Portman Insurance Plc, Re

The SE Regulation does not require companies forming a European company by merger to be actively trading. A dormant or shell company may participate where it is a genuine party to the proposed merger and the transaction is part of a real cross-border reorganisation. The court must distinguish that situation from using an overseas dormant company solely as a device to bring an otherwise domestic transaction within a cross-border statutory regime. That distinction reflects the purpose of the SE Regulation and cannot be displaced by a purposive construction unsupported by its express provisions or recitals.

Portman Insurance plc sought certification under Article 25(2) of the Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (SE). The proposed transaction involved its merger by absorption with its wholly owned French subsidiary, Portman SA, followed by the formation and relocation of an SE as part of a wider European reorganisation.

The issue was whether certification should be refused because Portman SA was dormant, non-trading and effectively a shell company. The question arose in light of Re Easynet Global Services Ltd [2016] EWHC 2681 (Ch), concerning the use of a dormant overseas company to create an artificial cross-border merger.

1. Certification. The court was satisfied that the pre-merger acts and formalities had been completed and that a certificate should be issued under Article 25(2) of the Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (SE).
2. Device principle. The reasoning in Re Easynet Global Services Ltd [2016] EWHC 2681 (Ch) concerned a transaction which was, in substance, domestic, with a dormant EEA company inserted only to bring it within the cross-border merger regime. Such a device would be contrary to the purpose of that regime. The present transaction was materially different. Portman SA was not included merely to enable other companies to use the SE Regulation; it was itself a party wishing to merge with Portman Insurance plc as part of a genuine reorganisation.
3. No trading requirement. The SE Regulation contains no express requirement that companies forming an SE by merger must have traded or be actively trading. Its recitals identify the objective of facilitating combinations between companies in different Member States and removing barriers to the internal market. They do not impose a trading condition.
4. The structure of Article 2 supports that conclusion. Although it contains express restrictions, including specified periods relating to subsidiaries, it contains no additional requirement of active trading. Article 2(4), which permits conversion of a public limited company having a subsidiary governed by another Member State’s law, cannot be read as making the availability of the statutory alternatives depend on whether the subsidiary has traded.
5. Certification therefore should not be refused merely because Portman SA was dormant and held only modest assets. Certificate to issue.

First instance decision. No prior appellate decision is stated in the judgment.