The High Court has refused to approve two linked and consecutive cross-border mergers because there was a defect at the pre-merger certificate stage for one of the transferor companies.
Re MDNX Group Holdings Limited and others concerned two linked cross-border mergers (CBMs) under the Companies (Cross-Border Mergers) Regulations 2007.
In the first CBM, one Dutch, one Scottish and five English wholly-owned subsidiaries would merge into their English parent company, MDNX Group Holdings Ltd (MDNX), through a merger by way of absorption.
In the second CBM, MDNX would merge into its sister company, Interoute Networks Ltd (Interoute), as would three other English companies and a Dutch company, again through a merger by way of absorption. Following the second merger, Interoute would continue the business carried on by all of the transferor companies.
To complete the mergers, among other things, the English High Court needed to issue a pre-merger certificate for the English companies, and the Scottish Court of Session needed to do the same for the Scottish company as part of the first CBM. The certificates take the form of orders stating that all of the pre-merger acts and formalities have been complied with. Following this, the English High Court would also need to grant a final order giving effect to the CBMs.
The companies applied for the pre-merger certificates for the first CBM. However, the companies had failed to send details of the date, time and place of the shareholder meetings required by the Regulations. The High Court did not spot this omission and granted pre-merger certificates for the English company. The Court of Session did spot the error, however, and granted an order stating that the pre-merger acts and formalities had been complied with, except for this particular failure.
What did the Court say?
At the hearing to seek final approval for the first CBM, the High Court said that the orders issued by the High Court amounted to valid pre-merger certificates, even though not all of the formalities had in fact been complied with. (This was a similar situation to that in Re M2 Property Invest Limited, on which we reported in January last year. In that case, a Polish Court had granted a pre-merger certificate despite having been given incorrect information about a Polish company’s financial standing. Nevertheless, the English Court approved the transfer, saying it could not re-evaluate the Polish Court’s decision.)
However, the High Court said that the Scottish order did not amount to a pre-merger certificate, because it did not confirm that all of the pre-merger acts and certificates had been completed. Indeed, it noted specifically that two specific requirements had not been completed. The High Court was not, therefore, able to approve the first CBM.