 to intervene in mergers). The Government's response to this recommendation was brief and did not deal with all elements of the recommendation: "The Government is committed to open markets and is equally committed to engaging with companies and investors to promote investment which benefits the UK economy" (para. 1.48).

UK: The Heseltine Review report

The Heseltine Review report was published yesterday: see here (pdf). Titled No stone unturned in the pursuit of growth, the report contains 89 recommendations.  One recommendation - number 73 - concerns takeovers and foreign ownership: Lord Heseltine argues that the Government needs to take a more interventionist approach, including engaging with potential foreign investors to secure commitments regarding research and skills and, exceptionally, to discourage unwanted investment. Such an approach should, he states, be underpinned by a greater willingness to use existing powers under the Enterprise Act 2002 to intervene in mergers.

UK: Takeover Code amendments - three consultation papers published

The Takeover Panel Code Committee yesterday published three consultation papers outlining proposed changes to the City Code on Takeovers and Mergers. The first paper concerns, amongst other things, profits forecasts, quantified financial benefits statements and material changes in information: see here (pdf). The second paper, available here (pdf), is concerned with issues relating to pension scheme trustees. In this paper the Code Committee proposes that the provisions of the Code which apply to employee representatives should apply also to the trustees of the offeree company’s pension scheme(s). As such offerors will, amongst other things, be required to state in the offer document what their intentions are with regard to the offeree company’s pension scheme(s). The third paper, available here (pdf), is concerned with the companies to which the Code applies and in this regard the Committee is proposing removing the residency test.

UK: the Companies (Cross-Border Mergers) Regulations 2007

The ICLR, as part of its free case summary service, has provided a summary for Re Itau BBA International Ltd [2012] EWHC 1783 (Ch), the headnote for which reads: "The definition of 'existing transferee company' in regulation 3(1) of the Companies (Cross-Border Mergers) Regulations 2007 was intended to do no more than to exclude from merger by absorption a transferee company formed for the purposes of, or in connection with, a merger by formation of a new company".

Europe: Commission consults on application of Directive 2007/44 EC

The European Commission is seeking views on the application of Directive 2007/44 EC (regarding the procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector) and in particular whether it has reduced barriers to cross-border mergers and acquisitions. The consultation paper is available here (pdf).

UK: the Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011

The Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011 were made on 25 June, laid before Parliament on 1 July, and come into force on 1 August. The Regulations are available here and here (pdf). The accompanying explanatory memorandum is available here (pdf). The Regulations make amendments to the Companies Act (2006) and the Cross-Border Mergers Regulations 2007 (SI 2007/2974) in order to implement Directive 2009/109/EC regarding the reporting and documentation requirements in mergers and divisions.

Europe: Directive 2011/35/EU on the mergers of public limited liability companies (codification)

A copy of the codifying Directive 2011/35/EU concerning the mergers of public limited liability companies has been published in the Official Journal of the EU: see here (pdf).

UK: the Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011 - draft published

The Department for Business, Innovation and Skills has published a draft of the Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011: see here (Word). The purpose of the Regulations is to implement EU Directive 2009/109/EC which makes amendments to four earlier Directives: the Second, Third and Sixth Company Law Directives as well as the Cross-Border Merger Directive. Further information is provided in the explanatory text accompanying the Regulations: see here (pdf).

UK: the FSA's approach to intensive supervision and corporate governance

Jon Pain, the Managing Director of Supervision at the Financial Services Authority, delivered a speech today in which he provided some interesting examples of the regulator's new, so-called "intensive", approach to regulation: see here. These included being "at the heart of the analysis and judgements being made by senior management" in mergers and acquisitions and actively encouraging changes in board membership. With regard to regulated firms' governance, Mr Pain observed:

... it is clear to us that the financial crisis exposed significant shortcomings in governance and management across numerous firms. And although poor governance was only one of many factors that contributed to the financial crisis, it was an important one. We are therefore looking closer at behaviour and culture in firms, particularly ensuring two key things: [1] that good culture and behaviours in firms is being driven by senior management; and [2] that good culture and behaviours are being reinforced by effective corporate governance and the role of the boards.

Through the crisis we have also seen examples where boards did not sufficiently challenge the executive or understand their firms’ business models and their inherent risks, and where boards did not simply receive the relevant management information to be able to carry out their important oversight role. Boards need to make sure they have the right people, asking the right questions, informed by the right information ... where this is not the case we will take action".

Jersey: merger reform for Jersey companies?

The States of Jersey Economic Development Department has published a green paper - see here (pdf) - in which this question is asked: should the Companies (Jersey) Law 1991 be amended to permit Jersey companies to merge directly with a wider range of bodies, including foreign companies?