Cross-Border Mergers


The Cross-Border Mergers of Limited Liability Companies Regulations (S.L.386.12; the “Regulations”) transpose the European Community Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (“CBMD”). Our laws made no provision for cross-border mergers prior to the transposition of the CBMD into Maltese national law. Today, cross-border mergers may occur only in respect of limited liability companies and no latitude exists for cross-border mergers outside the scope of the CBMD and, in particular, no rules exist for either collective investment companies or cooperative societies. What follows is a basic outline of the principal elements to be considered when seeking to carry out a cross-border merger involving one or more Malta companies.

Effects of Merger

A completed cross-border merger has, according to the relevant scenario, broadly these effects at law:

  • all the assets, rights, liabilities and obligations of:(i) the company being acquired are transferred to (and assumed by) the acquiring company; (ii) the merging companies are transferred to (and assumed by) the new company; and
  • the members of: (i) the company being acquired become members of the acquiring company; (ii) the merging companies become members of the new company; and
  • there shall cease to exist (i) the company being acquired and (ii) the merging companies.

Procedural and Documentary Elements

The merger process is initiated by the preparation of Common Draft Terms of Merger (“CDTM”). The CDTM is a key document to be drafted in a form common to the companies being merged and then filed with the Malta Registry of Companies (“RoC”) for registration and publication in the Government Gazette or on the RoC’s website. Publication must occur at least 1 month before the date of the extraordinary general meeting (“EGM”) called to approve the CDTM.

Other documents needed include a ‘management’ report to be signed (and made available to both shareholders and employees) by the Board of Directors of the Malta merging company explaining the CDTM and setting out the legal and economic grounds for the merger as well as the implications for the shareholders, creditors and employees. This, together with a copy of the CDTM, an independent expert’s report on the CDTM and financial statements and other accounting reports and documents of each merging company, must then be made available at the registered office of the Malta merging company for inspection by the shareholders at least 1 month before the proposed date of the EGM called to approve the CDTM.

EGM approval of the CDTM must occur at least 1month after the date of publication of the CDTM by the RoC but not later than 3 months from that date. Once taken, the resolutions adopted at the EGM and the instruments giving effect to them must be filed for registration with the RoC. If the RoC is satisfied with the documentation, a statement is published giving notice of the registration of the resolutions.

Certification of Merger on Completion

Upon verification of compliance with all requirements, and on the lapse of the applicable statutory time limit, the RoC will issue a Cross-Border Pre-merger Certificate if no contestation has been made in the interim. On submission to the RoC of the pre-merger certificate issued by the registry in the jurisdiction of the foreign merging company, the RoC will then proceed to issue a Certificate of Completion of Cross-Border Merger giving effect to the merger and notifying the foreign registry that the merger is effective. This certification is evidence that all legal requirements have been complied with and the merger cannot subsequently be declared null and void. Simplified formalities apply to mergers by acquisition of wholly owned or 90% owned subsidiaries. In these cases, the merging entities may benefit from less stringent requirements and shorter time frames if certain conditions are met.

Creditor and Other Forms of Protection

The Regulations afford several forms of legal protection to creditors, shareholders, holders of securities and debentures, other interested parties and employees. Creditors whose debts existed prior to the publication of the CDTM may object to the cross-border merger by filing an application before the courts of Malta; where there is more than one class of shares in a Malta merging company, the extraordinary resolution approving the merger is subject to a separate vote by at least each class of shareholders whose rights are affected thereby; holders of securities, other than shares, to which special rights are attached, must be given rights against the company resulting from the merger that are at least equivalent to those possessed in the merging company; dissenting minority shareholders may demand that their shares be redeemed; any interested party may contest the merger judicially within certain time frames on certain grounds; where the company resulting from the merger will have a Malta registered office, the RoC must scrutinise the merger’s legal validity and ensure the CDTM has been duly approved and employee participation arrangements respected. Furthermore, directors are personally liable for all damages occasioned to any shareholder of a merging company as a result of his negligent or wilful misconduct in the preparation and implementation of the merger.

Employee Protection and Merger Implementation Planning

Certain key elements need to be taken into consideration and properly planned out in advance of setting the merger in motion. Importantly, these elements include the applicability of special legislation (i) concerning the employees of the merging companies (and other labour laws), (ii) regulating the control of concentrations, and (iii) requiring the completion of certain formalities for the transfer of certain assets, rights and obligations and their effectiveness against third parties. It is essential that these matters are all taken into consideration at the preparation stage to ensure that legal requirements and timelines are complied with and respected and the merger is completed within the desired commercial time frames and with full legal effects.

GANADO Participation in Lexidale Bech-Bruun Study on CBMs

GANADO Advocates contributed as Country Expert to the preparation of a multi-jurisdictional study commissioned by the EU Commission and led by the Scandinavian law firm Bech-Bruun and international consultancy firm Lexidale. Published in September 2013, the study on the “Application of the Cross-Border Mergers Directive for the Directorate General for The Internal Market and Services of the European Union” furnishes evidence that the CBMD “brought about a new age of cross-border mergers activity. Stakeholders across the continent have consistently reported their satisfaction with the CBMD and its transposition, and consider it to be a vital step in creating a more vibrant and robust market environment within the EU and EEA.” The study provides insight into the main drivers for cross-border mergers and sheds light into the motivation to conduct them, as reported by stakeholders. Certain problems in implementation were identified and suggestions for improvement or mitigation made. This interesting and country by country study may be accessed by clicking here.


Disclaimer: The information provided on this page is not intended to impart advice and readers are asked to seek verification of statements made before acting on them.