The High Court (in Re Lanber Properties LLP & Lanber II GmbH [2014] EWHC 4713 (Ch), a case heard last year but the judgment of which was only recently published) approved two related cross-border mergers by absorption despite the mergers failing, on the face of it, to meet a requirement of the Companies (Cross-Border Mergers) Regulations 2007 (SI 2007/2974) (the Regulations).

The Regulations (as applicable to limited liability partnerships (LLPs)) require, as part of the consideration for a merger by absorption, that members of the transferor become members of the transferee. In this case the transferor’s members were

already members of the transferee. It was therefore not possible for them to “become” members, at the time of the proposed merger. The court agreed to apply the provision “purposively” to avoid what would “otherwise be an absurd result”. It noted that consideration had in fact been provided.

Impact – the court’s purposive interpretation of the Regulations is a welcome development in this area. It follows the recent decision in Re International Game Technology Plc and GTECH SpA [2015] EWHC 717 (Ch) which confirmed the court’s jurisdiction to make a conditional order approving the completion of a cross-border merger.

Background – mergers by absorption are where an existing company or, as in this case an LLP, absorbs one or more other merging companies / LLPs. Regulation 2(2)(f) of the Regulations, as applied with certain modifications to LLPs by the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 (SI 2009/1804), states that a merger by absorption is “…an operation in which… the consideration for the transfer is (i) members of the transferor LLP becoming members of the transferee LLP…”