Part 2: Cross-Border Mergers of Limited Liability Companies under Maltese Law

Part 2: Cross-Border Mergers of Limited Liability Companies under Maltese Law

The first part of this series examined the scope and applicability of the CBM Regulations, as well as the documents that must be prepared and submitted for the purposes of a cross-border merger.  

The second part focuses on the procedure for obtaining pre-merger certificates and the steps involved in the completion stage of a cross-border merger.

When a Maltese company is in the process of entering into a cross-border merger, it must file the required documentation with the Malta Business Registry (“MBR/Registrar”). This includes the Common Draft Terms of Merger (“CDTs”), the directors’ declaration of solvency and a copy of the notice sent to creditors, members and employees. This filing is not required when the same information is published by the company on its website and is made available free of charge.

APPROVAL BY THE GENERAL MEETING

As a general rule, the CDTs must be approved at a general meeting of each Maltese merging company by way of an extraordinary resolution. Before the vote, the general meeting must consider the directors’ report, the independent expert’s report, any employees’ opinions, and any comments submitted. The resolution may also cover amendments to the company’s memorandum and articles of association if required as a result of the merger. However, the law provides for an exemption whereby the general meeting of a company is not required.

Once approved, the extraordinary resolution must be delivered to the Registrar within fourteen days. If the Registrar is satisfied that the requirements have been met, the resolution will be registered and a statement shall be published in the Gazette or on the Registrar’s website.

PRE-MERGER CERTIFICATE

Each Maltese merging company must apply for a pre-merger certificate by submitting the prescribed Form-Merger to the MBR. This must be signed by at least two directors (or by the sole director, if applicable) and can be filed physically or online.

The application may only be filed after one month has passed from the last publication of the extraordinary resolution approving the merger, or, where such approval is not required, from the publication of the CDTs.

The application must include the documents listed in Regulation 17(2), namely the CDTs, the directors’ report, the independent expert’s report, the declaration of solvency, and a copy of the extraordinary resolution. If shares are pledged, the pledgee’s written consent must also be attached. In cases where the Maltese company carries out a licensable activity, regulatory approval from the competent authority in Malta is required. Likewise, if the company is a public company listed on a recognised investment exchange, evidence of the listing authority’s consent must be submitted.

Upon receiving the application, the MBR shall review all submitted documents and information. The initial review period is three months, which may be extended by a further three months if there are concerns about the purpose of the merger. A pre-merger certificate is issued only once the Registrar is satisfied that all legal requirements have been met, and in any case not before three months have lapsed from the first publication of the CDTs.

If the Registrar finds that certain conditions or procedures have not been complied with, the pre-merger certificate will not be issued. The company will be informed of the reasons for refusal within seven days of the end of the review period and may be given additional time to fulfil the requirements. No certificate will be granted if the merger is deemed abusive, fraudulent, designed to circumvent EU or Maltese law, or carried out for criminal purposes.

In essence, the pre-merger certificate confirms that the Maltese company has met all legal requirements and completed all procedures under the CBM Regulations.

CERTIFICATE OF COMPLETION OF CROSS-BORDER MERGER

When the company resulting from the merger has or is to have its registered office in Malta, the Registrar must confirm that the merging companies have approved the CDTs on the same terms and that arrangements for employee participation, where required, have been determined.

Each merging company must then submit the necessary completion documents to the MBR. These include:

• The CDTs;
• The pre-merger certificate (or its equivalent) issued by the competent authority in the jurisdiction of each merging company; and
• In the case of a merger by formation where the resulting company is Malta, the memorandum and articles of association together with any other documents required for registration.

The Registrar accepts the pre-merger certificates as conclusive proof that all procedures and formalities in the foreign relevant jurisdictions have been properly completed.

Once the Registrar verifies compliance with the CBM Regulations and payment of fees has been settled, a Certificate of Completion of the Cross-Border Merger will be issued within ten working days from the submission of the completion documents above-mentioned. This certificate shall include the name and registration number of the Maltese company resulting from the cross-border merger, the particulars of the merging companies, the type of merger carried out, and the effective date of the merger.

The Registrar will also publish an official statement confirming completion of the merger and notify the company registries of the other jurisdictions involved.

CONSEQUENCES OF A CROSS-BORDER MERGER

When a Maltese merging company ceases to exist as a result of a merger, the Registrar is notified by the foreign registry of the jurisdiction of the resulting company. Thereafter, the MBR will strike the Maltese company off the register and publish a notice confirming completion of the cross-border merger, indicating that the striking-off was due to the merger, together with the date and the details of the merging and resulting companies.

The legal consequences of a cross-border merger depend on the type of merger carried out.

• In a merger by acquisition or absorption, all assets and liabilities of the acquired company (including contracts, rights, obligations, and credits) are transferred to the acquiring company. The members of the acquired company become members of the acquiring company (unless they have disposed of their shares), and the acquired company is dissolved.
• In a merger by formation of a new company, all assets and liabilities of the merging companies are transferred to the newly established company. The members of the merging companies become members of the new company (unless they have disposed of their shares), and the merging companies cease to exist.

The third and final part of the series will examine the safeguards provided under the CBM Regulations, particularly the protections available to stakeholders such as creditors, shareholders, and employees.