Mergers & Corporate Restructuring
We provide expert advice and documentation to ensure companies and groups are optimally structured including mergers, group reorganisations and entity simplifications.
Under the Companies Act 2014 there are three types of mergers:
Under the Companies Act 2014, it is possible for a private limited company to be involved in a merger of companies. Under the previous Companies Acts, this was only available to public limited companies. PLC’s still have the option to merge under Part 17 of the 2014 Act.
None of the merging companies under Part 9 of the Companies Act 2014 can be a Public Limited Company and one of the companies must be an LTD company (private company limited by shares, registered under Part 2 of the Companies Act 2014) (See section 2 and 462 Companies Act 2014 for definition).
There are several means of achieving a merger. It can be done by means of the Summary Approval Procedure set out in Part 4 of the Act or by the means of merger available under Part 9. Acquisition can be separately employed under Chapter 1 of Part 9 of the Act. Under the Part 9 merger procedure, Form DM1 is submitted together with the Common Draft Terms. Court permission then required. Following the merger, the transferor companies are dissolved without entering liquidation.
Merger can be by acquisition, absorption or formation of a new company and can be made under Part 9 of the Act.
Merger by Acquisition is where a company, without going into liquidation, is dissolved and its assets and liabilities are transferred to a company in exchange for shares in the acquiring company with/without any cash payment.
Merger by Absorption is where a company, without going into liquidation, is dissolved and its assets and liabilities are transferred to a company that is the holder of all of the shares representing the capital of the dissolving company.
Merger by formation of a new company – one or more companies, without going into liquidation, is/are dissolved and the assets/liabilities are transferred to a company in exchange for shares in the new company with or without any cash payment.
The Act facilitates mergers by two different routes: the Summary Approval Process (SAP) and a High Court Approval Process. As the SAP is by far the more commonly used of the two, this article concentrates on that process. However we will also look at why, in some cases, the High Court route might be preferable (see below).
The SAP requires: (1) a majority of the directors of each merging entity making a Declaration of Solvency in which they confirm that the successor company will be in a position to pay both its own debts and the debts of the transferring (dissolved) company as they fall due during the 12 months following the merger and (2) the approval of the merger by unanimous approval of the shareholders of each of the merging entities.
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