Mergers and Divisions under the new Companies Act 2014

By Simon O’ Connor, 7th July 2015

Under the new Companies Act 2014 which was brought into effect on the 1st of June 2015, it is now possible for a private limited company to be involved in a merger or division of companies. Under the previous Act, this was only available to public limited companies. PLC’s still have the option to merge or divide under the new Act.

Mergers can be implemented by either a court order or by utilising the new Summary Approval Procedure which is a new validation procedure introduced under the new Act. This will make the cost of mergers a great deal lower than if an application to court was required.

A merger can now be by formation, absorption or acquisition of a new company and can be made under Part 9 of the Act.

  • Merger by formation of a new company – one or more companies, without going into liquidation, is/are dissolved and the assets/liabilities are transferred to a company in exchange for shares in the new company with or without any cash payment.
  • Merger by Absorption is where a company, without going into liquidation, is dissolved and its assets and liabilities are transferred to a company that is the holder of all of the shares representing the capital of the dissolving company.
  • Merger by Acquisition is where a company, without going into liquidation, is dissolved and its assets and liabilities are transferred to a company in exchange for shares in the acquiring company without any cash payment.

Irish tax law provides neutrality in relation to Cross-Border Mergers and at present, the Revenue has no plans to alter this. The changes to Mergers introduced by the Act are a significant legal development as now mergers will be a more accessible option when considering acquisition and corporate restructuring possibilities. This should help Non-domestic investment continue to grow.

Divisions

Companies may also be divided amongst two or more companies under Part 9 of the Act. None of the companies can be a Public Limited Company and one of the companies must be an LTD company.

Division can be by means of either acquisition or formation of new companies.

  • Division by Acquisition is where two or more companies acquire the assets and liabilities of a company that is being dissolved without entering liquidation in exchange for issue of shares in one or more of the companies acquiring the assets/liabilities.
  • Division by Formation of new companies – is where two or more new companies are formed in order to acquire the assets and liabilities of a company that is being dissolved without entering liquidation, and that this is in exchange for issue of shares in the companies

Public Limited Companies

Under part 17 of the Companies Act 2014, Public Limited Companies can merge together or be divided. One of the companies involved in the Merger or Division must be a Public Limited Company.

A merger can be by formation, absorption or acquisition of a new company.

  • Merger by Acquisition is where a company, without going into liquidation, is dissolved and its assets and liabilities are transferred to a company in exchange for shares in the acquiring company without any cash payment.
  • Merger by Absorption is where a company, without going into liquidation, is dissolved and its assets and liabilities are transferred to a company that is the holder of all of the shares representing the capital of the dissolving company.
  • Merger by Formation of a new company – two or more companies, without going into liquidation, is/are dissolved and the assets/liabilities are transferred to a company in exchange for shares in the new company with or without any cash payment.

Division can be by means of formation or acquisition of new companies.

  • Division by Acquisition is where two or more companies acquire the assets and liabilities of a company that is being dissolved without entering liquidation in exchange for issue of shares in one or more of the companies acquiring the assets/liabilities.
  • Division by Formation of new companies – is where two or more new companies are formed in order to acquire the assets and liabilities of a company that is being dissolved without entering liquidation, and that this is in exchange for issue of shares in the companies

If you would like any more information on Mergers or Divisions under the new Companies Act, please do not hesitate to contact the experts in Company Bureau on +3531 6461625 or alternatively you can fill out a contact form on our website.

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