Third and Sixth Company Law Directives:Company Mergers and Divisions
The Third Council Directive (78/855/EEC) provides a framework for mergers by absorption, or by formation, of public limited liability companies. The Sixth Council Directive (82/891/EEC) provides a framework for divisions of public limited liability companies. The provisions in these directives are implemented by the UK in Part 27 of the Companies Act 2006.
Significance of 3rd and 6th Company Law Directives in the UK
The operations governed by the 3rd and 6th Directives involve at least one plc ceasing to exist, and they are little used in the United Kingdom. Typically in the UK when a plc merges with another, or splits its business between two companies, the pre-existing plc will continue to exist. So that for example in a typical takeover of one plc by another, one of them will become a subsidiary of the other, and will continue as a company on the register, possible re-registered as a private limited company. Such a takeover will not be affected at all by these two directives.
According to Companies House figures, there were fewer than five 3rd or 6th Directive operations each year between 2001 and 2010.
The Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011
These regulations come into force on 1 August 2011, they amend Parts 17 and 27 of the Companies Act 2006 and the Cross-Border Mergers Regulations 2007 (S.I 2007/2974) to implement Directive 2009/109/EC. The regulations make changes which fall into two broad categories:
- Enabling companies to take advantage of new technology
- Remove over regulation
The amendments being made expand the range of circumstances in which a company is able to dispense with certain requirements when undertaking a merger or division. In particular the requirements for: an experts’ report on the restructuring, a statement by directors justifying the restructuring, an update of the company’s accounts, approval by general meeting, and updates of any changes since the restructuring was proposed.
The Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011 SI2011/1606
Explanatory Memorandum
Impact Assessment
Simplification of the 3rd and 6th Company Law Directives
Directive 2009/109/EC published in the Official Journal on 16th September 2009 ("the amending directive"), contains measures which are intended to simplify or reduce reporting requirements in the case of a company merger or division. It amends the third (78/855/EEC) company law directive on company mergers and the sixth (82/891/EEC) company law directive on company divisions. The proposals focus on requirements for a management report, an independent expert’s report and a supplementary accounting statement. In some cases the requirement for these reports has been withdrawn, or aligned (where this is not already the case) with relevant provisions in the 2nd (Capital maintenance) and Cross-Border Mergers Directives. Member States are required to bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 30 June 2011.
