Regulations, 2007

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 18,162, 14 ta’ Diçembru, 2007

L.N. 415 of 2007

COMPANIES ACT

(CAP. 386)

Cross-Border Mergers of Limited Liability Companies

Regulations, 2007

IN exercise of the powers conferred by article 425(1)(m) of the

Companies Act, the Prime Minister and Minister of Finance has made

the following regulations>-

(1) The title of these regulations is the Cross-Border Mergers Citation and

commencement.

of Limited Liability Companies Regulations, 2007.

(2) These regulations shall come into force on the 15 th

December, 2007.

The purpose of these regulations is to transpose and implement Purpose.

the EC Directive and they shall be interpreted accordingly.

(1) Any reference in these regulations to “the Act” shall be Interpretation.

construed as a reference to the Companies Act, and subject to the

provisions of sub-regulation (2), the provisions of article 2 of the Act

shall also apply to these regulations.

(2)

In these regulations, unless the context otherwise

requires>

“cross-border merger or mergers” means a merger or mergers

referred to in regulation 4(1) and (2)<

“EC Directive” means the European Community Directive

2005#56#EC of the European Parliament and of the Council of 26

October 2005 on cross-border mergers of limited liability

companies, as amended from time to time<

“Directive 68#151#EEC” means the European Economic

Community Directive 68#151#EEC of 9 March 1968 on the

coordination of safeguards which, for the protection of the interests

of members and others, are required by Member States of

companies within the meaning of the second paragraph of article

58 of the Treaty, with a view to making such safeguards equivalent

throughout the Community, as amended by subsequent legislation<

“company resulting from the merger” means either the

acquiring company in the case of a merger of the type referred to

in sub-regulation (4)(a) and (c), or the new company in the case of

a merger of the type referred to in sub-regulation (4)(b)<

“foreign merging company or companies” means a company

or companies registered in a Member State or EEA State other

than Malta taking part in a cross-border merger and includes an

acquiring company<

“management or administrative organ” means, in the case of

a company registered in Malta, the board of directors<

“Maltese merging company or companies” means a company

or companies registered in Malta taking part in a cross-border

merger and includes an acquiring company<

“Merging companies” means all the companies taking part in

a cross-border merger and includes an acquiring company.

(3) For the purpose of these regulations, “company”, unless

otherwise qualified, means>

(a) a company as referred to in article 1 of”Directive

68#151#EEC< or

(b) a company with share capital and having legal

personality, possessing separate assets which alone serve to cover

its debts and subject under the national law governing it to

conditions concerning safeguards such as are provided for by

European Community Directive 68#151#EEC for the protection of

the interests of members or others.

(4) For the purpose of these regulations, “merger” means

an operation whereby>

(a) 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, hereinafter referred to as “merger by

acquisition”< or

(b) 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, hereinafter referred to as”“merger by

formation”< or

(c) 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.

(1) These regulations shall apply to mergers of companies Applicability of

these regulations.

formed in accordance with the law of a Member State and having their

registered office, central administration or principal place of business

within the Community, provided at least two of such companies are

governed by the laws of different Member States and provided further

that at least one of the merging companies, or the company resulting

from the merger, is registered in Malta.

(2) Notwithstanding the definition of “merger” in regulation

3(4), these regulations shall also apply to cross-border mergers where

the law of at least one of the Member States concerned allows the cash

payment referred to in paragraphs (a) and (b) of the said definition to

exceed 10% of the nominal value, or, in the absence of a nominal value,

of the accounting par value of the securities or shares representing the

capital of the company resulting from the cross-border merger.

(3) These regulations shall 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.

Action taken by such a company to ensure that the stock exchange value

of its units does not vary significantly from its net asset value shall be

regarded as equivalent to such repurchase or redemption.

(4) Mergers between companies, all of which are registered

in Malta, shall continue to be regulated by Title II of Part VIII of the

Act.

(1) Unless otherwise provided in these regulations, a Maltese

merging company shall comply with the provisions and formalities of

the Act, in particular those concerning the decision making process

relating to the merger, the protection of creditors, debenture holders

and holders of securities or shares of the said company, as well as the

provisions of any other law in force in Malta concerning the rights of

employees.

(2) Any law in force in Malta which empowers any authority

in Malta to oppose a merger between companies registered in Malta on

grounds of public interest, shall also be applicable to a cross-border

merger in which a Maltese merging company participates>

Provided that this provision shall not prejudice the provisions

of article 21 of European Community Council Regulation 139#2004 of

20 January 2004 on the control of concentrations between undertakings.

The management or administrative organ of each of the

common draft terms

merging companies shall draw up the common draft terms of cross-

border merger which shall include at least the following particulars>

(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.

(1) The Maltese merging company or companies shall deliver Registration and

publication of the

to the Registrar for registration the common draft terms of the cross- common draft terms

border merger, duly completed and signed by at least one director and of cross-border

merger.

the company secretary of such company or companies.

(2) On being satisfied that the requirements of regulation 6

and sub-regulation (1) of this regulation have been complied with, 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 him 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.

(3) The publication referred to in sub-regulation (2) shall

be made at least one month before the date of the general meeting which

is to decide on the approval of the common draft terms of cross-border

merger in terms of regulation 10.

(1) The board of directors of the Maltese merging company

Report of the board

or companies shall draw up a report 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.

(2) The report shall be made available to the members and

to the representatives of the employees or, where there are no such

representatives, to the employees themselves, not less than one month

before the date of the general meeting referred to in regulation 10.

(3) Where the board of directors of the Maltese merging

company or companies receives, in good time, an opinion from the

representatives of their employees that opinion shall be appended to the

report.

(1) One or more experts acting on behalf of each Maltese

merging company but independent of it and approved by the Registrar,

shall examine the common draft terms of cross-border merger and draw

up a written report for each Maltese merging company. The report shall

be made available to the members not less than one month before the

date of the general meeting referred to in regulation 10.

(2) The report shall examine the common draft terms of

cross-border merger and shall 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.

(3) Each expert shall be entitled to obtain from the merging

companies all relevant information and documents for the discharge of

his duties.

(4) As an alternative to experts operating on behalf of each

of the merging companies, where at least one of the merging companies

is a Maltese merging company or where the company resulting from

the cross-border merger will be registered in Malta, one or more

independent experts may be appointed by the Registrar, at the joint

request of the merging companies, in order to draw up a single written

report for all the merging companies.

(5) Neither an examination of the common draft terms of

cross-border merger by independent experts nor an expert report shall

be required if all the members of each of the merging companies have

so agreed.

(1) After taking note of the reports referred to in regulations Approval by the

general meeting.

8 and 9, the general meeting of the Maltese merging company or

companies shall decide on the approval of the common draft terms of

cross-border merger by extraordinary resolution>

Provided that where a Maltese merging company is an

acquiring company, the approval of the merger by the general meeting

of such company shall not be required if the conditions laid down in

article 345 (6) of the Act are fulfilled.

(2) For the purposes of sub-regulation (1), approval shall

not be valid unless the extraordinary resolution is adopted at least one

month after the publication of the common draft terms of the cross-

border merger and not later than three months therefrom.

(3) When a Maltese merging company approves the

common draft terms of cross-border merger by extraordinary resolution

in accordance with this regulation, it shall be required to redeem the

shares held by any dissenting members who so request, on such terms

as may be agreed, or as the Court, pursuant to an application filed within

the three month period referred to in sub-regulation (2) by either the

Maltese merging company or the dissenting members, thinks fit to order.

Where such an application has been filed before the Court, the Registrar

may nonetheless issue the certificate referred to in regulation 14, as

long as he indicates in the certificate that the procedure is pending. The

Court’s decision in the procedure shall be binding on the company

resulting from the cross-border merger and all its members>

Provided that where one or more of the other merging

companies is situated in a Member State which does not provide for

such a procedure, the provisions of this sub-regulation shall only apply

if such other merging company or companies explicitly accept, when

approving the draft terms of cross-border merger, the possibility for the

members of the Maltese merging company to have recourse to such

procedure.

(4) Where there is more than one class of shares in a Maltese

merging company or companies, the extraordinary resolution of that

company or companies concerning the merger shall be subject to a

separate vote by at least each class of shareholders whose rights are

affected thereby.

(5) The extraordinary resolution taken by the Maltese

merging company or companies shall cover both the approval of the

common draft terms of the cross-border merger and any alterations and

additions to the memorandum and articles necessitated by the cross-

border merger.

(6) The provisions of the Act governing alterations and

additions to the memorandum and articles shall, as appropriate, apply

to any alterations and additions to the memorandum and articles

necessitated by the cross-border merger.

(7) The general meeting of each of the merging companies

may reserve the right to make implementation of the cross-border merger

conditional on express ratification by it of the arrangements decided on

with respect to the participation of employees in the company resulting

from the cross-border merger.

(1) All members of a Maltese merging company are entitled

to inspect the following documents at the registered office of the

company at least one month before the date fixed for the general meeting

which is to decide on the draft terms of cross-border merger>

(a)

the common draft terms of cross-border merger<

(b) the annual accounts and the annual reports of each

merging company for the preceding three financial years<

(c) an accounting statement, drawn up by each merging

company as at a date which shall not be earlier than the first day of

the third month preceding the date of the draft terms of the merger,

if the latest annual accounts relate to an accounting period which

ended more than six months before that date<

(d) the report of the directors relating to the Maltese merging

company or companies prepared pursuant to regulation 8<

(e) the report of the independent experts relating to the

Maltese merging company or companies prepared pursuant to

regulation 9.

(2) The accounting statement provided for in paragraph (c)

of sub-regulation (1) shall be drawn up using the same methods and the

same layout as used for the latest balance sheet>

Provided that –

(a) it shall not be necessary to take a fresh physical

inventory< and

(b) the valuations shown in the latest balance sheet shall be

altered only to reflect entries in the accounting records.

Notwithstanding the provisions of paragraphs (a) and (b),

interim depreciation and provisions as well as material changes in

actual values not shown in the accounting records shall be taken

into account.

(3) Every member shall be entitled to obtain, on request

and free of charge, full or, if so desired, partial copies of the documents

mentioned in sub-regulation (1).

(1) The extraordinary resolution taken by the Maltese Registration and

publication of the

merging company or companies approving the cross-border merger cross-border

together with the instruments giving effect thereto, or an authentic copy merger.

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.

(2) The Registrar shall additionally be required to publish,

without delay, in a daily newspaper circulating wholly or mainly in

Malta, a notice consequent to the registration referred in sub-regulation

(1). 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 Act shall apply.

(3) The statements referred to in sub-regulations (1) and

(2) shall include the following particulars>

(a) 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<

(b) the type, name and registered office of every merging

company.

(1) A registration made by the Registrar by virtue of either

regulation 7 or regulation 12 may be contested before the Court by any

interested party in accordance with the following conditions>

(a) the contestation shall be made by application against

the Registrar within one month from the publication following the

registration referred to in regulation 7 on the grounds that the

common draft terms of cross-border merger were not drawn up in

accordance with the provisions of regulations 6 and 7(1)< or within

three months from the last publication following the registration

referred to in regulation 12 on the grounds that the resolution of

the extraordinary general meeting was void or voidable. Notice of

the application shall be published by the Registrar in the Gazette

or on a website maintained by him<

(b) where it is possible to remedy a defect liable to render

the cross-border merger void or voidable, the Court shall grant the

companies involved a period within which to rectify the situation<

(c) a notice that the judgment of the Court has been delivered

shall be published by the Registrar in the Gazette or on a website

maintained by him, which notice shall specify whether the

application has been allowed or dismissed.

(2) Without prejudice to sub-regulation (1), any creditor of

the Maltese merging company or companies whose debt existed prior

to the publication of the common draft terms of cross-border merger

made pursuant to regulation 7(2) may, within the period of three months

from the last publication referred to in regulation 12, by application,

object to the cross-border merger and, if he shows good cause why it

should not take effect, the Court shall either uphold the objection or

allow the cross-border merger on sufficient security being given. This

remedy shall apply also to the debenture holders of the Maltese merging

company or companies so long as the merger has not already been

approved by the debenture holders individually, or by a special meeting

of the debenture holders called specifically for that purpose, at which

meeting all the debenture holders signify their consent.

After verifying that each Maltese merging company has Issue of Pre-merger

Certificate.

complied with the requirements of these regulations, the Registrar shall,

after the lapse of three months from the date of the last publication

referred to in regulation 12, issue without delay to every Maltese merging

company a Cross-Border Pre-Merger Certificate conclusively attesting

to the proper completion of the pre-merger acts and formalities>

Provided that where an application has been made under regulation

13, the Registrar shall only issue such certificate, after the date of the

final judgment rejecting the application. Where an application under

regulation 13 is allowed, the Registrar shall not issue such certificate

and shall amend the registration accordingly as if the merger procedure

had never commenced.

The holders of securities, other than shares, in a Maltese Protection of

holders of

merging company, to which special rights are attached, shall be given securities.

rights against the company resulting from the merger in accordance

with the common draft terms of the cross-border merger at least

equivalent to those they possessed in such merging company, unless>

(a) the holders of those securities individually agree to the

alteration of their rights< or

(b) the alteration has been approved by a meeting of the

holders of those securities called specifically for that purpose, at

which meeting all the holders of such securities shall signify their

consent< or

(c) the holders of those securities are entitled to have their

securities re-purchased by the company resulting from the merger.

Any director of a Maltese merging company responsible for

wilful or negligent misconduct in the preparation and the implementation

Liability of director

of the cross-border merger, or an expert responsible for drawing up, on or expert for

behalf of any Maltese merging company, of the report on the common misconduct.

draft terms of cross-border merger responsible for wilful or negligent

misconduct in the performance of his duties, shall be liable for all

damages occasioned to any shareholder of such merging company as a

consequence of his misconduct.

Where the company resulting from the cross-border merger Scrutiny of the

legality of the cross-

has or is to have its registered office in Malta, the following rules shall border merger and

apply>

issue of Certificate

of Completion of

Cross-Border

Merger.

(1) The Registrar shall scrutinise the legal validity of the

cross-border merger as regards that part of the procedure which concerns

the completion of the cross-border merger and, where appropriate, the

formation of the new company resulting from the cross-border merger.

In particular, he shall ensure that all the merging companies have

approved the common draft terms of cross-border merger in the same

terms and, where appropriate, that arrangements for employee

participation have been determined.

(2) Each merging company shall submit to the Registrar

the certificate which conclusively attests to the completion of the pre-

merger acts and formalities>

(a) in respect of a Maltese merging company or companies,

the certificate issued by the Registrar in accordance with regulation

14<

(b) in respect of a foreign merging company or companies,

the certificate issued by the foreign authority in accordance with

Article 10(2) of the EC Directive>

Such certificate shall be submitted to the Registrar within

six months of its issue, together with the common draft terms

of cross-border merger approved by the general meeting.

(3) After verifying that the provisions of these regulations

and all other applicable provisions of the Act have been complied with,

including the payment of any applicable fees, the Registrar shall without

delay, issue a Certificate of Completion of Cross-Border Merger, which

shall include the name and registration number of the company resulting

from the cross-border merger, a brief reference to the particulars of the

merging companies, a reference to the type of cross-border merger which

has taken place, and the date on which the cross-border merger takes

effect. Upon the issuance of such certificate, the Registrar shall cause a

statement to be published in the Gazette or on a website maintained by

him confirming the completion of the cross-border merger.

(4) A certificate issued by the Registrar under sub-regulation

(3) is conclusive evidence that the requirements of these regulations

have been complied with and it shall not be possible to declare the

merger null and void after the date on which the cross-border merger

takes effect.

(5) When the Registrar issues a Certificate of Completion

of Cross-Border Merger under sub-regulation (3), he shall without delay

notify the registry where each of the merging companies was required

to file documents that the cross-border merger has taken effect, indicating

the effective date of the cross-border merger.

(6) When a Maltese merging company ceases to exist as a

result of the cross-border merger, and the Registrar is notified by the

registry of the Member State to whose jurisdiction the company resulting

from the merger is subject, of the effective date of the cross-border

merger, the Registrar shall cause without delay a notice to be published

in the Gazette or on a website maintained by him, indicating that the

cross-border merger has been completed and he shall strike the name of

the Maltese merging company off the register and the provisions of

article 401(1)(e) of the Act shall apply.

(1) From the date on which the cross-border merger takes Consequences of

the cross-border

effect, a cross-border merger carried out pursuant to regulation 3(4) (a) merger.

and (c) shall have the following consequences>

(a) all the assets, rights, liabilities and obligations of the

company being acquired shall be transferred to the acquiring

company<

(b) the members of the company being acquired shall

become members of the acquiring company<

(c)

the company being acquired shall cease to exist.

(2) From the date on which the cross-border merger takes

effect, a cross-border merger carried out pursuant to regulation 3(4)(b)

shall have the following consequences>

(a) all the assets, rights, liabilities and obligations of the

merging companies shall be transferred to the new company<

(b) the members of the merging companies shall become

members of the new company<

(c)

the merging companies shall cease to exist.

(3) Where the laws in force in Malta or in another Member

State require the completion of special formalities for the transfer of

certain assets, rights and obligations by the merging company or

companies to become effective against third parties, those formalities

shall be carried out by the company resulting from the cross-border

merger.

(4) The rights and obligations of the merging companies

arising from contracts of employment or from employment relationships

and existing at the date on which the cross-border merger takes effect

shall, by reason of that cross-border merger taking effect, be transferred

to the company resulting from the cross-border merger on the date on

which the cross-border merger takes effect.

(5) No shares in the acquiring company shall be exchanged

for shares in the company being acquired held either>

(a) by the acquiring company itself or through a person

acting in his or her own name but on its behalf<

(b) by the company being acquired itself or through a person

acting in his or her own name but on its behalf.

(1) Where a cross-border merger by acquisition is carried

out by a company which holds all the shares and other securities

conferring the right to vote at general meetings of the company or

companies being acquired, the provisions of regulation 6(b), (c) and

(e), regulation 9 and regulation 18(1)(b) shall not apply. Regulation

10(1) shall not apply to the company or companies being acquired.

(2) Where a cross-border merger by acquisition is carried

out by a company which holds 90% or more but not all of the shares

and other securities conferring the right to vote at general meetings of

the company or companies being acquired, and the acquiring company

or the company being acquired is a Maltese merging company, the report

by an independent expert or experts referred to in regulation 9 shall not

be required as long as the dissenting minority shareholders of the

company or companies being acquired have the right to have their shares

purchased by the acquiring company for an agreed consideration

corresponding to the fair value of their shares, or in the event of

disagreement regarding the fair value of such consideration, as shall be

determined by the Court.

These regulations are without prejudice to>

(a) the application of European Community Council

Regulation 139#2004 of 20 January 2004 on the control of

concentrations between undertakings<

(b) the Control of Concentration Regulations promulgated

under the Competition Act<

(c) the application of Community legislation regulating

credit intermediaries and other financial undertakings and any law

in force in Malta made or introduced pursuant to such community

legislation.

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