Olympus UK Ltd & Ors

For the purposes of the Companies (Cross-Border Mergers) Regulations 2007 and Directive 2005/56/EC, a merger by absorption may remain a cross-border merger even where members of the transferor company waive their entitlement to shares, securities or cash consideration.

The relevant provisions must be interpreted purposively and, in the case of the Directive, autonomously. The word “issue” may include the grant, allocation or allotment of shares without requiring their receipt and registration. The conclusion was confined to the wholly-owned group structure before the court.

Three companies applied under Regulations 11 and 13 of the Companies (Cross-Border Mergers) Regulations 2007 for directions in connection with proposed cross-border mergers by absorption involving German transferee companies.

The draft merger terms provided that the shareholders of the English transferor companies would receive no shares, securities or cash because the companies were ultimately wholly-owned within the same Olympus group and the shareholders would waive their rights. The central issue was whether the proposed operations satisfied the statutory and Directive definitions of a merger by absorption despite that waiver.

1. Applications granted. The proposed operations constituted cross-border mergers within the meaning of the Companies (Cross-Border Mergers) Regulations 2007 and Directive 2005/56/EC. Directions sought by the applicants had been made on 15 April 2014.
2. The implementing Regulations had to be interpreted, so far as possible, in conformity with the Directive. The Directive itself required a purposive and teleological approach directed to uniformity, effectiveness and the facilitation of cross-border mergers. Its terms had to be given an autonomous European meaning rather than a specialised meaning derived solely from English company law.
3. Although Article 2(2)(a) of the Directive referred to an exchange for the issue of securities or shares, the relevant language versions and the objectives of the Directive supported a broader meaning of “issue”, extending to grant, allocation or allotment. Receipt and registration of the shares were not essential.
4. The right of members of a transferor company to be offered shares in exchange could therefore be recognised even where all members simultaneously waived that right. The absence of an express waiver provision did not prevent waiver. The corresponding reference in Regulations 2(2) and 2(4) to consideration being “receivable” was capable of the same interpretation.
5. The court was materially influenced by the wholly-owned group structure. A strict interpretation could produce a formal issue of economically worthless shares and unnecessary cross-shareholdings, contrary to the practical effectiveness of the legislative scheme. It was unnecessary to decide whether the same result would follow in other contexts.
6. The additional argument based on freedom of establishment under Articles 49 and 54 TFEU was not finally determined, although it might provide further support for the conclusion.

The judgment was reached without adversarial argument and was expressly subject to that caveat.

First-instance decision. No appellate history was stated in the judgment.