1 June 2023
Irish limited companies can now avail of enhanced and harmonised EU regime allowing them to convert and divide across other EEA jurisdictions. Michael Moore, Aisling Garry and Killian O'Sullivan explain the implications of the new Mobility Regulations below.
After several months delay, the European Union (Cross-Border Conversions, Mergers and Divisions) Regulations (S.I. No. 233 of 2023) (the “Mobility Regulations”) were signed into law on 24 May 2023, by Simon Coveney, Minister for Enterprise, Trade and Employment. The Mobility Regulations give effect to the provisions of Directive (EU) 2019/2021 of the European Parliament (the “Mobility Directive”).
As well as updating the existing cross-border merger regime, the Mobility Regulations also introduces two novel concepts to Irish law, namely cross-border conversions and cross-border divisions (together with cross-border mergers referred to as “cross-border operations”).
In the past, the lack of an EU harmonised framework for cross-border operations has resulted in legal uncertainty and complexity. The Mobility Directive recognises the freedom of establishment principle as set out in the European Court of Justice in case C-106/16 (Polbud). The Directive essentially aims to eliminate any unjustified barriers to the freedom of establishment of EU companies in the single market.
In implementing the Mobility Directive, the Mobility Regulations amend and update the existing rules on cross-border mergers in the EU and, and for the first time, provides an EU harmonised framework to companies seeking to implement a cross-border conversion or cross-border division. The previous European Communities (Cross-Border Mergers) Regulations 2008 have been revoked entirely and the Mobility Regulations will apply to any cross-border mergers from 24 May 2023 onwards, with the caveat that the previous regime will continue to apply to any cross-border mergers where common draft terms have been filed with the Companies Registration Office prior to 24 May 2023.
The Mobility Regulations will, however, only apply to Irish limited companies, as defined by the Companies Act 2014, except in circumstances where such limited companies are in liquidation and have begun to distribute assets to members.
A cross-border conversion is, ultimately, the re-location and re-registration of a limited company to another EU jurisdiction by operation of law. The Mobility Regulations will allow Irish limited companies to migrate their registered office to another country within the EEA without changing their legal personality, and in the inverse, allow limited liability companies within another EEA country to migrate their registered office to Ireland.
It is defined under Article 86 (b) (2) of the Mobility Directive as “an operation whereby a company, without being dissolved or wound up or going into liquidation, converts the legal form under which it is registered in a departure Member State into a legal form of the destination Member State and transfers at least its registered office to the destination Member State, while retaining its legal personality.”
The procedure for the cross-border conversion will be familiar to those who have previously utilised the cross-border merger regime and the Irish High Court will be the competent national authority for the purposes of approving and certifying any cross-border conversion, with filings also being made to the Companies Registration Office.
Interestingly, for the first time, the Mobility Regulations introduce provisions for submissions to the Irish High Court in respect of all cross-border operations to be made online, without any requirement to appear before the Court.
A cross-border division enables a company to separate or divide itself into two or more companies across various EEA jurisdictions. In terms of cross boarder divisions, under the Mobility Regulations, companies can benefit from either a full division, partial division, or division by creation of new subsidiaries.
The process for cross-border divisions differs from the domestic division procedure in so far as there is no requirement for the company being divided to be dissolved.
The provisions and rules in relation to the cross-border merger regime has not been significantly changed by the Mobility Regulations. However, there are enhanced protections for employees, shareholders and creditors which mirror those introduced for the other cross-border operations, as well as a variation to the merger by acquisition procedure which removes the requirement for the issuance of new shares.
The implementation of the Mobility Regulations is a very welcomed advancement. The Mobility Regulations address several issues relating to cross-border operations and will ultimately afford new opportunities, for non-Irish EEA registered companies to relocate to Ireland.
The clearly defined framework will also provide new opportunities for Irish companies to restructure across various jurisdictions within the EEA.
The full text of the Mobility Regulations can be found here and a summary of the current status of the Mobility Directive across EEA jurisdictions is set out in the Appendix.
KPMG Law LLP has advised numerous clients in relation to both inward and outward cross-border mergers under the previous regime. We remain ideally placed to advise our clients in relation to the new cross-border operations introduced under the Mobility Regulations as a result of our unique full service legal, tax and technical accounting expertise within the KPMG Network, as well as the far-reaching KPMG Law Network across all EEA jurisdictions.
Contact our team below to discuss the implications of the Mobility Regulations for your business. We'd be delighted to hear from you.
Country |
Stage of Implementation |
Austria |
The Mobility Directive has not yet been implemented in Austria. |
Bulgaria |
The EU Mobility Directive has not yet been implemented in Bulgaria. The draft laws transposing the directive have not yet been published. |
Belgium |
Belgium has not met The Mobility Directive deadline and the law transposing the Mobility Directive has only been approved by the chamber of representatives on 27 April 2023. |
Cyprus |
The Mobility Directive has not yet been implemented in Cyprus. |
Croatia |
The Mobility Directive has not yet been implemented in Croatia. The draft laws transposing the directive have not yet been published. |
Czech Republic |
The Mobility Directive has not yet been implemented in the Czech Republic. Draft laws transposing the directive have been published. It is in the process of consultation. |
Estonia |
The Mobility Directive was implemented in Estonia and became effective as of 1 February 2023. |
France |
The Mobility Directive has not yet been implemented in France. Draft laws transposing the directive have been published. It is in the process of consultation before parliament. |
Finland |
The Mobility Directive was implemented on 29 December 2022 and became effective as of 31 January 2023. |
Germany |
The EU Mobility Directive was implemented by two acts on 13 January 2023 and 28 February 2023 and became effective as of 31 January 2023 and 1 March 2023 (retrospectively). |
Greece |
The Mobility Directive has not yet been implemented in Greece. The draft laws transposing the directive have not yet been published. |
Hungary |
The Mobility Directive was implemented in Hungary and became effective as of the 1 September 2022. |
Ireland |
The Mobility Directive was transposed into Irish Law by way of the Mobility Regulations on 24 May 2023. |
Iceland |
The Mobility Directive has not yet been implemented in Iceland. |
Italy |
The Mobility Directive has not yet been implemented in Italy. Draft laws transposing the directive have been published. It is in the process of adoption. |
Latvia |
The Mobility Directive has not yet been implemented in Latvia. Draft laws transposing the directive have been published. It is in the process of adoption. |
Lithuania |
The Mobility Directive has not yet been implemented in Lithuania. Draft laws transposing the directive have been published. It is in the process of consultation. |
Malta |
The EU Mobility Directive was transposed in Maltese law on 31 January 2023. |
Netherlands |
The Mobility Directive has yet not been implemented in the Netherlands. Draft laws transposing the directive have been published. It is in the process of consultation before parliament. |
Poland |
The Mobility Directive has not yet been implemented in Poland. |
Portugal |
The Mobility Directive has not yet been implemented in Portugal. Draft laws transposing the directive have not yet been published. |
Romania |
The Mobility Directive has not yet been implemented in Romania. Draft laws transposing the directive have not yet been published. |
Slovenia |
The Mobility Directive has not yet been implemented in Slovenia. Draft laws transposing the directive have not yet been published. |
Sweden |
The Mobility Directive was implemented in Sweden and became effective as of 31 January 2023. |
Spain |
The Mobility Directive has not yet been implemented in Spain. A Draft Bill was approved on 14 February 2023. The Draft Bill is subject to public considerations before parliamentary procedure begins. |
Slovakia |
The Mobility Directive has not yet been implemented in Slovakia. Draft laws transposing the directive have not yet been published. |
United Kingdom |
The EU Mobility Directive does not apply to the United Kingdom. UK law does not recognize or permit the concept of mergers. |
