Cross-border Mergers with only a Token Cross-border Element?

by Ellis Van Der Vos

In a recent decision1 which will be welcomed by businesses seeking to simplify their group structures and/or relocate to another EU member state, the Court of Appeal has ruled that a cross-border merger involving a large number of English companies and only one, dormant, Netherlands company could be carried out under the European Cross-Border Mergers Directive (the “Directive”).

Easynet acknowledged that the Netherlands company had been included purely to introduce the cross-border element required by the Directive. In the High Court, the judge said the merger should not be approved on the grounds that it did not have a “real” cross-border element. However, the Court of Appeal disagreed, noting that the purpose of the regime created by the Directive was to promote freedom of establishment and holding that there was no justification for seeking to impose additional conditions which could restrict or undermine that freedom. The Court also held that introducing the dormant Netherlands company in this way, and for this purpose, did not amount to an abuse of EU law.

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1 Easynet Global Services Limited [2018] EWCA Civ 10

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