In a significant change to both domestic and EU company law, transposition by Ireland of the EU Mobility Directive will update the cross-border merger regime and, for the first time, allow in-scope Irish companies to ‘convert’ into another company type in another European Economic Area (EEA)* member country or divide its assets and liabilities between certain companies in other EEA member countries.
*EEA = 27 EU Member States + 3 European Free Trade Area (EFTA) States (Iceland, Liechtenstein, Norway).
Transposition of Mobility Directive
The EU Mobility Directive (Directive (EU) 2019/2021) was recently transposed into Irish law by the EU (Conversions, Mergers & Divisions) Regulations 2023 (the Mobility Regulations). The Mobility Directive promotes the right of in-scope companies to carry out Cross-Border Conversions, Mergers and Divisions (Cross-Border Operations). It introduces for the first time a codified, harmonised EU framework for all Cross-Border Operations, thus facilitating the freedom of establishment, a fundamental principle of the European Union.
The deadline for transposition of the Mobility Directive was 31 January 2023. However, Ireland and certain other EU member states were slightly late in transposing. The Mobility Regulations took effect on 24th May 2023 other than a limited number of stated provisions which did not take effect until May 26th last.
Scope and Objective of Mobility Regulations
The Mobility Regulations apply to limited liability companies which are not in liquidation (in-scope companies) and introduce significant changes to and expansion of the Cross-Border Operations regime. Previously, certain Cross-Border Operations were subject to the domestic law of EU Member States and inconsistencies in domestic laws had resulted in a lack of legal certainty and unnecessary complexity.
The Mobility Regulations aim to allow increased mobility for Irish companies within the EEA (and for other EEA established companies within Ireland) while reconciling the harmonised framework for Cross-Border Operations with the objective of social protection, including additional rules to provide for a uniform level of protection with regard to rights to information/participation for employees and protection for members and creditors of in-scope companies and the introduction of anti-abuse provisions.
Key aspects of Mobility Regulations
The Mobility Regulations are set to introduce significant changes for in-scope Irish companies:
- Cross-Border Mergers - repeal and replace Ireland’s EU (Cross Border Merger) Regulations 2008 (SI 157/2008) and introduce simplified formalities for certain non-complex mergers. Introduce updated protections for employees, creditors and members of affected companies.
- Cross-Border Conversions - the new cross-border conversion process will allow, for the first time, in-scope Irish companies to convert from the legal form under which they are registered in a departure EEA member countries into a legal form of company in the destination EEA member country, thus enabling in-scope Irish companies to re-locate within the EEA by operation of law.
- Cross-Border Divisions - in-scope companies can, for the first time, avail of full or partial cross-border divisions under which they can transfer all assets and liabilities to two or more companies or transfer a portion of the company’s assets and liabilities to one or more companies in other EEA member countries.
- Legal Scrutiny/Alignment – all Cross-Border Operations are subject to legal scrutiny of the nominated competent authority in the departing and destination member states (which in Ireland is the High Court). The legal procedures for all Cross-Border Operations have been aligned for efficiency and consistency and competent authorities have investigation powers if there are suspected criminal, fraudulent or abusive acts or doubts as to the bona fide nature of the transaction.
Transposition of the Mobility Directive is welcome news both for Irish businesses with a current (or planned) cross-border presence who now have increased flexibility as to cross-border restructuring options within the EEA and for practitioners due to the increased consistency and alignment of Cross-Border Operations. We look forward to assisting clients in availing of the increased restructuring flexibility afforded by the Mobility Regulations.