Nomura International Plc, Re

Approval of a cross-border merger requires more than proof that the prescribed pre-merger steps have been completed. Under regulation 16 of the The Companies (Cross Border Mergers) Regulations 2007, the court must consider whether it is proper to exercise its discretion in favour of approval. This includes reviewing whether the merger materially adversely affects stakeholders, including shareholders, employees and creditors, and whether there is any other good reason to refuse approval. Where the evidence shows that shareholder interests are unchanged, creditors are not adversely affected, employees’ terms remain unchanged, and no other objection arises, approval may properly be granted.

Nomura International Plc and Nomura Bank Deutschland GmbH applied jointly for approval of completion of a cross-border merger under regulation 16 of the The Companies (Cross Border Mergers) Regulations 2007. Nomura International Plc was the transferee company. The court was satisfied that the required pre-merger orders and certificates had been obtained, that the application was timely, and that the draft merger terms were identical.

The central issue was whether the court should exercise its discretion to approve completion after the statutory preconditions had been met, including whether the merger adversely affected shareholders, creditors or employees, or whether any other good reason justified refusal.

1. The application was granted. The court approved completion of the cross-border merger.

2. Regulation 16 required the court to be satisfied that the specified statutory conditions were fulfilled. Those conditions included the transferee company’s status, the relevant pre-merger orders and certificates, the six-month time limit, identical draft merger terms, and, where appropriate, arrangements for employee participation under Part 4 of the Regulations.

3. Compliance with the pre-merger requirements did not exhaust the court’s role. Following and respectfully agreeing with Sales J in Diamond Resorts (Europe) Limited [2012] EWHC 3576, the court had to conduct a further review before exercising its discretion. It had to consider whether the merger materially adversely affected stakeholders, including shareholders, employees and creditors, and whether any other good reason existed to refuse approval.

4. The stakeholder review was satisfied on the evidence. Both merging companies were wholly owned by the same parent, so the shareholder position was unchanged. Both companies were highly solvent and had substantial net asset positions, so their creditors were not adversely affected. The employees’ employment terms would not change. The transfer of German employees to employment by a UK company was not, without further evidence, an adverse effect on their interests.

5. There was no other good reason to refuse approval. The merger was therefore approved.