In May of this year, the EU (Cross-Border Conversions, Mergers and Divisions) Regulations 2023 (the Regulations) transposed the EU "Mobility Directive" into Irish law.
The Regulations enable an Irish limited company to carry out a cross-border conversion process as a consequence of which, without being dissolved, wound-up or going into liquidation, it converts its legal form under Irish law into that of another EEA member state and transfers at least its registered office to that EEA member state, while retaining its fundamental legal personality.
The Regulations contain detailed requirements for carrying out the process, including the need for:
- draft terms of conversion, to include the proposed constitution, or equivalent, in the destination EEA member state and details of safeguards for creditors
- directors' explanatory statement, to include details of implications for employees (employee participation may be required in certain circumstances) and shareholders
- an expert's report addressed to shareholders
- approval at a general meeting of shareholders by way of special resolution (75%).
The Regulations also contain provision for minority shareholders to require the company in question to acquire their shares for cash in the event that the conversion is approved at the general meeting.
Once the various pre-conversion requirements summarised above are met, the company must make an application to the High Court for a "pre-conversion certificate". Once issued, the certificate must be delivered to the Companies Registration Office which will then make it available to the authorities designated by the other EEA member states. Application is then made for the conversion to be approved by the relevant authorities in the destination member state in accordance with the transposing regulations of that member state. In Ireland, the High Court has jurisdiction to approve application for conversions by companies from other member states.
Similar to the cross-border merger regime, the intended effect of a conversion will be to maintain the status quo with all assets, liabilities, contracts, legal proceedings etc. transferring to the post-conversion entity.
The Mobility Directive (Directive (EU) 2019/2121) was adopted in November 2019 and amended the limited provisions of Directive 2017/1132 in relation to cross-border mergers of limited liability companies by creating harmonised rules on cross-border conversions and diversions. Essentially, the Directive aimed to ensure and strengthen the freedom of establishment for companies within the EU market through the harmonisation of EEA member states' laws, while protecting the rights of employees
The Regulations repeal and replace the existing regulations on cross-border mergers, adding an alternative to the previous merger regime (which will still apply, with some modifications).
However, legal uncertainty remains as to how the new regime will operate in transactions involving other member states where the Mobility Directive hasn't yet been transposed – while transposed in Ireland, the Directive remains to be transposed in a number of other EEA member states.
Our view is that this is a welcome addition to the range of options available to companies within the EEA although it will be interesting to see how smoothly in practice the conversion process will operate.
Please contact Paddy Quinlan, Adam Griffith, Dannie Hanna or your usual Taylor Wessing contact if you have any queries in relation to this or other legal topics.
