Liberty Mutual Insurance Europe Plc, Re

Under Article 26 of the Council Regulation (EC) No 2157/2001, the court scrutinises only the legality of the merger concerning completion of the merger and formation of the SE. Pre-merger acts and formalities are outside that scrutiny where they have been conclusively attested under Article 25(2). The court must verify the documents, matching draft terms, employee-involvement arrangements and compliance with the law of the proposed registered office. No employee-involvement arrangements are required where neither merging company has employees. A merger structure designed to enable a company to become an SE is not an abuse of rights where the steps fall within the Regulation and do not infringe European law. The appropriate order confirms and declares that the companies may proceed, subject to registration, rather than approving or sanctioning the merger.

Liberty Mutual Insurance Europe plc, an English public limited company, sought to merge with LSM Luxembourg plc SA under the Council Regulation (EC) No 2157/2001 so that it could become Liberty Mutual Insurance Europe SE. Certificates under Article 25(2) had been issued in respect of the pre-merger acts and formalities for each company.

The application was made under Article 26. The issues included the scope of the court’s scrutiny, the effect of the absence of employees, the interpretation of Article 26(4), whether the use of a newly incorporated Luxembourg company involved an abuse of rights, and the appropriate form of order.

1. Scope of Article 26. The court’s function was to scrutinise the legality of the merger only as regards completion of the merger and formation of the SE. The pre-merger acts and formalities were outside that function because Article 25(2) certificates had conclusively attested their completion. The companies had supplied those certificates within six months and had produced the draft terms of merger approved by both companies.
2. Article 26 requirements. The court was satisfied that the draft terms were in identical terms. Article 26(3) did not require arrangements for employee involvement where neither company had employees. Article 26(4) could refer either to the original formation of the English company or to the future formation of the SE. The latter reading required the provision to be understood as meaning that the SE would be formed in accordance with English law.
3. Abuse of rights. The fact that the Luxembourg company had been formed to enable the English company to use the merger provisions and become an SE did not prevent the transaction from falling within the Regulation. Following the reasoning in Easynet Global Service Ltd v Secretary of State of Business, Energy and Industrial Services [2018] EWCA Civ 10, the proposed steps did not infringe the principle of abuse of rights.
4. Having been satisfied that the requirements of Article 26 were met and that no further legality issue arose, the court declined to describe its order as approving or sanctioning the merger. It confirmed and declared that the companies were free to take steps to bring the merger and formation of the SE into effect, with the consequences taking effect upon registration, and directed delivery of the order and necessary documents to the Registrar of Companies.