Structure and process, legal regulation and consentsStructure
How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?
The sale and purchase of privately owned companies, businesses or assets in Ireland is usually conducted by way of written agreement between the buyer and seller. The sale will typically involve a bilateral negotiation between the buyer and the seller, or a seller-controlled auction process where there are a number of potential buyers. A bilateral sales process will usually involve:
- the execution of a confidentiality agreement and other preliminary documentation (eg, non-binding heads of terms, an exclusivity agreement);
- a due diligence exercise where the buyer is given access to information on the company, business or assets being acquired and has the opportunity to ask questions of the seller or sellers, the target business, or both;
- a contract for the sale and purchase either of the shares in the company (a share purchase agreement (SPA)) or the assets or business of the company (an asset purchase agreement (APA) or business transfer agreement (BTA)) and other transaction documentation (eg, disclosure letter, tax deed) are negotiated, finalised and signed;
- conditions to completion (where relevant) are dealt with ahead of the completion date; and
- post-completion obligations (eg, payment of applicable stamp duty, name changes) are completed.
In an auction scenario, a process letter issued by or on behalf of the seller will outline to the potential buyers how the process will be conducted (eg, access to vendor due diligence reports, indicative offers from bidders, detailed due diligence and negotiation of definitive transaction documentation).
The transaction will generally take place over a number of months, but the timing and process will be dependent upon the nature, size and complexity of the transaction and the parties themselves. The timetable will also be influenced by any third-party consents or other approvals that might be required (eg, competition clearance - see question 6).
Where a buyer offers to purchase all of the shares in the company and there are dissenting shareholders, the offer can be followed by a compulsory statutory squeeze-out (see question 4). The transfer of shares could alternatively be structured by way of a court-sanctioned scheme of arrangement under the Irish Companies Act 2014 (the Companies Act); however, this process is generally used by public limited companies with a significant number of shareholders.
An Irish company can merge with another Irish company using the domestic merger regime provided for in Chapter 3 of Part 9 of the Irish Companies Act. Although the use of this structure is increasing, it is typically used for intra-group transactions and as such is not yet common practice in traditional transaction structures.
An Irish private company can also merge with another company incorporated in the European Union using the cross-border merger (CBM) regime (European Communities (Cross-Border Mergers) Regulations 2008 (implementing Directive 2005/56/EC on Cross-Border Mergers, which has been repealed and codified by Chapter II, Title II of Directive 2017/1132 of the European Parliament and of the Council in June 2017) (CBM Directive) (or in an EEA country that has implemented the CBM Directive). In Ireland, a cross-border merger is a court-sanctioned process and is generally used only for high-value cross-border transactions..Legal regulation
Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?
The Companies Act (as amended) is the primary piece of legislation regulating the affairs of Irish companies. There is a wide variety of other legislation that may be applicable to a particular transaction; for example, competition, employment, data protection, tax and pension legislation.
The parties can choose the governing law for the SPA, APA or BTA. The laws of Ireland would typically govern an SPA, APA or BTA for the sale and purchase of shares in an Irish company or of an Irish business. However, it is possible for the contract to be governed by the laws of other jurisdictions (eg, the laws of England and Wales), although this can introduce complexities that do not arise where the governing law is the same as that governing the establishment of the relevant company or business. Where the laws of another jurisdiction are chosen, there typically are the applicable Irish legal requirements in respect of the sale that must be complied with (eg, the transfer of shares must be effected using a prescribed stock transfer form, with board approval and Irish stamp duty must be paid).Legal title
What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?
Legal and beneficial title are distinct interests in Irish law and the nature of the interest being acquired should be specified in the SPA, APA or BTA.
Legal ownership of shares is reflected in an Irish company’s register of members (typically the term ‘member’ and ‘shareholder’ mean the same person) and a transfer of the legal interest must be effected by using a stock transfer form in the prescribed form. The holder of the legal title to the shares can be a nominee of a third party that has the right to the economic benefits of the shares. The beneficial ownership in shares of an Irish company can be transferred without updating the company’s register of members. In a private sale of an Irish company, the execution and provision of the stock transfer form is always a completion deliverable under the SPA. The SPA usually also contains provisions confirming the nature of the seller’s interest (legal, beneficial, or both) in the shares.
The legal and beneficial interest in other assets can also be held by different persons. The APA or BTA will either operate to transfer the title of the assets on completion (eg, contracts and intellectual property (IP)) or prescribe how the assets will transfer depending on the category of assets, with requisite formalities being specified in the APA or BTA (eg, title to stock would normally pass by physical delivery of the goods). The APA or BTA will also usually contain warranties that the seller is the full legal and beneficial owner of the assets being transferred.Multiple sellers
Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?
Generally, buyers and sellers will agree the number of shares to be sold. Typically, a buyer will want all of the sellers to be party to the transaction documentation. Compulsory purchases of minority shareholders’ shares are possible.
Where a private company has multiple shareholders, the constitution of the target company and the shareholders’ agreement to which the selling shareholders are party will typically contain bespoke ‘drag-along’ and ‘tag-along’ provisions that deal with minority shareholders on the sale of shares.
Section 457 of the Companies Act provides a statutory squeeze-out mechanism for a buyer to purchase all of the remaining shares in an Irish company where an offer has been made for the entire issued share capital of the company and the offer has become binding, been approved or been accepted in respect of 80 per cent in value of the shares affected and where, on the date of the offer, more than 20 per cent of the aggregate value of the shares is in the beneficial ownership of the offeror, the assenting shareholders hold not less than 50 per cent in number of the shares.Exclusion of assets or liabilities
Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?
Under Irish contract law, the parties to a business or asset sale can generally agree which assets or liabilities are transferred, assumed or ‘left behind’.
The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (TUPE) apply in Ireland so that employees will transfer with the business (on an asset sale) while retaining their existing rights and benefits (including years of service, existing terms and conditions of employment and the benefit of any collective agreements). There are very limited exceptions to these regulations, and attempts to exclude or limit their applicability are void. Both the seller and buyer have information and consultation obligations in respect of the employees (see questions 33 to 35).
Whether third-party consents are required to transfer the assets will depend on the transaction and the nature of the assets being transferred (see question 7).Consents
Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?
There are no restrictions on foreign ownership. However, under Part 3 of the Irish Competition Act 2002, as amended (Irish Competition Act), it is necessary to notify a transaction and gain clearance from the Irish Competition Consumer Protection Commission (CCPC) where certain financial thresholds are met. The financial thresholds in Ireland are met where, in the most recent financial year, the aggregate turnover in Ireland of the undertakings involved is not less than €60 million; and the turnover in Ireland of each of two or more of the undertakings involved is not less than €10 million. The Irish Competition Act sets out a two-phase process for the review of merger notifications.
In an initial Phase I investigation, the CCPC has 30 working days from the ‘appropriate date’ to either clear the transaction or open a Phase II investigation. The ‘appropriate date’ is the date of notification or, where the CCPC makes a formal request for information (RFI) in writing during Phase I, the date on which the RFI is complied with. An RFI during Phase I therefore has the effect of resetting the 30-working-day review timetable. The Phase I period is automatically extended to 45 working days where remedy proposals are made by the notifying parties to overcome competition concerns.
In a full Phase II investigation, the CCPC has 120 working days from the ‘appropriate date’ to make a Phase II determination. Provided that the ‘appropriate date’ is the date of notification (and is not reset by an RFI during Phase I) and the CCPC takes the full 30-working-day period in Phase I, Phase II will run for a further 90 working days. However, if the CCPC issues an RFI during the first 30 working days of the Phase II process, the running of the clock is suspended until the request is complied with. The deadline by which the CCPC must issue a Phase II determination may be extended from 120 to 135 working days where proposals to address competition concerns are made by the parties. At the end of Phase II, the CCPC will provide a written determination as to whether the transaction will be cleared (unconditionally or subject to conditions) or prohibited.
If the transaction gives rise to a ‘Community dimension’ it may fall within the European Merger Regulation.
All ‘media mergers and acquisitions’ must be notified to the CCPC and are subject to an additional review by the Irish Minister for Communications to assess the impact of the transaction on the plurality of the media in Ireland.
Other regulatory consents that may be required will depend on the nature of the transaction; for example, a consent is required from the Central Bank of Ireland in relation to certain banking and insurance transactions.
Are any other third-party consents commonly required?
Where a target company has multiple shareholders, there may be certain formalities with which a selling shareholder (and potentially the buyer) must comply (eg, pre-emption rights, tag-along rights).
Third-party consents are commonly required under contracts in place in the relevant companies (including grant agreements (eg, with Enterprise Ireland, a state body), lease documentation, IP licences and security documentation), and specific consents for the transaction should become apparent as part of the due diligence process. A share sale will require that the contracts to which the target company or its subsidiaries, or both, are a party are reviewed for change of control and termination provisions. In an asset sale, contracts are primarily reviewed to determine whether there are restrictions or consent requirements on assignment. While it will depend on the terms of each contract at hand, the failure to obtain these contractual consents will not generally void the transfer. Rather, there will most likely be a breach of the underlying contract allowing the relevant counterparty to terminate or seek damages.
Obtaining the necessary business critical consents in connection with the transaction will usually be a condition precedent to completion under the terms of the SPA, APA or BTA.
If there are perfection formalities to be complied with, typically the transfer will complete only when these requirements have been complied with.Regulatory filings
Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?
There are no filings that are required to be made to the Irish Companies Registration Office (CRO) on the transfer of the legal ownership in shares (although for private companies, changes in the registered ownership will be reflected in the company’s next annual return filed with the CRO). The buyer is deemed to be the legal owner of the shares once the register of members of the company has been updated to reflect the transfer. The register of members cannot be updated until all relevant stamp duty has been paid (see question 31).
Irish companies are required to maintain an internal register of beneficial owners (Internal BOR). To the extent that an acquisition of shares in a company results in a change to the beneficial ownership then, pursuant to the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019, an update to the company’s Internal BOR will be necessary. The company will also be required to update the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (Public BOR) which is maintained by the CRO. The information contained on this Public BOR is publicly available.
Registrations and filings required on the transfer of assets will depend on the nature of the asset (eg, transfers of registered land are required to be registered with the Irish Land Registry with an accompanying fee).