Mergers and Divisions

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.

The CRO must receive the following documents from each of the companies involved. Please note that it is a requirement of the Act that separate declarations/resolutions are made by EACH individual company in the process. One form will not cover all the companies involved in the process.

• The special resolution to approve the merger. The resolution must be unanimous. It cannot be a majority decision.
• The declaration made under section 206 Companies Act 2014.  The declaration made under section 206 must be accompanied by a statement under section 209 Companies Act 2014. The declaration made under section 206 must be made by a majority of the directors.

The declaration must include the following:

• the total amount of the assets and liabilities of the merging company in question as at the latest practicable date before the date of making of the declaration and in any event at a date not more than 3 months before the date of that making; and
• that the declarants have made a full inquiry into the affairs of the company and the other merging companies and that, having done so, they have formed the opinion that the successor company (within the meaning of Chapter 3 of Part 9) will be able to pay or discharge the debts and other liabilities of it and the transferor company or companies in full as they fall due during the period of 12 months after the date on which the merger takes effect.
• The statement under section 209 must confirm that the common draft terms of merger provide for such particulars of each relevant matter as will enable each of the prescribed effects provisions to operate without difficulty in relation to the merger; or specifying such particulars of each relevant matter as will enable each of those effects provisions to operate without difficulty in relation to the merger.

The declaration must be submitted within 21 days of the event. Upon receipt of both the declaration and the resolution, the registration of the merger can be effected. It needs to be made clear which company or companies is/are to be merged.

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)