June 12, 2018

Mergers - Liberty Mutual Insurance Europe Plc, Re

Court allows a merger between an English company and the Luxembourg company which it created, to create a SE

An English company underwriting (re)insurance from its office in London and its branches across Europe wished to prepare for Brexit by becoming a Societas Europaea (an "SE"). (An SE is a European public limited company which can be created in any EEA state. It must be treated as if it is a public limited company (some countries even require the head office and the registered office to be at the same address)).

The English company set up a new company, incorporated in Luxembourg, with the intention that it will merge with the Luxembourg company to become an SE (at which point the Luxembourg company will cease to exist under the relevant EU Regulation). In accordance with that Regulation, a notary public in Luxembourg has certified that the pre-merger acts and formalities in relation to the Luxembourg company have been completed.

The English court is therefore required under the Regulation to scrutinise the legality of the merger "as regards the part of the procedure concerning the completion of the merger and formation of the SE". Morgan J queried whether he should be concerned that the Luxembourg company had been specifically formed in order to allow the applicant to use the merger provisions and become an SE. He concluded that this did not present a problem: "I considered that even if the involvement of [the Luxembourg company] was merely a means to enable the Company to produce the intended result under the Regulation, the steps which had been taken and which would be taken came within the ambit and terms of the Regulation and did not infringe the principle of abuse of rights in accordance with the European jurisprudence".

Accordingly, he held that the English and Luxembourg companies are free to take steps to bring the proposed merger and creation of an SE into effect.