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Countdown to the Companies Act 2014: Day6

Monday, May 25, 2015

There are now 5 working days until the Companies Act 2014 (the “Act”) comes into force in Ireland. The Act will radically change the existing legal framework for companies in Ireland. Each day, we will provide you with a snapshot of key changes to consider in advance of the Act commencing on June 1st.


For the first time under Irish law, there will be a statutory provision to allow for two Irish private limited companies to merge. The process closely follows the European legislation on cross border mergers. Under Part 9 of the Companies Act 2014, it will now be possible to merge two Irish private companies by court order or by using the summary approval procedure (“SAP”) and thus reducing the time and cost of a court application. As is the case under the EC (Cross Border Merger) Regulations 2008, there are three possible methods of merger:

  • Merger by acquisition (s. 463 (1)) – this is where an existing company acquires all of the assets and liabilities of one or more transferor companies in exchange for the allotment of shares to the members of those transferor companies. This may or may not be accompanied by a cash payment. The transferor companies are dissolved without going into liquidation.
  • Merger by absorption (s.463(2)) – this is the process whereby a wholly owned subsidiary transfers all of its assets and liabilities to its holding company. Like with the merger by acquisition, the transferor company is dissolved without going into liquidation.
  • Merger by formation of a new company (s.463 (3)) – a newly formed company acquires all of the assets and liabilities of one or more transferor companies in exchange for the allotment of shares in the new company to the members of the transferor companies.


As with the cross border merger regime, certain documentation must be prepared. Common draft terms must be drawn up, the contents of which must comply with s.466 (2).These include the corporate details of the companies involved, the arrangement regarding the shares to be allotted and information on the valuation of the assets and liabilities involved. In addition, a directors explanatory report must be prepared by the directors explaining the legal and economic grounds for and the implications of the proposed merger with particular reference to the proposed share exchange ratio, organisation and management structures, recent and future commercial activities and the financial interests of the holders of the shares and other securities in the company. Such explanatory report is not required for a merger by absorption.


The report of an expert is also required. There are some exceptions for groups and where all shareholders agree that such report is not necessary. The expert must be a statutory auditor and must not have been an employee or director of the merging companies in the previous twelve months, and subject to some exceptions must not be connected with the officers of the merging companies. The expert report must include, among other things, an opinion on the values arrived at and the methods used.


Unless the SAP is being used to effect the merger, the merging companies must deliver to the Companies Registration Office (“CRO”), at least thirty days before the passing of the members’ resolution to approve the merger, a copy of the common draft terms. Notice is then published in the CRO Gazette and at least one national daily newspaper. It is possible to avoid this notification requirement by posting the common draft terms on a merging company’s website for at least two months and at least thirty days before the resolution to approve the merger, and notification of this is published in the CRO Gazette and one national daily newspaper.


Finally, the merger must be approved by the members in general meeting or by using the SAP. It is worth noting that when using the SAP for the merger regime, the resolution of the members must be unanimous as opposed to a special majority for other restricted activities approved under the SAP.  There are protections for minority shareholders and creditors under sections 476 and 478 respectively.  On completion of the SAP or the court approval (should the merging companies choose the court process), the merger will be confirmed and shall take effect in accordance with the common draft terms.




The availability of the SAP for an Irish domestic merger should make the process easier and more cost effective.  Where companies can avail of the SAP, it will be possible to avoid a potentially lengthy and costly court process.

Some of the main benefits for mergers under the new regime include: (i) there is no requirement for a formal liquidation process, which will save on costs; (ii) there is the potential for less documentation as assets and liabilities pass automatically upon approval; and (iii) there is legal certainty as to the validity of transfer of the relevant assets and liabilities.

The merger regime can be beneficial for companies with complex group structures. Companies can streamline their structure by using the merger regime to get rid of companies within the structure that may have outlived their use.


The content of this article is provided for information purposes and does not constitute legal or other advice.



Eoghan Doyle