Last Updated on December 7, 2020
The Cross-Border Mergers of Limited Liability Companies Regulations (subsidiary legislation 386.12) provides that a ‘merger’ means any one of the following operations in Maltese company law:
When one or more companies, on being dissolved without going into liquidation, transfer all their assets, rights, liabilities and obligations to another existing company (“the acquiring company”) in exchange for the issue to their members of securities or shares representing the capital of that other company and, if applicable, a cash payment not exceeding 10% of the nominal value, or, in the absence of a nominal value, of the accounting par value of those securities or shares [Merger by acquisition];
When two or more companies, on being dissolved without going into liquidation, transfer all their assets, rights, liabilities and obligations to a company that they form(“the new company”) in exchange for the issue to their members of securities or shares representing the capital of that new company and, if applicable, a cash payment not exceeding 10% of the nominal value, or in the absence of a nominal value, of the accounting par value of those securities or shares [Merger by formation];
When a company, on being dissolved without going into liquidation, transfers all its assets, rights, liabilities and obligations to the company holding all the securities or shares representing its capital (“the acquiring company”).
For the regulations on cross-border mergers to apply, the companies involved would need to have been formed in accordance with the laws of a Member State, having their registered office or place of administration with an EU Member State. Moreover, at least two of the involved companies in a cross-border merger are governed by the laws of two different Member States. It is also further required that one of the companies, or the resulting company form the merger, is registered in Malta.
The regulations however, do not apply to cross-border mergers involving a company the object of which is the collective investment of capital provided by the public, which operates on the principle of risk-spreading and the units of which are, at the holders’ request, repurchased or redeemed, directly or indirectly, out of the assets of that company.
For a cross-border merger to take place, the merging companies shall have their administrative and managing organs draw up the common draft terms of cross-border merger which shall include at least the following:
(a) the form, name and registered office of the merging companies and those proposed for the company resulting from the cross-border merger;
(b) the ratio applicable to the exchange of securities or shares representing the company capital and the amount of any cash payment;
(c) the terms for the allotment of securities or shares representing the capital of the company resulting from the cross-border merger;
(d) the likely repercussions of the cross-border merger on employment;
(e) the date from which the holding of such securities or shares representing the company capital will entitle the holders to share in profits and any special conditions affecting that entitlement;
(f) the date from which the transactions of the merging companies will be treated for accounting purposes as being those of the company resulting from the cross-border merger;
(g) the rights conferred by the company resulting from the cross-border merger on members enjoying special rights or on holders of securities other than shares representing the company capital, or the measures proposed concerning them;
(h) any special advantages granted to the experts who examine the draft terms of the cross-border merger or to members of the administrative, management, supervisory or controlling organs of the merging companies;
(i) the statutes of the company resulting from the cross-border merger;
(j) where appropriate, information on the procedures by which arrangements for the involvement of employees in the definition of their rights to participation in the company resulting from the cross-border merger are determined;
(k) information on the evaluation of the assets and liabilities which are transferred to the company resulting from the cross-border merger;
(l) dates of the merging companies’ accounts used to establish the conditions of the cross-border merger. Registration and publication of the common draft terms of cross-border merger.
The resulting common draft terms of the cross-border merger are to be delivered to the Registrar for registration by the Maltese merging company or companies, duly signed by at least one director and company secretary of such company or companies.
Having been satisfied that the requirements of the common draft terms set out by the regulations are met, the Registrar shall register the common draft terms of cross-border merger and shall cause without delay a statement to be published in the Gazette or on the website maintained by the same Registrar showing:
(a) the date on which registration was made, together with an indication that the document registered relates to the common draft terms of the cross-border merger;
(b) the type, name and registered office of every merging company;
(c) the register in which the documents referred to in Article 3(2) of Directive 68/151/EEC are filed in respect of each merging company, and the number of the entry in that register;
(d) an indication, for each of the merging companies, of the arrangements made for the exercise of the rights of creditors and of any minority members of the merging companies and the address at which complete information on those arrangements may be obtained free of charge.
The publication of the common draft terms in the Gazette or on the website maintained by the Registrar shall take place at least one month before the date of the general meeting which is to decide on the approval of the common draft terms of the cross-border merger.
In relation to the common draft terms of the cross-border merger there shall be drawn up two reports, being the report of the board of directors and the independent expert report.
The report drawn up by the board of directors of the Maltese merging company or companies, is intended for the members explaining and justifying the legal and economic aspects of the cross-border merger and explaining the implications of the cross-border merger for members, creditors and employees. It shall be made available to the members and to the representatives of the employees, or to the employees themselves when there are no such representatives, at least one month before the date of the general meeting.
The report drawn up by an independent expert or experts acting on behalf of each Maltese merging company but independent of it and approved by the Registrar, shall be based on the examination of the common draft terms of the cross-border merger. This report is to be made available to the members not less than one month before the date of the general meeting. The experts’ examination of the common draft terms shall serve for the report to specify whether the share exchange ratio is fair and reasonable and to this effect it shall:
(a) indicate the method or methods used to arrive at the share exchange ratio proposed;
(b) state whether such method or methods are adequate in the case in question, indicating the values arrived at using such method or methods and giving an opinion on the relative importance attributed to such method or methods in arriving at the value decided on;
(c) describe any special valuation difficulties which have arisen.
The extraordinary resolution taken by the Maltese merging company or companies approving the cross-border merger together with the instruments giving effect thereto, or an authentic copy thereof, shall be delivered for registration to the Registrar, who, being satisfied that the requirements of these regulations have been complied with, shall register them and shall cause without delay a statement to be published in the Gazette or on a website maintained by him.
The Registrar shall additionally be required to publish, without delay, in a daily newspaper circulating wholly or mainly in Malta. Such publication shall be made by the Registrar at the expense of the Maltese merging company or companies and the provisions of article 401(1)(e) of the Companies Act shall apply. The statements to be published shall include the date on which the registration of the extraordinary resolution was made, together with a reference that it was passed for the purpose of approving the cross-border merger, together wuth the type, name and registered office of every merging company.
