Mergers & Divisions

Under the new Companies Act 2014, it is now possible for a private limited company to be involved in a merger or division of companies. Under the previous Companies Acts, this was only available to public limited companies. PLC’s still have the option to merge or divide under Part 17 of the new Act.

Mergers

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.

Procedure: Part 9 Merger

1. Common Draft Terms submitted to the CRO together with Form DM1  
2. Form DM1 submitted for CRO Gazette notice
3. Advertisement placed in newspaper at least 30 days prior to meeting 
4. Directors Report, Experts Report and Financial Statements supplied to members (except where merger by absorption or where 90% agreement) 
30 days later ……. 
5. Special resolution where required should be submitted.
6. Court order finalizing merger should be submitted.
7. Second CRO Gazette notice published by the Registrar on receipt of court order. 
  
Publication requirements in the CRO Gazette are met by the submission of the form DM1 and the subsequent court order. Where the common draft terms are published on a website instead of being submitted to the CRO, Form DM1 is still submitted.

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Divisions

Companies can also be divided amongst two or more companies under Chapter 4 of Part 9. Again, none of the companies 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).

Division can be by means of acquisition or formation of new companies.

  • Division by Acquisition is where two or more companies acquire the assets and liabilities of a company that is being dissolved without entering liquidation in exchange for issue of shares in one or more of the companies acquiring the assets/liabilities. 
  • Division by Formation of new companies – is where two or more new companies are formed in order to acquire the assets and liabilities of a company that is being dissolved without entering liquidation, and that this is in exchange for issue of shares in the companies 

The Common Draft terms of division are submitted along with Form DV1. Court approval is required. Following division, the transferor company is dissolved without entering liquidation.

Part 9 Division
1. Common Draft Terms submitted
2. Form DV1 submitted for CRO Gazette notice
3. Advertisement placed in 1 newspaper at least 30 days prior to meeting 
4. Directors Report, Experts Report and Financial Statements supplied to members (except where unanimously agreed)
30 days later …….
5. Special resolution submitted where applicable.
6. Court order finalises division
7. Second CRO Gazette notice published by the Registrar on receipt of court order.

Publication requirements in the CRO Gazette are met by the submission of the form DV1 and the subsequent court order. Where the common draft terms are published on a website instead of being submitted to the CRO, Form DM1 is still submitted. Where publication is made on the website, the advertisement must be made in 2 newspapers.

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Public Limited Companies can merge together or be divided under Part 17 of the Companies Act 2014. At least one of the companies participating in the Merger or Division under Part 17 must be a Public Limited Company.

Merger can be by acquisition, absorption or formation of a new company and can be made under Part 17 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 – two 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.

Where the merger is being effected under Part 17, notice to the CRO Gazette is by means of the submission of the Form DM2. Where the Division is being effected under Part 17, notice to the CRO Gazette is by means of the submission of Form DV2. Submission of the court order confirming the merger or division will suffice with regards to the CRO Gazette requirement.

Division can be by means of acquisition or formation of new companies.

  • Division by Acquisition is where two or more companies acquire the assets and liabilities of a company that is being dissolved without entering liquidation in exchange for issue of shares in one or more of the companies acquiring the assets/liabilities. 
  • Division by Formation of new companies – is where two or more new companies are formed in order to acquire the assets and liabilities of a company that is being dissolved without entering liquidation, and that this is in exchange for issue of shares in the companies