Successful cross-border merger of a German GmbH with an English limited company

On 14 June 2012, ebl miller rosenfalck obtained a pre-merger certificate for a client, in respect of a cross-border merger of a UK limited company and a German GmbH, by way of formation of a new company in Germany.

In this matter previous English advisors had failed to obtain the desired Court Order after more than one attempt, perhaps reflecting a general uncertainty in recently adopted English procedural requirements for such applications.

We are aware anecdotally that there have been other cases where the merger process including a UK company has become stuck or delayed, due either to UK advisors’ inability to satisfy the evidential burden imposed by the court, or where the fees charged/quoted being disproportionate. Some have had unfortunate experiences of lengthy applications ending up either aborting the merger process due to the increased costs as a result of inadequate advice, or switching advisors and incurring further costs.

We therefore take this opportunity to briefly explain the UK process.

Traditionally English law is not familiar with the Civil law concept of mergers whereby companies’ activities are transferred to another legal entity without dissolution – rather, businesses would typically be merged under English law by a combination of transfer of assets followed by the liquidation of one or more transferors. As a result of such unfamiliarity with the concept, English courts are very cautious when dealing with applications to merge companies and particularly so when there is a cross-border element.

The Companies (Cross-Border Mergers) Regulations 2007 (“CCMR”) implements the EU Directive on Cross-Border Mergers of limited liability companies (2005/56/EC).

The pre-merger process under the CCMR and related Civil Procedure Rules in England aims to satisfy the English Court that substantive requirements of the CCMR are properly fulfilled.

Obtaining a pre-merger certificate in England is a two-stage process consisting of two hearings before a registrar (judge). At the first hearing, permission to hold a meeting of members (and/or creditors) is sought, following which the order and documents are filed at Companies House. At the second hearing, the pre-merger certificate will be issued provided that the Court is satisfied that the relevant parts of the regulations have been satisfied and it is the task of the Applicants’ solicitor to ensure that compliance is demonstrated to the court. This is done by completing and taking the court through a comprehensive witness statement which must provide supporting documentation.

Upon receipt of the Court Order confirming that the pre-merger requirements have been completed by the Applicant, the Order can be produced to the court in the EU jurisdiction of choice for the purpose of applying for final approval of merger in that jurisdiction. A copy of the final approval is subsequently submitted to Companies House in the UK at which point the company name is removed from the register.

As the above UK regulations are relatively new, practice is still building and there is limited alternative guidance available for practitioners. We therefore recommend employing advisors with both experience of this area of law as well as an international commercial law understanding. It can be particularly advantageous to employ advisors with a dual qualification in a continental legal system as the advisor will have a deeper understanding of the foreign element of the transaction and therefore in a position with greater authority to explain legal and procedural differences to the application court.

 The material contained in this guide is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© Miller Rosenfalck LLP June 2012

Please contact:

Pia Dalziel - Solicitor & Advokat (Denmark)

DD +44 (0)20 7553 4070

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