Companies Act 2006

Chapter 2U.K.Merger

IntroductoryU.K.

904Mergers and merging companiesU.K.

(1)The scheme involves a merger where under the scheme—

(a)the undertaking, property and liabilities of one or more public companies, including the company in respect of which the compromise or arrangement is proposed, are to be transferred to another existing public company (a “merger by absorption”), or

(b)the undertaking, property and liabilities of two or more public companies, including the company in respect of which the compromise or arrangement is proposed, are to be transferred to a new company, whether or not a public company, (a “merger by formation of a new company”).

(2)References in this Part to “the merging companies” are—

(a)in relation to a merger by absorption, to the transferor and transferee companies;

(b)in relation to a merger by formation of a new company, to the transferor companies.

Requirements applicable to mergerU.K.

905Draft terms of scheme (merger)U.K.

(1)A draft of the proposed terms of the scheme must be drawn up and adopted by the directors of the merging companies.

(2)The draft terms must give particulars of at least the following matters—

(a)in respect of each transferor company and the transferee company—

(i)its name,

(ii)the address of its registered office, and

(iii)whether it is a company limited by shares or a company limited by guarantee and having a share capital;

(b)the number of shares in the transferee company to be allotted to members of a transferor company for a given number of their shares (the “share exchange ratio”) and the amount of any cash payment;

(c)the terms relating to the allotment of shares in the transferee company;

(d)the date from which the holding of shares in the transferee company will entitle the holders to participate in profits, and any special conditions affecting that entitlement;

(e)the date from which the transactions of a transferor company are to be treated for accounting purposes as being those of the transferee company;

(f)any rights or restrictions attaching to shares or other securities in the transferee company to be allotted under the scheme to the holders of shares or other securities in a transferor company to which any special rights or restrictions attach, or the measures proposed concerning them;

(g)any amount of benefit paid or given or intended to be paid or given—

(i)to any of the experts referred to in section 909 (expert's report), or

(ii)to any director of a merging company,

and the consideration for the payment of benefit.

(3)The requirements in subsection (2)(b), (c) and (d) are subject to section 915 (circumstances in which certain particulars not required).

906Publication of draft terms [F1by registrar](merger)U.K.

(1)The directors of each of the merging companies must deliver a copy of the draft terms to the registrar.

(2)The registrar must publish in the Gazette notice of receipt by him from that company of a copy of the draft terms.

(3)That notice must be published at least one month before the date of any meeting of that company summoned for the purpose of approving the scheme.

[F2(4)The requirements in this section are subject to section 906A (publication of draft terms on company website).]

[F3906APublication of draft terms on company website (merger)U.K.

(1)Section 906 does not apply in respect of a company if the conditions in subsections (2) to (6) are met.

(2)The first condition is that the draft terms are made available on a website which—

(a)is maintained by or on behalf of the company, and

(b)identifies the company.

(3)The second condition is that neither access to the draft terms on the website nor the supply of a hard copy of them from the website is conditional on payment of a fee or otherwise restricted.

(4)The third condition is that the directors of the company deliver to the registrar a notice giving details of the website.

(5)The fourth condition is that the registrar publishes the notice in the Gazette at least one month before the date of any meeting of the company summoned for the purpose of approving the scheme.

(6)The fifth condition is that the draft terms remain available on the website throughout the period beginning one month before, and ending on, the date of any such meeting.]

907Approval of members of merging companiesU.K.

(1)The scheme must be approved by a majority in number, representing 75% in value, of each class of members of each of the merging companies, present and voting either in person or by proxy at a meeting.

(2)This requirement is subject to sections 916, 917[F4, 917A] and 918 (circumstances in which meetings of members not required).

908Directors' explanatory report (merger)U.K.

(1)The directors of each of the merging companies must draw up and adopt a report.

(2)The report must consist of—

(a)[F5the required statement explaining the effect of the compromise or arrangement,] and

(b)insofar as that statement does not deal with the following matters, a further statement—

(i)setting out the legal and economic grounds for the draft terms, and in particular for the share exchange ratio, and

(ii)specifying any special valuation difficulties.

[F6(2A)In subsection (2) “the required statement explaining the effect of the compromise or arrangement” means—

(a)in a case where a meeting is summoned under section 896 in relation to the compromise or arrangement, the statement required by section 897;

(b)in a case where a meeting is summoned under section 901C in relation to the compromise or arrangement, the statement required by section 901D.]

(3)The requirement in this section is subject to section 915 (circumstances in which reports not required) [F7, section 915A (other circumstances in which reports and inspection not required) and section 918A (agreement to dispense with reports etc).].

909Expert's report (merger)U.K.

(1)An expert's report must be drawn up on behalf of each of the merging companies.

(2)The report required is a written report on the draft terms to the members of the company.

(3)The court may on the joint application of all the merging companies approve the appointment of a joint expert to draw up a single report on behalf of all those companies.

If no such appointment is made, there must be a separate expert's report to the members of each merging company drawn up by a separate expert appointed on behalf of that company.

(4)The expert must be a person who—

(a)is eligible for appointment as a statutory auditor (see section 1212), and

(b)meets the independence requirement in section 936.

(5)The expert's report must—

(a)indicate the method or methods used to arrive at the share exchange ratio;

(b)give an opinion as to whether the method or methods used are reasonable in all the circumstances of the case, indicate the values arrived at using each such method and (if there is more than one method) give an opinion on the relative importance attributed to such methods in arriving at the value decided on;

(c)describe any special valuation difficulties that have arisen;

(d)state whether in the expert's opinion the share exchange ratio is reasonable; and

(e)in the case of a valuation made by a person other than himself (see section 935), state that it appeared to him reasonable to arrange for it to be so made or to accept a valuation so made.

(6)The expert (or each of them) has—

(a)the right of access to all such documents of all the merging companies, and

(b)the right to require from the companies' officers all such information,

as he thinks necessary for the purposes of making his report.

(7)The requirement in this section is subject to section 915 (circumstances in which reports not required) [F8, section 915A (other circumstances in which reports and inspection not required)][F9and section 918A (agreement to dispense with expert's report)] .

910Supplementary accounting statement (merger)U.K.

[F10(1)This section applies if the last annual accounts of any of the merging companies relate to a financial year ending before—

(a)the date seven months before the first meeting of the company summoned for the purposes of approving the scheme, or

(b)if no meeting of the company is required (by virtue of any of sections 916 to 918), the date six months before the directors of the company adopt the draft terms of the scheme.

(1A)If the company has not made public a half-yearly financial report relating to a period ending on or after the date mentioned in subsection (1), the directors of the company must prepare a supplementary accounting statement.]

(2)That statement must consist of—

(a)a balance sheet dealing with the state of affairs of the company as at a date not more than three months before the draft terms were adopted by the directors, and

(b)where the company would be required under section 399 to prepare group accounts if that date were the last day of a financial year, a consolidated balance sheet dealing with the state of affairs of the company and the undertakings that would be included in such a consolidation.

(3)The requirements of this Act F11... as to the balance sheet forming part of a company's annual accounts, and the matters to be included in notes to it, apply to the balance sheet required for an accounting statement under this section, with such modifications as are necessary by reason of its being prepared otherwise than as at the last day of a financial year.

(4)The provisions of section 414 as to the approval and signing of accounts apply to the balance sheet required for an accounting statement under this section.

[F12(5) In this section “ half-yearly financial report ” means a report of that description required to be made public by rules under section 89A of the Financial Services and Markets Act 2000 F13 (transparency rules).

(6) The requirement in this section is subject to section 915A (other circumstances in which reports and inspection not required) and section 918A (agreement to dispense with reports etc ). ]

911Inspection of documents (merger)U.K.

(1)The members of each of the merging companies must be able, during the period specified below—

(a)to inspect at the registered office of that company copies of the documents listed below relating to that company and every other merging company, and

(b)to obtain copies of those documents or any part of them on request free of charge.

(2)The period referred to above is the period—

(a)beginning one month before, and

(b)ending on the date of,

the first meeting of the members, or any class of members, of the company for the purposes of approving the scheme.

(3)The documents referred to above are—

(a)the draft terms;

(b)the directors' explanatory report;

(c)the expert's report;

(d)the company's annual accounts and reports for the last three financial years ending on or before the first meeting of the members, or any class of members, of the company summoned for the purposes of approving the scheme; F14. . .

(e)any supplementary accounting statement required by section 910.[F15; and

(f)if no statement is required by section 910 because the company has made public a recent half-yearly financial report (see subsection (1A) of that section), that report. ]

[F16(3A)The requirement in subsection (1)(a) is subject to section 911A(1) (publication of documents on company website).]

(4)The requirements of subsection (3)(b) and (c) are subject to section 915 (circumstances in which reports not required)[F17 and section 918A (agreement to dispense with reports etc)].

[F18(5)Section 1145 (right to hard copy) does not apply to a document sent or supplied in accordance with subsection (1)(b) to a member who has consented to information being sent or supplied by the company by electronic means and has not revoked that consent.

(6)Part 4 of Schedule 5 (communications by means of a website) does not apply for the purposes of subsection (1)(b) (but see section 911A(5)).

(7)The requirements in this section are subject to section 915A (other circumstances in which reports and inspection not required).]

[F19911APublication of documents on company website (merger)U.K.

(1)Section 911(1)(a) does not apply to a document if the conditions in subsections (2) to (4) are met in relation to that document. This is subject to subsection (6).

(2)The first condition is that the document is made available on a website which—

(a)is maintained by or on behalf of the company, and

(b)identifies the company.

(3)The second condition is that access to the document on the website is not conditional on payment of a fee or otherwise restricted.

(4)The third condition is that the document remains available on the website throughout the period beginning one month before, and ending on, the date of any meeting of the company summoned for the purpose of approving the scheme.

(5)A person is able to obtain a copy of a document as required by section 911(1)(b) if—

(a)the conditions in subsections (2) and (3) are met in relation to that document, and

(b)the person is able, throughout the period specified in subsection (4)—

(i)to retain a copy of the document as made available on the website, and

(ii)to produce a hard copy of it.

(6)Where members of a company are able to obtain copies of a document only as mentioned in subsection (5), section 911(1)(a) applies to that document even if the conditions in subsections (2) to (4) are met.]

[F20911BReport on material changes of assets of merging companiesU.K.

(1)The directors of each of the merging companies must report—

(a)to every meeting of the members, or any class of members, of that company summoned for the purpose of agreeing to the scheme, and

(b)to the directors of every other merging company,

any material changes in the property and liabilities of that company between the date when the draft terms were adopted and the date of the meeting in question.

(2)The directors of each of the other merging companies must in turn—

(a)report those matters to every meeting of the members, or any class of members, of that company summoned for the purpose of agreeing to the scheme, or

(b)send a report of those matters to every member entitled to receive notice of such a meeting.

(3) The requirement in this section is subject to section 915A (other circumstances in which reports and inspection not required) and section 918A (agreement to dispense with reports etc ). ]

912Approval of articles of new transferee company (merger)U.K.

[F21(1)]In the case of a merger by formation of a new company, the articles of the transferee company, or a draft of them, must be approved by ordinary resolution of F22. . . each of the transferor companies. [F23This is subject to subsection (2).]

[F24(2)In the case of a compromise or arrangement to be sanctioned under Part 26A, it is not necessary for the articles of the transferee company (or a draft of them) to be approved by ordinary resolution of the company in respect of which the compromise or arrangement is proposed. ]

913Protection of holders of securities to which special rights attached (merger)U.K.

(1)The scheme must provide that where any securities of a transferor company (other than shares) to which special rights are attached are held by a person otherwise than as a member or creditor of the company, that person is to receive rights in the transferee company of equivalent value.

(2)Subsection (1) does not apply if—

(a)the holder has agreed otherwise, or

(b)the holder is, or under the scheme is to be, entitled to have the securities purchased by the transferee company on terms that the court considers reasonable.

[F25914No allotment of shares to transferor company or its nominee (merger)U.K.

The scheme must not provide for any shares in the transferee company to be allotted to—

(a)a transferor company (or its nominee) in respect of shares in the transferor company held by the transferor company itself (or its nominee); or

(b)the transferee company (or its nominee) in respect of shares in a transferor company held by the transferee company (or its nominee).]

Exceptions where shares of transferor company held by transferee companyU.K.

915Circumstances in which certain particulars and reports not required (merger)U.K.

(1)This section applies in the case of a merger by absorption where all of the relevant securities of the transferor company (or, if there is more than one transferor company, of each of them) are held by or on behalf of the transferee company.

(2)The draft terms of the scheme need not give the particulars mentioned in section 905(2)(b), (c) or (d) (particulars relating to allotment of shares to members of transferor company).

(3)[F26In a case where a meeting has been summoned under section 896 in relation to the compromise or arrangement, section 897] (explanatory statement to be circulated or made available) does not apply.

[F27(3A)In a case where a meeting has been summoned under section 901C in relation to the compromise or arrangement, section 901D (explanatory statement to be circulated or made available) does not apply.]

(4)The requirements of the following sections do not apply—

• section 908 (directors' explanatory report),

• section 909 (expert's report).

(5)The requirements of section 911 (inspection of documents) so far as relating to any document required to be drawn up under the provisions mentioned in [F28subsection (4)] above do not apply.

(6)In this section “relevant securities”, in relation to a company, means shares or other securities carrying the right to vote at general meetings of the company.

[F29915AOther circumstances in which reports and inspection not required (merger)U.K.

(1) This section applies in the case of a merger by absorption where 90% or more (but not all) of the relevant securities of the transferor company (or, if there is more than one transferor company, of each of them) are held by or on behalf of the transferee company.

(2) If the conditions in subsections (3) and (4) are met, the requirements of the following sections do not apply—

(a)section 908 (directors' explanatory report),

(b)section 909 (expert's report),

(c)section 910 (supplementary accounting statement),

(d)section 911 (inspection of documents), and

(e)section 911B (report on material changes of assets of merging company).

(3) The first condition is that the scheme provides that every other holder of relevant securities has the right to require the transferee company to acquire those securities.

(4) The second condition is that, if a holder of securities exercises that right, the consideration to be given for those securities is fair and reasonable.

(5)The powers of the court under section 900(2) [F30or, as the case may be, section 901J(2)] (power to facilitate reconstruction or amalgamation) include the power to determine, or make provision for the determination of, the consideration to be given for securities acquired under this section.

(6) In this section—

• “ other holder ” means a person who holds securities of the transferor company otherwise than on behalf of the transferee company (and does not include the transferee company itself);

• “ relevant securities ”, in relation to a company, means shares or other securities carrying the right to vote at general meetings of the company. ]

916Circumstances in which meeting of members of transferee company not required (merger)U.K.

(1)This section applies in the case of a merger by absorption where 90% or more (but not all) of the relevant securities of the transferor company (or, if there is more than one transferor company, of each of them) are held by or on behalf of the transferee company.

(2)It is not necessary for the scheme to be approved at a meeting of the members, or any class of members, of the transferee company if the court is satisfied that the following conditions have been complied with.

[F31(3)The first condition is that either subsection (3A) or subsection (3B) is satisfied.

(3A)This subsection is satisfied if publication of notice of receipt of the draft terms by the registrar took place in respect of the transferee company at least one month before the date of the first meeting of members, or any class of members, of the transferor company summoned for the purpose of agreeing to the scheme.

(3B)This subsection is satisfied if—

(a)the conditions in section 906A(2) to (4) are met in respect of the transferee company,

(b)the registrar published the notice mentioned in subsection (4) of that section in the Gazette at least one month before the date of the first meeting of members, or any class of members, of the transferor company summoned for the purpose of agreeing to the scheme, and

(c)the draft terms remained available on the website throughout the period beginning one month before, and ending on, that date.]

[F32(4)The second condition is that subsection (4A) or (4B) is satisfied for each of the documents listed in the applicable paragraphs of section 911(3)(a) to (f) relating to the transferee company and the transferor company (or, if there is more than one transferor company, each of them).

(4A)This subsection is satisfied for a document if the members of the transferee company were able during the period beginning one month before, and ending on, the date mentioned in subsection (3A) to inspect that document at the registered office of that company.

(4B)This subsection is satisfied for a document if—

(a)the document is made available on a website which is maintained by or on behalf of the transferee company and identifies the company,

(b)access to the document on the website is not conditional on the payment of a fee or otherwise restricted, and

(c)the document remains available on the website throughout the period beginning one month before, and ending on, the date mentioned in subsection (3A).

(4C)The third condition is that the members of the transferee company were able to obtain copies of the documents mentioned in subsection (4), or any part of those documents, on request and free of charge, throughout the period beginning one month before, and ending on, the date mentioned in subsection (3A).

(4D)For the purposes of subsection (4C)—

(a)section 911A(5) applies as it applies for the purposes of section 911(1)(b), and

(b)Part 4 of Schedule 5 (communications by means of a website) does not apply.]

(5)The [F33fourth] condition is that—

(a)one or more members of the transferee company, who together held not less than 5% of the paid-up capital of the company which carried the right to vote at general meetings of the company (excluding any shares in the company held as treasury shares) would have been able, during that period, to require a meeting of each class of members to be called for the purpose of deciding whether or not to agree to the scheme, and

(b)no such requirement was made.

(6)In this section “relevant securities”, in relation to a company, means shares or other securities carrying the right to vote at general meetings of the company.

917Circumstances in which no meetings required (merger)U.K.

(1)This section applies in the case of a merger by absorption where all of the relevant securities of the transferor company (or, if there is more than one transferor company, of each of them) are held by or on behalf of the transferee company.

(2)It is not necessary for the scheme to be approved at a meeting of the members, or any class of members, of any of the merging companies if the court is satisfied that the following conditions have been complied with.

[F34(3)The first condition is that either subsection (3A) or subsection (3B) is satisfied.

(3A)This subsection is satisfied if publication of notice of receipt of the draft terms by the registrar took place in respect of all the merging companies at least one month before the date of the court's order.

(3B)This subsection is satisfied if—

(a)the conditions in section 906A(2) to (4) are met in respect of each of the merging companies,

(b)in each case, the registrar published the notice mentioned in subsection (4) of that section in the Gazette at least one month before the date of the court's order, and

(c)the draft terms remained available on the website throughout the period beginning one month before, and ending on, that date.]

[F35(4)The second condition is that subsection (4A) or (4B) is satisfied for each of the documents listed in the applicable paragraphs of section 911(3)(a) to (f) relating to the transferee company and the transferor company (or, if there is more than one transferor company, each of them).

(4A)This subsection is satisfied for a document if the members of the transferee company were able during the period beginning one month before, and ending on, the date mentioned in subsection (3A) to inspect that document at the registered office of that company.

(4B)This subsection is satisfied for a document if—

(a)the document is made available on a website which is maintained by or on behalf of the transferee company and identifies the company,

(b)access to the document on the website is not conditional on the payment of a fee or otherwise restricted, and

(c)the document remains available on the website throughout the period beginning one month before, and ending on, the date mentioned in subsection (3A).

(4C)The third condition is that the members of the transferee company were able to obtain copies of the documents mentioned in subsection (4), or any part of those documents, on request and free of charge, throughout the period beginning one month before, and ending on, the date mentioned in subsection (3A).

(4D)For the purposes of subsection (4C)—

(a)section 911A(5) applies as it applies for the purposes of section 911(1)(b), and

(b)Part 4 of Schedule 5 (communications by means of a website) does not apply.]

(5)The [F36fourth] condition is that—

(a)one or more members of the transferee company, who together held not less than 5% of the paid-up capital of the company which carried the right to vote at general meetings of the company (excluding any shares in the company held as treasury shares) would have been able, during that period, to require a meeting of each class of members to be called for the purpose of deciding whether or not to agree to the scheme, and

(b)no such requirement was made.

(6)In this section “relevant securities”, in relation to a company, means shares or other securities carrying the right to vote at general meetings of the company.

Other exceptionsU.K.

[F37917AOther circumstances in which meeting of members of transferor company not required (merger)U.K.

In the case of a compromise or arrangement to be sanctioned under Part 26A, it is not necessary for the scheme to be approved by the members of the company in respect of which the compromise or arrangement is proposed.]

918Other circumstances in which meeting of members of transferee company not required (merger)U.K.

(1)In the case of any merger by absorption, it is not necessary for the scheme to be approved by the members of the transferee company if the court is satisfied that the following conditions have been complied with.

[F38(2) The first condition is that either subsection (2A) or subsection (2B) is satisfied.

(2A)This subsection is satisfied if publication of notice of receipt of the draft terms by the registrar took place in respect of the transferee company at least one month before the date of the first meeting of members, or any class of members, of the transferor company (or, if there is more than one transferor company, any of them) summoned for the purposes of agreeing to the scheme.

(2B)This subsection is satisfied if—

(a)the conditions in section 906A(2) to (4) are met in respect of the transferee company,

(b)the registrar published the notice mentioned in subsection (4) of that section in the Gazette at least one month before the date of the first meeting of members, or any class of members, of the transferor company (or, if there is more than one transferor company, any of them) summoned for the purposes of agreeing to the scheme, and

(c)the draft terms remained available on the website throughout the period beginning one month before, and ending on, that date.]

[F39(3)The second condition is that subsection (3A) or (3B) is satisfied for each of the documents listed in the applicable paragraphs of section 911(3) relating to the transferee company and the transferor company (or, if there is more than one transferor company, each of them).

(3A)This subsection is satisfied for a document if the members of the transferee company were able during the period beginning one month before, and ending on, the date of any such meeting as is mentioned in subsection (2A) to inspect that document at the registered office of that company.

(3B)This subsection is satisfied for a document if—

(a)the document is made available on a website which is maintained by or on behalf of the transferee company and identifies the company,

(b)access to the document on the website is not conditional on the payment of a fee or otherwise restricted, and

(c)the document remains available on the website throughout the period beginning one month before, and ending on, the date of any such meeting as is mentioned in subsection (2A).

(3C)The third condition is that the members of the transferee company were able to obtain copies of the documents mentioned in subsection (3), or any part of those documents, on request and free of charge, throughout the period beginning one month before, and ending on, the date of any such meeting as is mentioned in subsection (2A).

(3D)For the purposes of subsection (3C)—

(a)section 911A(5) applies as it applies for the purposes of section 911(1)(b), and

(b)Part 4 of Schedule 5 (communications by means of a website) does not apply.]

(4)The [F40fourth] condition is that—

(a)one or more members of that company, who together held not less than 5% of the paid-up capital of the company which carried the right to vote at general meetings of the company (excluding any shares in the company held as treasury shares) would have been able, during that period, to require a meeting of each class of members to be called for the purpose of deciding whether or not to agree to the scheme, and

(b)no such requirement was made.

[F41918A Agreement to dispense with [F42 reports etc] (merger) U.K.

(1)If all members holding shares in, and all persons holding other securities of, [F43the merging companies], being shares or securities that carry a right to vote in general meetings of the company in question, so agree, [F44the following requirements do not apply].

[F45(1A)The requirements that may be dispensed with under this section are—

(a)the requirements of—

(i)i)section 908 (directors' explanatory report),

(ii)section 909 (expert's report),

(iii)section 910 (supplementary accounting statement), and

(iv)section 911B (report on material changes of assets of merging company); and

(b)the requirements of section 911 (inspection of documents) so far as relating to any document required to be drawn up under sections 908, 909 or 910.]

(2)For the purposes of this section—

(a)the members, or holders of other securities, of a company, and

(b)whether shares or other securities carry a right to vote in general meetings of the company,

are determined as at the date of [F46the relevant application].]

[F47(3)In subsection (2) “the relevant application” means—

(a)in the case of a compromise or arrangement to be sanctioned under Part 26, the application to the court under section 896;

(b)in the case of a compromise or arrangement to be sanctioned under Part 26A, the application to the court under section 901C(1).]