Livanova Plc v Sorin SPA

Under regulation 16 of the Companies (Cross-Border Mergers) Regulations 2007, the court may approve completion of a proposed cross-border merger while recognising that the merger may not ultimately complete. The court may fix a date for the consequences of the merger to take effect, subject to contractual termination, because the order does not compel the parties to carry out the merger. Approval may be withheld where the application is academic, premature or the merger is most unlikely to occur, but the court should avoid excessive speculation. The extent of the court’s scrutiny under regulation 16 remained open for fuller argument in a future case.

Livanova plc and Sorin SPA applied jointly for approval of a proposed cross-border merger under regulation 16 of the Companies (Cross-Border Mergers) Regulations 2007. The draft order approved completion for the purposes of article 11 of Directive 2005/56/EC and fixed 19 October 2015 as the date when the merger’s consequences would take effect, subject to termination rights under the transaction agreement.

The principal questions were whether the court had jurisdiction to make an order in those conditional terms and whether approval should be withheld because the merger might not complete. The court also considered the extent of the scrutiny required under regulation 16.

1. Jurisdiction. The court had jurisdiction under regulations 16(1) and 16(2) of the Companies (Cross-Border Mergers) Regulations 2007 to approve completion of the proposed merger and fix a date for the consequences of the merger to take effect, even though the order contemplated that the merger might not complete. The conditional wording did not require the court to compel the parties to implement the merger. [2015] EWHC 2865 (Ch), paras 8–9.
2. Discretion. The possibility that the merger might not occur did not make the application academic or premature on the facts. A relatively low hurdle should apply before approval is withheld on that basis. The court should avoid excessive speculation about the prospects of completion. It remained open whether approval should be withheld where completion was most unlikely or the court would otherwise be acting in vain. [2015] EWHC 2865 (Ch), para 11.
3. Extent of scrutiny. The court conducted the more extensive review described by Sales J in re Diamond Resorts (Europe) Ltd, including consideration of whether stakeholders would suffer material detriment, and was satisfied that approval was proper. However, it was well arguable that this review went beyond what article 11 of the Directive and regulation 16 required. In particular, it was open to argument that the English court need not review procedures adopted in other Member States or undertake a broad assessment of benefits and detriments to shareholders, employees and creditors. That issue was left for a future case with competing argument. [2015] EWHC 2865 (Ch), paras 12–17.
4. Order. The proposed order was made, approving completion of the cross-border merger and fixing 19 October 2015 as the date for its consequences to take effect, subject to the specified contractual termination condition.