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Cross-Border Mergers Directive and Its Impact in the UK

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Cross-Border Mergers

Part of the book series: Studies in European Economic Law and Regulation ((SEELR,volume 17))

Abstract

This paper assesses the impact of the Cross-border Mergers Directive in the UK. It finds that merger cases between 2007 (when the Directive was implemented in the UK) and 2017 reveal a constructive facilitation of cross-border mergers in the UK. It finds that courts have applied the Directive in a way that gives effect to freedom of establishment. Despite the facilitation of cross-border mergers, it finds that schemes of arrangement, and takeovers, are still more popular than cross-border mergers. It argues that the impact of the Cross-border Mergers Directive in the UK is due to the Directive providing a forum shopping opportunity for non-UK companies to use the service of the UK court to restructure their companies using the continental-type mergers. It argues that if or when the Cross-border Mergers Directive ceases to apply in the UK post-Brexit, the vacuum of cross-border mergers may lead to more takeovers in the UK and EEA companies using the English schemes of arrangement.

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Notes

  1. 1.

    European Commission, “Study on the Application of the Cross-Border Mergers Directive” (September 2013).

  2. 2.

    Case C-411/03 Sevic Systems AG [2005] ECR I-10805 [para 19].

  3. 3.

    Siems (2007), p. 309.

  4. 4.

    Centros Ltd v Erhvervs- og Selskabsstyrelsen [1999] ECR I-01459 (para 39).

  5. 5.

    Gerner-Beuerle et al. (2017).

  6. 6.

    Third Council Directive 78/855/EEC of 9 October 1978 based on Article 54 (3) (g) of the Treaty concerning mergers of public limited liability companies.

  7. 7.

    Papadopoulos (2008).

  8. 8.

    Siems (2004), p. 172.

  9. 9.

    Statutory Instrument 1987/1991.

  10. 10.

    [2012] EWHC 1783 (Ch); [2013] Bus LR 490, 500.

  11. 11.

    Companies Act 2006, Part 27, s 902.

  12. 12.

    Companies Act 2006, Part 27, s 904.

  13. 13.

    A simply search for UK literature on the Third Directive (“Directive 78/855/EEC”) in one popular UK company law journal (the Company Lawyer) found no discussion on this Directive (29 August 2017).

  14. 14.

    Davies and Worthington (2012), p. 114.

  15. 15.

    Article 1, the CBM Directive 2005/56/EC.

  16. 16.

    Article 2(1)(b) of the CBM Directive defines “limited liability companies” as companies with “share capital”—which suggests excluding companies limited by guarantee without share capital.

  17. 17.

    Companies Act 2006, s 1; Companies (Cross-Border Mergers) Regulations 2007, reg 3(1).

  18. 18.

    Companies Act 2006, s 1043; Companies (Cross-Border Mergers) Regulations 2007, reg 5.

  19. 19.

    Companies (Cross-Border Mergers) Regulations 2007, reg 3(1) defines a “UK company” as a company within the meaning of the Companies Acts (see Companies Act 2006, s 1) other than—(a) a company limited by guarantee without a share capital (see Companies Act 2006, s 5) or a company being wound up.

  20. 20.

    Companies (Cross-Border Mergers) Regulations 2007, reg 6; Re House-Clean Ltd [2013] EWHC 2337 (Ch); [2013] BCC 611.

  21. 21.

    Companies (Cross-Border Mergers) Regulations 2007, reg 16; Re International Game Technology plc [2015] EWHC 717; [2015] BCC 866.

  22. 22.

    Companies (Cross-Border Mergers) Regulations 2007, reg 7; Re House-Clean Ltd [2013] EWHC 2337 (Ch); [2013] BCC 611; Re ITouch Ltd [2016] EWHC 3448 (Ch); [2017] BCC 96.

  23. 23.

    Companies (Cross-Border Mergers) Regulations 2007, reg 8; Re House-Clean Ltd [2013] EWHC 2337 (Ch); [2013] BCC 611.

  24. 24.

    Companies (Cross-Border Mergers) Regulations 2007, reg 9; Re International Game Technology plc [2015] EWHC 717; [2015] BCC 866.

  25. 25.

    Companies (Cross-Border Mergers) Regulations 2007, reg 10; Re House-Clean Ltd [2013] EWHC 2337 (Ch); [2013] BCC 611.

  26. 26.

    Companies (Cross-Border Mergers) Regulations 2007, reg 12; Re House-Clean Ltd [2013] EWHC 2337 (Ch); [2013] BCC 611.

  27. 27.

    Companies (Cross-Border Mergers) Regulations 2007, reg 13; Re Oceanrose Investment Ltd [2008] EWHC 3475 (Ch); [2009] Bus LR 947; Re Olympus UK Ltd [2014] EWHC 1350 (Ch); [2004] 2 BCLC 402.

  28. 28.

    Companies (Cross-Border Mergers) Regulations 2007, reg 14.

  29. 29.

    Companies (Cross-Border Mergers) Regulations 2007, reg 15.

  30. 30.

    [2013] EWHC 3279 (Ch); [2014] BCC 70.

  31. 31.

    Pannier (2005), p. 1425.

  32. 32.

    Companies (Cross-Border Mergers) Regulations 2007, reg 16(1)(f).

  33. 33.

    Companies (Cross-Border Mergers) Regulations 2007, reg 22.

  34. 34.

    Ugliano (2007), p. 609.

  35. 35.

    [2009] Bus LR 947, 948.

  36. 36.

    [2013] EWHC 2789 (Ch).

  37. 37.

    [2014] BCC 70.

  38. 38.

    [2014] Bus LR 816, 822.

  39. 39.

    [2014] EWHC 4713 (Ch).

  40. 40.

    [2015] Bus LR 844, 847.

  41. 41.

    Rickford (2005), p. 1399.

  42. 42.

    Horan et al. (2013), p. 349.

  43. 43.

    This is based on a search in the Westlaw database for the period between 15 Dec 2007 and 29 Aug 2017.

  44. 44.

    [2011] EWHC 3089 (Ch); [2012] BCC 67.

  45. 45.

    Re National Bank Ltd [1966] 1 WLR 819, 829.

  46. 46.

    [2012] EWHC 1783 (Ch); [2013] BCC 225.

  47. 47.

    Horan et al. (2013), p. 353.

  48. 48.

    This case was heard in the Chancery Division on 30 November 2016 (unreported).

  49. 49.

    [2012] EWHC 3576 (Ch); [2013] BCC 275.

  50. 50.

    [2013] EWHC 2842 (Ch); [2013] BCC 767.

  51. 51.

    [2013] EWHC 3279 (Ch); [2014] BCC 70.

  52. 52.

    [2014] EWHC 1350 (Ch); [2014] Bus LR 816.

  53. 53.

    Enriques (2017), p. 768.

  54. 54.

    Atlantic Star v Bona Spes [1974] AC 436, 442 (HL).

  55. 55.

    Société du Gaz de Paris v Armateurs francais [1926] SLT 33; Boys v Chaplin [1971] AC 356.

  56. 56.

    Payne (2013), p. 566; for detailed understanding of schemes of arrangement, see Payne (2014).

  57. 57.

    (1877) 3 CPD 282.

  58. 58.

    George Wilson and Others v John Wilson and Others (1878) 5 R 867.

  59. 59.

    Starting from section 136 of the Companies Act 1862, through section 2 of the Joint Stock Companies Arrangements Act 1870, section 24 of the Companies Act 1900, section 38 of the Companies Act 1907, section 120 of the Companies (Consolidated) Act 1908, section 153 of the Companies Act 1929, section 206 of the Companies Act 1948, section 425 of the Companies Act 1985, to section 895 of the Companies Act 2006.

  60. 60.

    Companies (Cross-Border Mergers) Regulations 2007, reg 2.

  61. 61.

    [2017] BCC 20, 28.

  62. 62.

    Companies Act 2006, s 895(2)(b).

  63. 63.

    [2012] EWHC 2944 (Ch); [2014] BCC 417.

  64. 64.

    Payne (2013), p. 570.

  65. 65.

    [2012] BCC 459, 476 per Briggs J.

  66. 66.

    [2013] BCC 201, 223 per Hildyard J.

  67. 67.

    Re Algeco Scotsman PIK SA (unreported) 22 June 2017 (Ch) per Hildyard J.

  68. 68.

    Case C-1/04 Susanne Staubitz-Schreiber [2006] ECR I-701, para 71–72 (Opinion of Mr Advocate General Ruiz-Jarabo Colomer delivered on 6 September 2005); see also Case C-343/04 Land Oberösterreich v ČEZ as [2006] ECR I-4557, para 85 (Opinion of Mr Advocate General Poiares Maduro delivered on 11 January 2006).

  69. 69.

    Article 2(1), Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, OJ L142/12.

  70. 70.

    Securities Acquisition and Takeover Act [Wertpapiererwerbs- und Ubernahmegesetz] (“WpUG”), s 29.

  71. 71.

    Takeover Panel, The Weyburn Engineering Company Ltd (1973/15) 3—accessed on 10 August 2017 at http://www.thetakeoverpanel.org.uk/wp-content/uploads/2008/12/1973-15.pdf.

  72. 72.

    Mukwiri (2009), p. 7.

  73. 73.

    Rickford (2005), p. 1396.

  74. 74.

    Kershaw (2016), p. 61.

  75. 75.

    The City Code of Takeovers and Mergers (Twelfth edition, 12 September 2016), rule 21.

  76. 76.

    Smith (2013), p. 225.

  77. 77.

    Mukwiri (2017), update 63.

  78. 78.

    Davies and Worthington (2012), p. 1122.

  79. 79.

    The Takeover Panel, The European Directive on Takeover Bids, Explanatory Paper (The Panel on Takeovers and Mergers, London 20 January 2005).

  80. 80.

    Amour and Skeel (2007), p. 1729.

  81. 81.

    R v Panel on Takeovers and Mergers ex parte Guinness [1989] 1 All ER 509, 512 (per Sir Donaldson MR).

  82. 82.

    R v Panel on Takeovers and Mergers, ex parte Datafin plc [1987] QB 815, 842 (per Sir Donaldson MR).

  83. 83.

    Takeover Directive 2004/25/EC was implemented in the UK by the Interim Regulations 2006, and later by the Companies Act 2006 (which in turn empowers the Panel to make and administer rules in the Takeover Code).

  84. 84.

    Rickford (2005), p. 1412.

  85. 85.

    Davies and Worthington (2012), p. 1123.

  86. 86.

    City Code on Takeovers and Mergers (Twelfth edition, 12 September 2016), rule 25.

  87. 87.

    CBM Directive, Articles 2(1) and 14(1).

  88. 88.

    Companies (Cross-Border Mergers) Regulations 2007, reg 22.

  89. 89.

    Wyckaert and Geens (2008), p. 288; for more on minority protection in cross-border mergers, see Kurtulan (2017).

  90. 90.

    CBM Directive, Article 4(2).

  91. 91.

    CBM Directive, Article 10(3).

  92. 92.

    Article 15 of the Takeover Directive 2004/25/EC; Companies Act 2006, s 979.

  93. 93.

    Companies Act 2006, s 984(2).

  94. 94.

    Payne (2011), p. 76.

  95. 95.

    Burkart and Panunzi (2004), p. 793.

  96. 96.

    In Re Bugle Press Ltd [1961] Ch 270, 276–277 per Buckley J.

  97. 97.

    Re Gierson, Oldham and Adams Ltd [1968] Ch 17.

  98. 98.

    HM Treasury, “The Long-Term Economic Impact of EU Membership and the Alternatives” (April 2016) p. 8.

  99. 99.

    Allen, Pickard, Mance, “Post-Brexit Britain to Seek ‘Unique’ model as great trading state” (2016) Financial Times, 31 August.

  100. 100.

    [2011] EWHC 1104 (Ch); [2011] Bus LR 1245.

  101. 101.

    [2012] EWHC 164 (Ch); [2013] BCC 201.

  102. 102.

    [2012] EWHC 2998 (Ch).

  103. 103.

    [2012] EWHC 3686 (Ch).

  104. 104.

    Re Real Estate Development Co [1991] BCLC 210; Re Drax Holdings Ltd [2003] EWHC 2743 (Ch); [2004] WLR 1049.

  105. 105.

    [2014] EWHC 249 (Ch).

  106. 106.

    [2014] EWHC 3849 (Ch); [2015] Bus LR 374.

  107. 107.

    [2015] Bus LR 374, 435 per Hildyard J.

  108. 108.

    Re Algeco Scotsman PIK SA (unreported case that came before Hildyard J), 22 June 2017.

  109. 109.

    Department for Exiting the European Union, “Legislating for the United Kingdom’s Withdrawal from the European Union” (March 2017) Cm 9446, para 2.5.

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  1. Durham Law School, Durham University, Durham, UK

    Jonathan Mukwiri

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  1. Department of Law, University of Cyprus, Nicosia, Cyprus

    Thomas Papadopoulos

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Mukwiri, J. (2019). Cross-Border Mergers Directive and Its Impact in the UK. In: Papadopoulos, T. (eds) Cross-Border Mergers. Studies in European Economic Law and Regulation, vol 17. Springer, Cham. https://doi.org/10.1007/978-3-030-22753-1_23

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