Cross-border mergers of limited liability companies 2023 ‒ Part 7

These FAQs are the seventh and final part in a series of FAQs addressing the scope and application of the Cross-Border Mergers of Limited Liability Companies Regulations 2023 (Subsidiary Legislation 386.28), which came into effect as from January 31, 2023 (the ‘2023 CBM Regulations’), and which focus, in particular, on the completion stages of the cross-border merger process in light of the 2023 CBM Regulations.

Q. How has the procedure to obtain the pre-merger certificate changed under the 2023 CBM Regulations?

A. Under the 2023 CBM Regulations, each Maltese merging company must now apply to the Registrar of Companies in Malta for a pre-merger certificate using a newly introduced form, the ‘Form-Merger’, which is to be signed by at least two directors (or if applicable, by the sole director).

The Form-Merger is to be submitted to the registrar (whether physically or online) upon the expiry of one month from the last publication relating to the extraordinary resolution, and must be accompanied by the supporting documents listed under Regulation 17(2) of the 2023 CBM Regulations.

Upon receiving the complete application, the registrar has up to three months to review same, which period may be extended by an additional three months if the registrar has serious concerns about the intended purpose of the cross-border merger.

The pre-merger certificate will only be issued once the registrar is satisfied that all legal requirements have been met, and not before the lapse of three months from the date of the first publication by the registrar concerning the common draft terms of the cross-border merger (the ‘CDTs’).

It is relevant to note that the above timeline is without prejudice to any pending court proceedings initiated by creditors or members in connection with the merger under the 2023 CBM Regulations.

Q: Can the registrar refuse to issue the pre-merger certificate?

A. Yes, where it is determined that the cross-border merger is set up for abusive or fraudulent purposes leading to, or aimed at, the evasion or circumvention of community or national law, or for criminal purposes, the registrar shall not issue the pre-merger certificate.

In addition, where it is determined that not all the relevant conditions and/or procedures for the cross-border merger have been followed, the registrar shall not issue the certificate and shall inform the Maltese merging company of its reasons within seven days from the lapse of the three-month application review period granted at law.

In such case, the registrar may grant the Maltese merging company a time frame within which to fulfil the conditions or complete the procedures as applicable.

Q: What documents must be submitted to the registrar for the completion of a cross-border merger in Malta?

A: Where the company resulting from the merger has, or shall have, its registered office in Malta, each merging company must submit the following documents to the registrar (the ‘CBM Completion Documents’) – which may be submitted entirely online:

1. The CDTs;

2. The pre-merger certificate (or its equivalent) issued by the competent authority in the jurisdiction of each merging company;

3. In the case of a merger by formation where the resulting company is a Maltese entity, the proposed memorandum and articles of association, and any additional documents required for registration under Maltese law; and

4. If any merging company is established outside the EU/EEA, a reasoned legal opinion confirming that the merger is permitted under the laws of the relevant non-EU/EEA jurisdiction.

Upon receiving the complete application, the registrar has up to three months to review same

Q: What is the registrar’s role in verifying the completion of a cross-border merger in Malta?

A: When the company resulting from a cross-border merger has, or is intended to have, its registered office in Malta, the registrar must ensure that (i) all merging companies have approved the CDTs on identical terms, and (ii) where applicable, appropriate arrangements for employee participation have been made.

It is relevant to note that the registrar will accept the pre-merger certificate as conclusive proof that the necessary pre-merger procedures and formalities in the relevant jurisdiction have been properly completed.

Q: When and how is a cross-border merger in Malta deemed to be completed?

A: Once the registrar is satisfied that the 2023 CBM Regulations and all other applicable provisions of the Companies Act (Chapter 386 of the laws of Malta) have been complied with (including the payment of any applicable fees), the registrar shall:

1. Issue a Certificate of Completion of Cross-Border Merger not later than 10 working days from the submission of the CBM Completion Documents;

2. Publish an official statement confirming the completion of the cross-border merger; and

3. Notify the company registers of each merging company’s jurisdiction that the cross-border merger has taken effect.

The registrar shall also ensure that the following details are entered into the Maltese company register:

1. A declaration that the registration of the resulting company is the outcome of a cross-border merger;

2. The date of registration of the resulting company; and

3. The registration number, name and legal form of each merging company and of the company resulting from the merger.

Q: When a Maltese merging company ceases to exist as a result of a cross-border merger, what steps are required to be taken by the registrar?

A: Upon receiving notification from the foreign registry of the company resulting from the merger, confirming the effective date of the cross-border merger, the registrar shall immediately strike the name of the Maltese merging company off the register and publish a notice confirming that the cross-border merger has been completed.

The registrar must also ensure that the following information is recorded in the register:

• That the company’s removal from the register is due to a cross-border merger;

• The date of the striking off;

• The registration number, name and legal form of each merging company and of the company resulting from the merger.

Q: What are the consequences of a cross-border merger, once complete?

A: A distinction must be drawn between a cross-border merger that takes place by acquisition or absorption, and a cross-border merger that takes place by formation.

A cross-border merger by acquisition or absorption, shall, from the effective date of the merger, have the following consequences:

• All the assets and liabilities of the company being acquired, including all contracts, credits, rights and obligations, shall be transferred to the acquiring company;

• The members of the company being acquired shall become members of the acquiring company, unless they have disposed of their shares; and

•  The company being acquired shall cease to exist.

A cross-border merger by formation shall, from the effective date of the cross-border merger, have the following consequences:

• All the assets and liabilities of the merging companies, including all contracts, credits, rights and obligations, shall be transferred to the new company;

• The members of the merging companies shall become members of the new company, unless they have disposed of their shares; and

• The merging companies shall cease to exist.

Sarah Fenech is a senior associate at Fenech & Fenech Advocates.