CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES REGULATIONS *

SUBSIDIARY LEGISLATION 386.12

CROSS-BORDER MERGERS OF LIMITED

LIABILITY COMPANIES REGULATIONS *

15th December, 2007

LEGAL NOTICE 415 of 2007.

The title of these regulations is the Cross-Border Mergers

of Limited Liability Companies Regulations.

The purpose of these regulations is to transpose and

implement the EC Directive and they shall be interpreted

accordingly.

(1) Any reference in these regulations to "the Act" shall be

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

C om m u ni ty D ir e c t iv e 68 /1 51 /E E C o f 9 M a rch 1 9 68 o n th e

coordination of safeguards which, for the protection of the interests

o f m e m b e r s a n d o t h e r s , a r e r e q u i r e d b y M e m b e r St a t e s o f

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

*Repealed by Legal Notice 25 of 2023.

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

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

R e g u la ti o n 1 39 / 20 04 of 2 0 Ja n u a r y 2 00 4 o n t h e c on t r ol of

concentrations between undertakings.

The management or administrative organ of each of the

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

CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

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 to the Registrar for registration the common draft terms of

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

director and 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

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

c o m p a n i e s a l l r e l e v a n t i n f o r m at i o n a n d d o c u m e n t s f o r t h e

discharge of his duties.

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

t h e m erg i n g c o m p a n i e s , w h e r e at l e a s t o n e o f t h e m e rg i n g

companies is a Maltese merging company or where the company

resulting from the cross-border merger will be registered in Malta,

o n e o r m o r e i n d e p e n d en t e x p e r t s m a y b e a p p o i n t e d b y t h e

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 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

t h a t t h e p r oc e d u r e i s p e n d i n g . T h e Co u r t’s d e c i s i o n i n t h e

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 sub-regulation

(1)(c) of 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

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.

(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

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

merging company, to which special rights are attached, shall be

given 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

i m p l e m e n t a t i o n o f t h e c r o s s - b o r d e r m e r g e r, o r a n e x p e r t

responsible for drawing up, on behalf of any Maltese merging

company, of the report on the common 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

has or is to have its registered office in Malta, the following rules

shall apply

(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

premerger 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

effect, a cross-border merger carried out pursuant to regulation

3(4)(a) 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

c om p a ni e s to be c o m e effe c ti ve ag a i ns t t hi r d pa rt ie s , t ho s e

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.