Wood DIY Ltd & Anor

On an application under regulation 16 of the The Companies (Cross-Border Mergers) Regulations 2007, the court has a residual discretion to approve a cross-border merger after the statutory requirements are satisfied. That discretion is appropriately exercised by applying the scheme-of-arrangement test: whether an intelligent and honest member of the relevant class, acting in that person’s own interest, might reasonably approve the arrangement. Commercial justification, shareholder approval and the absence of creditor objection may support approval.

Wood DIY Limited, an English company, and Olivero Franco SARL, an Italian company, jointly applied for approval of a cross-border merger by absorption under regulation 16 of the The Companies (Cross-Border Mergers) Regulations 2007. The court considered whether the statutory requirements were met and whether it should exercise its residual discretion to approve the merger. The transferor had no employees, so regulation 16(1)(f) did not apply.

1. Application granted. The court approved the cross-border merger by absorption, with the consequences of the merger to take effect on 15 July 2011 pursuant to regulation 16(2) of the The Companies (Cross-Border Mergers) Regulations 2007.
2. The requirements of regulation 16(1) were satisfied insofar as they applied. The relevant orders had been made by the English Companies Court and the appropriate Italian authority. Regulation 16(1)(f) was inapplicable because the companies had no employees.
3. Regulation 16(1) confers a residual discretion on the court. Although there was no clear authority governing its exercise in this context, the appropriate approach was generally to apply the scheme-of-arrangement approval test stated in In re National Bank [1966] 1 WLR 819, at 829.
4. Applying that test, the commercial reasons for the transfer, shareholder approval and the absence of objection from the Italian company’s creditors justified approval. The court was satisfied that an appropriate member of the relevant class might reasonably approve the arrangement.