Oki Europe Ltd v Oki Systems (Polska) SP ZOO

On an application to approve a cross-border merger, the court must first verify that the statutory jurisdictional requirements are satisfied. It should then assess whether the merger adversely affects any stakeholder in a material way. In a straightforward case, the court may adopt the more stringent approach of examining the interests of shareholders, creditors and employees before approving the merger. Evidence of improved solvency, creditor protection and continuity of employment may establish that the merger causes no material adverse effect. Where no such adverse effect or other good reason against approval exists, the merger may be approved.

Oki Europe Ltd sought approval under the Companies (Cross-Border Mergers) Regulations 2007 for the absorption of its wholly owned Polish subsidiary, Oki Systems (Polska) Sp. Z.O.O., without liquidation. The application was made under Part 8 of the Civil Procedure Rules. The court considered whether the requirements of Regulation 16.1 were met and whether the proposed group restructuring adversely affected stakeholders.

The court also considered the approach adopted in Diamond Resorts (Europe) Ltd, followed in Re Livanova Plc v Sorin S.P.A, and discussed in Re M2 Property Invest Ltd.

1. The court had jurisdiction under Regulation 16.1. The transferee was an eligible UK company, the required certificates of proper completion had been issued in the United Kingdom and Poland, the application was in time, and the draft merger terms matched those covered by the certificates. Regulation 16.1(f) and Part 4 were not engaged because neither company had employee participation arrangements.
2. The court adopted the approach of Sales J in Diamond Resorts (Europe) Ltd [2012] EWHC 3576 Ch. The approach had been followed by Morgan J in Re Livanova Plc v Sorin S.P.A [2015] EWHC 2865 Ch, although Morgan J had indicated that it might merit further consideration. Snowdon J had made a similar observation in Re M2 Property Invest Ltd [2017] EWHC 3218 Ch. This straightforward case was not appropriate for resolving that wider question.
3. The relevant assessment began by asking whether any stakeholder was adversely affected by the proposed merger. The court considered the position of shareholders, creditors and employees. The merger reduced the number of companies within the group without materially altering the interests of the transferee’s shareholders.
4. The financial evidence showed that Oki Europe would be solvent after completion. The letter of support, guarantee arrangements and postponement of internal creditors’ claims substantially improved the position of outside creditors. Employees would remain employed in their existing locations and on unchanged contractual terms, with statutory and collective-bargaining rights preserved.
5. The court found no material adverse effect on stakeholders and no other good reason to refuse approval. The order approving completion of the cross-border merger was therefore made.