The Undertakings for Collective Investment in Transferable Securities Regulations 2011

PART 4MERGERS

Interpretation

7.—(1) In this Part—

“the Act” means the Financial Services and Markets Act 2000(1);

“the Authority” means the Financial Services Authority”;

“cross-border merger” means a merger of UCITS—

“depositary” means—

“domestic merger” means a merger between two or more UK UCITS where at least one of the UCITS involved has given notice to the Authority under paragraph 20B of Schedule 3 to the Act;

“EEA UCITS” is a UCITS which is established in an EEA State other than the United Kingdom;

“managers” means—

“UCITS” means an undertaking for collective investment in transferable securities within the meaning of Article 1.2 of the UCITS directive, or a sub-fund of such an undertaking, and includes an open ended investment company, or an authorised unit trust to which the UCITS directive applies;

“UCITS directive” means directive means the Council Directive of 13th July 2009 on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (No 2009/65/EC);

“UK UCITS” means a UCITS which is established in the United Kingdom;

“unit-holders” means—

“units” means—

(2) Subject to sub-paragraph (1), expressions used in this Part shall have the same meaning as in the Act.

8.—(1) This Part applies to any reconstruction or amalgamation involving a UK UCITS which is a cross-border merger or a domestic merger, and which takes the form of a merger by absorption, a merger by formation of a new company or unit trust scheme, or a merger by sub-fund.

(2) A “merger by absorption” means an operation in which—

(a)there are one or more transferor EEA UCITS or sub-funds (the “merging UCITS”);

(b)there is an existing transferee UK UCITS or sub-fund (the “receiving UCITS”);

(c)every transferor UCITS or sub-fund is dissolved without going into liquidation and transfers all of its assets and liabilities to the transferee UCITS or sub-fund; and

(d)the consideration for the transfer is units in the receiving UCITS, receivable by unit-holders in the merging UCITS, or members of the sub-fund, with or without a cash payment to unit-holders not exceeding ten per cent of the net asset value of those units.

(3) A “merger by formation of a new UCITS” means an operation in which—

(a)there are two or more transferor EEA UCITS, or sub-funds (the “merging UCITS”);

(b)every transferor EEA UCITS or sub-fund is dissolved without going into liquidation, and on dissolution transfers all of its assets and liabilities to a transferee UK UCITS or sub-fund formed for the purpose of, or in connection with, the operation (the “receiving UCITS”);

(c)the consideration for the transfer is—

(i)units in the receiving UCITS, and

(ii)if so agreed, a cash payment not exceeding 10 per cent of the net asset value of those units,

receivable by members of the transferor UCITS.

(4) A “merger by scheme of arrangement” means an operation in which—

(a)there are one or more transferor UCITS or sub-funds of a UCITS (“the merging UCITS”);

(b)the transferor UCITS or sub-funds continue to exist until their liabilities have been discharged, but transfer their net assets to—

(i)a sub-fund of the same UCITS;

(ii)another existing UCITS or a sub-fund of that UCITS; or

(iii)a UCITS formed for the purposes of the operation

(“the receiving UCITS”).

Application for authorisation

9.—(1) A merging UK UCITS must apply to the Authority for an order authorising a merger (an “authorisation order”).

(2) The application must be made in such manner as the Authority may direct and must be accompanied by—

(a)the common draft terms of the proposed merger duly approved by the UCITS, any other merging UCITS and the receiving UCITS;

(b)where the receiving UCITS is an EEA UCITS, an up-to-date version of the prospectus and the key investor information referred to in Article 78 of the UCITS directive for that UCITS;

(c)a statement by each of the depositaries or, in the case of an authorised unit trust scheme, the trustee, of the merging UCITS and the receiving UCITS confirming that, in accordance with rules made by the Authority or by the competent authorities of an EEA UCITS involved in the merger to implement Articles 40 and 41 of the UCITS directive, they have verified compliance of the following matters with the requirements of those rules—

(i)the identification of the type of merger and of the UCITS involved;

(ii)the planned effective date of the merger; and

(iii)the rules applicable, respectively, to the transfer of assets and the exchange of units; and

(d)the information on the proposed merger that the merging and the receiving UCITS intend to provide to their respective unit-holders.

(3) Where the proposed merger is a cross-border merger, the information referred to in paragraph (2) must be supplied to the Authority both in English, and in the official language, or one of the official languages of any EEA State in which the merging or receiving EEA UCITS is established, or in a language approved by the competent authorities in that EEA State.

(4) Where the Authority considers that the information supplied under paragraph (2) by the merging UCITS is not complete, the Authority must, within 10 working days of receiving the information, request additional information from the UCITS.

(5) Where the receiving UCITS is an EEA UCITS, the Authority must transmit copies of the information supplied under paragraph (2) to the competent authorities of the receiving EEA UCITS.

(6) The Authority must consider the potential impact of the proposed merger on unit-holders of the merging UCITS to assess whether appropriate information is being provided to unit-holders.

(7) Where the Authority considers it necessary, it may require that the information to be provided to unit-holders of the merging UCITS be clarified.

(8) The Authority must make an authorisation order under paragraph (1) if the following conditions are satisfied—

(a)the requirements set out in this regulation and regulations 10 and 11 and in rules made by the Authority to implement Articles 40 and 41 of the UCITS directive have been complied with;

(b)the merger has been approved by unit-holders of the UK UCITS in accordance with rules made by the Authority;

(c)the receiving UCITS has given the Authority, or, in the case of an EEA receiving UCITS has given the competent authorities of its home Member State, notice of its intention to market its units in another EEA State and that notification has been transmitted under Article 93 of the UCITS directive to the competent authorities of those EEA States in which the merging UCITS is able to market its units; and

(d)the Authority and the competent authorities of any other merging EEA UCITS and of the receiving EEA UCITS are satisfied with the proposed information to be provided to unit-holders, or no indication of dissatisfaction has been received from the competent authorities of the receiving UCITS under paragraph 3 of Article 39 of the UCITS directive.

(9) The Authority must determine an application for authorisation of a merger under this regulation and inform the applicant of its decision within 20 working days of the date on which the Authority received the information required under paragraph (2), or the date on which the Authority received any further information requested under paragraph (4).

(10) The Authority must inform the competent authorities of a receiving EEA UCITS of its decision.

(11) The authorisation order must specify the date on which the merger shall take effect and the dates for calculating the exchange ratio of units of the merging UCITS into units of the receiving UCITS, and, where applicable, for determining the relevant net asset value for cash payments.

Modification of information

10.—(1) Where the Authority has received information on a proposed merger as the competent authority for a receiving UK UCITS, it must consider the potential impact of the proposed merger on unit-holders of the receiving UCITS.

(2) Where the Authority considers it necessary, it may require the receiving UCITS to modify the information to be provided to its unit-holders.

(3) Any such requirement must be made in writing, not more than 15 working days after the date on which the Authority received the complete information required under regulation 9(2).

(4) Where the Authority imposes a requirement under paragraph (2), it must notify the competent authorities of the merging EEA UCITS, explaining the reasons for its dissatisfaction.

(5) Within 20 working days of the day on which it receives the modified information, the Authority must inform the competent authorities of the merging EEA UCITS whether it is satisfied with the modified information to be provided to unit-holders.

Report by depositary or auditor

11.—(1) A report must be drawn up in respect of a merging UK UCITS in accordance with this regulation validating—

(a)the criteria adopted for valuation of the assets and, where applicable, the liabilities on the date for calculating the exchange ratio referred to in Article 47(1) of the UCITS directive;

(b)where applicable, the cash payment per unit; and

(c)the calculation method of the exchange ratio as well as the actual exchange ratio determined at the date for calculating that ratio, as referred to in Article 47(1) of the UCITS directive.

(2) The report must be drawn up by—

(a)a depositary, or

(b)a person who—

(i)is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006(2), and

(ii)satisfies the independence requirement in section 936 of the Companies Act 2006.

(3) The auditors of the merging UCITS and the receiving UCITS must be considered to be independent for the purposes of paragraph (2)(b)(ii).

(4) A copy of the report must be made available on request and free of charge to—

(a)the unit-holders of the merging UCITS and of the receiving UCITS, and

(b)the Authority and, in relation to a cross-border merger, the competent authorities of the EEA UCITS concerned.

Right of redemption

12.—(1) The unit-holders of the merging and the receiving UCITS may require their UCITS—

(a)to purchase or redeem any units they hold in either the merging or the receiving UCITS; or

(b)to convert any units they hold in either the merging or receiving UCITS into units of another UCITS which—

(i)has similar investment policies to those of the merging or receiving UCITS; and

(ii)is managed by the same manager or by a manager which is associated with that manager within the meaning of section 256 of the Companies Act 2006.

(2) The rights referred to in paragraph (1) shall become effective from the moment when the unit-holder is informed of the proposed merger in accordance with rules made by the Authority to implement Article 43 of the UCITS directive, and must cease five working days before the date on which the exchange ratio must be calculated under Article 47.1 of the directive.

(3) No charge may be made for the exercise of the rights in paragraph (1) except to enable the UCITS to meet disinvestment costs.

(4) Where one of the merging or receiving UCITS is a master UCITS within the meaning of section 237(3) of the Act, the master UCITS must enable its feeder UCITS to repurchase or redeem all the units of the master UCITS in which they have invested before the consequences of the merger become effective, unless the Authority approves the continued investment by the feeder UCITS in the UCITS resulting from the merger.

Consequences of a merger

13.—(1) A merger by absorption must have the following consequences—

(a)all the assets and liabilities of the merging EEA UCITS are transferred to the receiving UK UCITS, or, where applicable, to the depositary of the receiving UK UCITS;

(b)all the unit-holders of the merging EEA UCITS become unit-holders of the receiving UK UCITS, and where applicable, they are entitled to a cash payment not exceeding 10 per cent of the net asset value of their units in the merging EEA UCITS; and

(c)the merging UCITS shall cease to exist on the entry into effect of the merger.

(2) A merger by formation of a new UCITS shall have the following consequences—

(a)all the assets and liabilities of the merging EEA UCITS are transferred to the newly constituted receiving UK UCITS, or, where applicable, to the depositary of the receiving UK UCITS;

(b)all the shareholders or members of the merging EEA UCITS become unit-holders of the newly constituted receiving UK UCITS and, where applicable, they are entitled to a cash payment not exceeding 10% of the net asset value of their units in the merging EEA UCITS; and

(c)the merging EEA UCITS shall cease to exist on the entry into effect of the merger.

(3) A merger by scheme of arrangement shall have the following consequences—

(a)the net assets of the merging UCITS are transferred to the receiving UCITS or, where applicable, the depositary of the receiving UCITS;

(b)all the shareholders or members of the merging UCITS become unit-holders in the receiving UCITS; and

(c)the merging UCITS continues to exist until all the liabilities have been discharged.

(4) Subject to paragraph (6) the consequences take effect—

(a)where an order has been made by the Authority under regulation 9, on the date specified in that order; or

(b)where an order authorising the merger has been made by the competent authority of another EEA State, on the date fixed in accordance with the law of that state.

(5) The receiving UCITS, or where applicable, the depositary of the receiving UCITS, must take such steps as are required by law (including by the law of another EEA State) to give effect to the transfer of the assets and liabilities of the merging UCITS.

(6) Where one of the merging or receiving UCITS is a master UCITS, the merger shall not take effect unless the master UCITS has provided the information specified under regulation 9(2) together with any additional information requested under regulation 9(4) (“the required information”) to all its unit-holders and to the competent authorities of each of its feeder UCITS at least 60 days before the planned effective date.

(7) A master UCITS will have complied with the obligation in paragraph (6) to provide information to all its unit-holders if it has sent the required information to each of the unit-holders (or in the case of joint unit-holders, to the first named unit-holder) whose name is entered in the register of unit-holders at the date on which the information is provided.

Publication of a merger

14.  The entry into effect of the merger must be published by the Authority in the record kept by the Authority under section 347 of the Act.