Brexit: Cross-border mergers 2019 to avoid chaos
Wirtschaftsanwälte.at, 3 March 2019
Shortly before Brexit and due to the increasing uncertainty resulting from Great Britain’s exit from the EU, an increasing number of Austrian companies decides to give up their UK branches overseas.
However, it is companies formed as UK Limiteds operating in Austria – a few years ago traded as a real alternative to the Austrian GmbH partly because of their extremely low minimum share capital – that are threatened by Brexit. In a no-deal szenario they run risk of losing their legal personality and thus the personal and unlimited liability of their shareholders.
Cross-border mergers as an attractive form of corporate reorganization:
In addition to various reorganization options, such as the establishment of a European stock corporation (SE) with subsequent relocation or a so-called side-stream contribution, the option of transferring all assets of the Limited by way of “universal succession” through a cross-border merger with the Austrian company is particularly attractive.
The legal framework for cross-border mergers is determined by EU law, implemented in the United Kingdom in the Companies (Cross-border Mergers) Regulations 2007 (SI 2007/2974) and in the Austrian by the EU-VerschG.
What is necessary to effect merger:
To process the merger, it is necessary to obtain a confirmation in all jurisdictions involved in form of a certificate, which confirms that all formalities have been completed in that particular sovereign territory before the merger. After this has been granted, an application is made to register the merger in the relevant commercial register.
According to the U.K. In addition to further documentation, the Limited must prepare a merger plan and a management report describing the effects of the merger on members, creditors and employees. Occasionally, a report from an independent expert will also be required.
While the procedure on the Austrian side is essentially carried out by the Austrian Firmenbuch as the commercial register, a total of two court appointments before the High Court build the core of the UK merger proceedings. If the court is able to convince itself of the completeness and conformity of the previously submitted documents in the context of a first oral hearing, it will set a date to convene a general meeting for approval of the merger.
At the same time, mandatory regulations on employee participation must be observed. Business owners are well advised to initiate this as early as possible, as it may take a few months employment matters get sorted.
No later than one month before the general meeting to approve the merger, the Registrar of Companies will publish the planned merger at Companies House (the English commercial register).
After the general meeting has been held, there will be another court hearing. The content of this appointment is to obtain the aforementioned merger certificate. Proof of the fulfillment of all conditions for the merger must be provided by submitting relevant documentation such as testimony from the management in form of written avidavits.
Depending on whether the Austrian or the UK company is to emerge as the acquiring company, a joint application must be submitted to the High Court or the commercial register for final approval of the merger. This will take effect 21 days after approval has been granted.
From experience and depending on the circumstance and complexity in a particular case, Brexit cross-border mergers can be carried out with sufficient efficiency and vehemence in less than six months. Although the exit of the United Kingdom is fast approaching, Austrian legislature wants to enable further cross-border mergers with the UK by enacting the Brexit-Begleitgesetz 2019 as a law accompanying Brexit.
You will find here all you need to know with regard to Brexit related cross-border reorganization.