S.I. No. 137/1987:

EUROPEAN COMMUNITIES (MERGERS AND DIVISIONS OF COMPANIES) REGULATIONS, 1987.

EUROPEAN COMMUNITIES (MERGERS AND DIVISIONS OF COMPANIES) REGULATIONS, 1987.

ARRANGEMENT OF REGULATIONS

PART I

Preliminary

Regulation

1. Citation and commencement.

2. Interpretation.

3. Penalties.

PART II

Mergers

4. Interpretation of Part II.

5. Mergers to which Part II applies.

6. Draft terms of merger.

7. Directors' explanatory report.

8. Independent person's report.

9. Accounting statement.

10. Companies (Amendment) Act, 1983 : sections 30 and 31 restricted.

11. Registration and publication of documents.

12. Inspection of documents.

13. General meetings of merging companies.

14. Meetings of classes of shareholder.

15. Purchase of minority shares.

16. Application for confirmation of merger by court.

17. Protection of creditors.

18. Preservation of rights of holders of securities.

19. Confirmation order.

20. Limitation on power of court to make orders.

21. Registration and publication of confirmation of merger.

22. Civil liability of directors and independent persons.

23. Criminal liability for false statements in merger documents.

PART III

Divisions

24. Interpretation of Part III.

25. Divisions to which Part III applies.

26. Draft terms of division.

27. Directors' explanatory report.

28. Independent person's report.

29. Accounting statement.

30. Registration and publication of documents.

31. Inspection of documents.

32. General meetings of the companies involved in a division.

33. Meetings of classes of shareholder.

34. Purchase of minority shares.

35. Application for confirmation of division by court.

36. Protection of creditors.

37. Preservation of rights of holders of securities.

38. Confirmation order.

39. Limitation on power of court to make orders.

40. Registration and publication of confirmation of division.

41. Civil liability of directors and independent persons.

42. Criminal liability for untrue statements in division documents.

S.I. No. 137 of 1987.

EUROPEAN COMMUNITIES (MERGERS AND DIVISIONS OF COMPANIES) REGULATIONS, 1987.

I, ALBERT REYNOLDS, Minister for Industry and Commerce, in exercise of the powers conferred on me by section 3 of the European Communities Act, 1972 (No. 27 of 1972) and for the purpose of giving effect to Council Directive No. 78/855/EEC of 9 October, 1978¹ and No. 82/891/EEC of 17 December, 1982² hereby make the following Regulations:

PART I Preliminary

1. (1) These Regulations may be cited as the European Communities (Mergers and Divisions of Companies) Regulations, 1987.

(2) These Regulations shall be construed as one with the Companies Acts.

(3) These Regulations shall come into operation on the 1st day of June, 1987.

2. (1) In these Regulations, unless the context otherwise requires--

"the Act of 1963" means the Companies Act, 1963 ;

"the Companies Acts" means the Act of 1963 and every enactment (including these and other Regulations made under the European Communities Act, 1972 ) which is to be construed as one with that Act;

"company" means a public limited company, within the meaning of the Companies (Amendment) Act, 1983 , or a body corporate to which certain provisions of the Act of 1963 are applied by section 377 (1) of that Act;

¹ O.J. No. L 295/36, 20.10.78.

² O.J. No. L 378/47, 31.12.82.

"director", in relation to a company which is being wound up, means liquidator;

"division" has the meaning assigned to it by Regulation 24;

"merger" has the meaning assigned to it by Regulation 4;

"Minister" means the Minister for Industry and Commerce.

(2) In these Regulations a reference to any enactment shall, unless the context otherwise requires, be construed as a reference to that enactment as amended by any other enactment including these Regulations.

3. A person convicted of an offence under these Regulations shall be liable, on summary conviction, to a fine not exceeding £1,000 or, at the discretion of the court, to imprisonment for a term not exceeding 12 months or both.

PART II Mergers

4. In this Part, unless the context otherwise requires--

"acquiring company", has the meaning assigned to it by Regulation 5;

"merger" means "merger by acquisition" or "merger by formation of a new company" within the meaning of Regulation 5 (1);

"merging company" means a company which is a party to a proposed merger.

5. (1) In this Part--

(a) "merger by acquisition" means an operation whereby an existing company ("the acquiring company") acquires all the assets and liabilities of another company or companies in exchange for the issue to the shareholders of the company or companies being acquired of shares in the acquiring company, with or without any cash payment, and with a view to the dissolution of the company or companies being acquired; and

(b) "merger by formation of a new company" means a similar operation where the acquiring company has been formed for the purpose of such acquisition.

(2) Where a company is being wound up it may--

(a) become a party to a merger by acquisition or by formation of a new company, provided that the distribution of its assets to its shareholders has not begun at the date, under Regulation 6 (4), of the draft terms of merger, or

(b) opt to avail of the provisions of sections 201 to 204, 260 and 271 of the Act of 1963.

(3) Subject to paragraph (2), the said provisions shall not apply to merger by acquisition or by formation of a new company.

6. (1) Where a merger is proposed to be entered into, the directors of the merging companies shall draw up draft terms of the merger in writing.

(2) The draft terms of merger shall state, at least--

(a) the name and registered office of each of the merging companies;

(b) as to each of such companies, whether it is a public company limited by shares, a public company limited by guarantee and having a share capital or a body corporate to which section 377 (1) of the Act of 1963 relates;

(c) the proposed share exchange ratio and the amount of any cash payment;

(d) the proposed terms relating to allotment of shares in the acquiring company;

(e) the date from which holders of such shares will become entitled to participate in the profits of the acquiring company;

(f) the date from which the transactions of the company or companies being acquired shall be treated for accounting purposes as being those of the acquiring company;

(g) any special conditions, including special rights or restrictions, whether in regard to voting, participation in profits, share capital or otherwise, which will apply to shares or other securities issued by the acquiring company in exchange for shares or other securities in the company or companies being acquired;

(h) any payment or benefit in cash or otherwise, paid or given or intended to be paid or given to any independent person referred to in Regulation 8 and to any director of any of the merging companies insofar as it differs from the payment or benefit paid or given to other persons in respect of the merger and the consideration, if any, for any such payment or benefit.

(3) Where the merger is a merger by formation of a new company the draft terms of merger shall include or be accompanied by the memorandum or draft memorandum and the articles or draft articles of association of the new company.

(4) The draft terms of merger shall be signed and dated on behalf of each of the merging companies by two directors of each such company and that date shall, for the purposes of this Part, be the date of the draft terms of merger.

7. (1) A separate written report ("the explanatory report") shall be drawn up in respect of each of the merging companies by the directors of each such company.

(2) The explanatory report shall at least detail and explain--

(a) the draft terms of merger;

(b) the legal and economic grounds for and implications of the draft terms of merger with particular reference to the proposed share exchange ratio, organisation and management structures, recent and future commercial activities and the financial interests of the holders of the shares and other securities in the company;

(c) the methods used to arrive at the proposed share exchange ratio and the reasons for the use of these methods;

(d) any special valuation difficulties which have arisen.

(3) The explanatory report shall be signed and dated on behalf of each of the merging companies by two directors of each such company.

8. (1) Each of the merging companies shall appoint an independent person to examine the draft terms of merger and to prepare a written report on them to the shareholders of the company concerned.

(2) No person shall act as an independent person for the purposes of paragraph (1) unless he is authorised by the Minister on application by the company concerned to be such a person for the purposes of the proposed merger.

(3) One or more independent persons may be authorised by the Minister on joint application by the merging companies for all the said companies.

(4) None of the following persons shall be qualified to act as an independent person in respect of a proposed merger--

(a) a person who is or, within 12 months of the date of the draft terms of merger, has been, an officer or servant of the company;

(b) except with the leave of the Minister, a parent, spouse, brother, sister or child of an officer of the company;

(c) a person who is a partner or in the employment of an officer or servant of the company.

(5) If an independent person becomes disqualified by virtue of this regulation he shall thereupon cease to hold office and shall give notice in writing of his disqualification to the Minister within 14 days thereof, but without prejudice to the validity of any acts done by him in his capacity as independent person.

(6) Any person who acts as an independent person when disqualified from doing so under this regulation or who makes default in complying with paragraph (5) shall be guilty of an offence.

(7) The report referred to in paragraph (1) shall--

(a) state the method or methods used to arrive at the proposed share exchange ratio;

(b) give the opinion of the person making the report as to whether the proposed share exchange ratio is fair and reasonable;

(c) give the opinion of the person making the report as to whether the method or methods used are adequate in the case in question;

(d) indicate the values arrived at using each such method;

(e) give the opinion of the person making the report as to the relative importance attributed to such methods in arriving at the values decided on;

(f) any special valuation difficulties which have arisen.

(8) A person making a report under this regulation shall be entitled to require from the merging companies and their officers such information and explanation (whether orally or in writing) and to carry out such investigations as he thinks necessary to enable him to make the report.

(9) Any of the merging companies and any officer thereof who--

(a) fails to supply to an independent person any information or explanation in his power, possession or procurement which that person thinks necessary for the purposes of this report, or

(b) knowingly or recklessly makes a statement or provides a document which--

(i) is misleading, false or deceptive in a material particular, and

(ii) is a statement or document to which this paragraph applies,

shall be guilty of an offence.

(10) Paragraph (9) applies to any statement made, whether orally or in writing, or any document provided to any person making a report under this regulation being a statement or document which conveys or purports to convey any information or explanation which that person requires, or is entitled to require, under paragraph (8).

9. (1) Where the latest annual accounts of any of the merging companies relate to a financial year ended more than six months before the date of the draft terms of merger, that company shall prepare an accounting statement in accordance with the provisions of this regulation.

(2) The accounting statement shall, where required under paragraph (1), be drawn up--

(i) in the format of the last annual balance sheet and in accordance with the provisions of the Companies Acts; and

(ii) as at a date not earlier than the first day of the third month preceding the date of the draft terms of merger.

(3) Valuations shown in the last annual balance sheet shall, subject to the exceptions outlined in paragraph (4), only be altered to reflect entries in the books of account.

(4) Notwithstanding the provisions of paragraph (3), the following shall be taken into account in preparing the accounting statement--

(a) interim depreciation and provisions, and

(b) material changes in actual value not shown in the books of account.

(5) The provisions of the Companies Acts relating to the auditor's report on the last annual accounts shall apply, with any necessary modifications, to the accounting statement required by paragraph (1).

10. The provisions of sections 30 and 31 of the Companies (Amendment) Act, 1983 , shall not apply to the issue of shares by any company formed for the purposes of a merger by formation of a new company.

11. (1) Each of the merging companies shall--

(a) deliver for registration to the registrar of companies a copy of the draft terms of merger, signed and dated as required by Regulation 6; and

(b) publish in Irish Oifigiúil and once at least in 2 daily newspapers circulating in the district where the registered office or principal place of business of the company is situate notice of delivery to the registrar of companies of the draft terms of merger.

(2) The requirements of paragraph (1) shall be fulfilled by each of the merging companies at least one month before the date of the general meeting of each such company which by virtue of Regulation 13 is to consider the draft terms of merger.

12. (1) Each of the merging companies shall, subject to paragraph (2), make available for inspection free of charge by any member of the company at its registered office during business hours (subject to such reasonable restrictions as the company in general meeting may impose so that not less than 2 hours in each day be allowed for inspection)--

(a) the draft terms of merger;

(b) the audited annual accounts for the preceding three financial years of each company or, where a company has traded for less than 3 financial years before the date of the draft terms of merger, the audited annual accounts for those financial years for which the company has traded;

(c) the explanatory reports relating to each of the merging companies referred to in Regulation 7;

(d) the independent person's report relating to each of the merging companies referred to in Regulation 8;

(e) any accounting statement in relation to any of the merging companies which is required to be prepared pursuant to Regulation 9.

(2) The provisions of paragraph (1) shall apply in the case of each of the merging companies for a period of one month before the general meeting which is to consider the draft terms of merger.

13. (1) Subject to paragraph (4) of this regulation and to Regulation 14, the draft terms of merger shall be approved by a special resolution passed at a general meeting of each of the merging companies.

(2) Where the merger is a merger by formation of a new company, the memorandum or draft memorandum and articles or draft articles of association of the new company shall be approved by a special resolution of each of the companies being acquired.

(3) The notice convening the general meeting referred to in paragraph (1) shall contain a statement of every shareholder's entitlement to obtain on request, free of charge, full or, if so desired, partial copies of the documents listed in Regulation 12.

(4) In the case of--

(a) a merger by acquisition, or

(b) an operation whereby one or more companies are acquired by another company which holds ninety per cent or more, but not all, of their shares and other securities conferring the right to vote at general meetings ("a voting right") (whether such shares and other securities are held either by the acquiring company together with or solely by other persons in their own names but on behalf of that company), or

(c) an operation to which paragraph (8) of this regulation applies,

approval of the draft terms of merger by means of a special resolution shall not be required in the case of the acquiring company provided that the following conditions are fulfilled--

(i) the provisions of Regulations 11 and 12 are complied with at least one month before the date of the general meeting of each of the companies being acquired, and

(ii) one or more members of the company holding paid up share capital amounting in total value to not less than 5% of such of the paid up share capital as confers a voting right, whether or not the shares held confer a voting right, shall be entitled, under the articles of association of the company, to require the convening of a general meeting of the company to consider the draft terms of merger.

(5) The directors of each of the companies being acquired shall inform

(a) the general meeting of that company, and

(b) the directors of the acquiring company

of any material change in the assets and liabilities of the company or companies being acquired between the date of the draft terms of merger and the date of such general meeting.

(6) The directors of the acquiring company shall inform the general meeting of that company of the matters referred to in paragraph (5).

(7) Regulations 7, 8 and 12 shall not apply in the case of an operation under paragraph (4) (b) of this regulation provided that the conditions under Regulation 15 are fulfilled.

(8) Notwithstanding anything contained in Regulation 5, but subject to paragraph (9) of this regulation, these Regulations shall apply to an operation whereby a company ("the acquiring company") acquires all the assets and liabilities of another company or companies and the acquiring company is the holder of all of the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired, whether such shares and other securities are held either by the acquiring company together with or solely by other persons in their own name but on behalf of that company.

(9) The following provisions of these Regulations shall not apply to an operation under paragraph (8), namely, Regulations 6 (2) (c), 6 (2) (d), 6 (2) (e), 7, 8, 12 (1) (c), 12 (1) (d), 19 (1) (b) and 21.

14. Where the share capital of any of the merging companies is divided into shares of different classes, section 38 of the Companies (Amendment) Act, 1983 , shall apply.

15. (1) Any person being--

(a) a shareholder in any of the merging companies who voted against the special resolution of the company concerned relating to the draft terms of merger, or

(b) in a case to which Regulation 13 (4) (b) relates, any shareholder other than the acquiring company, may, not later than 15 days after the relevant date, request the acquiring company in writing to acquire his shares for cash.

(2) In this regulation "the relevant date" in relation to a company means the date on which the latest general meeting of that company to consider the draft terms of merger, or of any class of the holders of shares or other securities of such company, as required by these Regulations, is held.

(3) Nothing in this regulation shall prejudice the power of the court to make any order necessary for the protection of the interests of a dissenting minority in a merging company.

16. (1) An application to the court for an order confirming a merger shall be made jointly by all the merging companies.

(2) The application shall be accompanied by a statement of the size of the shareholding of any shareholder who has requested the purchase of his shares under Regulation 15 and of the measures which the acquiring company proposes to take to comply with such shareholder's request.

17. (1) A creditor of any of the merging companies who, at the date of publication of the notice under Regulation 11 (1) (b), is entitled to any debt or claim against the company, shall be entitled to object to the confirmation by the court of the merger.

(2) If the court deems it necessary in order to secure the adequate protection of creditors of any of the merging companies it may--

(a) determine a list of creditors entitled to object and the nature and amount of their debts or claims, and may publish notices fixing a period within which creditors not entered on the list may have a claim for inclusion on that list considered;

(b) where an undischarged creditor on the list referred to in subparagraph (a) does not consent to the merger, the court may dispense with the consent of that creditor, on the company securing payment of the debt or claim by apportioning to that creditor such following amount as the court may direct--

(i) if the company concerned admits the full amount of the debt or claim, that amount;

(ii) if the company concerned does not admit the debt or claim, or if the amount is contingent or not ascertained, an amount fixed by the court after the like inquiry and adjudication as if the company were being wound up by the court.

(3) If, having regard to any special circumstances of the case it thinks proper so to do, the court may direct that paragraph (2) shall not apply as regards any class of creditors.

18. (1) Subject to paragraph (2), holders of securities, other than shares, in any of the companies being acquired to which special rights are attached shall be given rights in the acquiring company at least equivalent to those they possessed in the company being acquired.

(2) Paragraph (1) shall not apply--

(a) where the alteration of the rights in the acquiring company has been approved--

(i) by a majority of the holders of such securities at a meeting held for that purpose, or

(ii) by the holders of those securities individually, or

(b) where the holders of those securities are entitled under the terms of those securities to have their securities purchased by the acquiring company.

19. (1) The court, on being satisfied that--

(a) the requirements of these Regulations have been complied with,

(b) proper provision has been made for--

(i) any dissenting shareholder of any of the merging companies who has made a request under Regulation 15, and

(ii) any creditor of any of the merging companies who objects to the merger in accordance with Regulation 17, and

(c) the rights of holders of securities other than shares in any of the companies being acquired are safeguarded in accordance with Regulation 18,

may, subject to Regulation 20, make an order confirming the merger with effect from such date as the court appoints ("the appointed date").

(2) The order of the court confirming the merger shall, with effect from the appointed date, have the following effects--

(a) all the assets and liabilities of the company or companies being acquired shall stand transferred to the acquiring company in accordance with the draft terms of merger as approved by the court;

(b) the shareholders of the company or companies being acquired shall become shareholders in the acquiring company in accordance with the draft terms of the merger as approved by the court;

(c) the company or companies being acquired shall, subject to paragraph (4), be dissolved;

(d) all legal proceedings pending by or against any of the dissolved companies shall be continued with the substitution, for the dissolved company, of the acquiring company.

(3) The court may, either by the order confirming the merger or by a separate order, make provision for such matters as the court considers necessary to secure that the merger shall be fully and effectively carried out.

(4) The court may, in particular, by order--

(a) direct that the acquiring company shall, on a date specified by the court, purchase the shares of a dissenting shareholder who has made a request under Regulation 15 and pay therefor the sum determined by the court, being not less than the market sale price of the shares on the appointed date, and

(b) provide for the reduction accordingly of the company's capital.

(5) Section 41 (1) of the Companies (Amendment) Act, 1983 (which restricts the right of a company to purchase its own shares) shall not apply to the purchase of any shares in pursuance of an order of the court under this regulation.

(6) If it is necessary for any of the companies being acquired to take any steps to ensure that its assets and liabilities are fully transferred, the court may specify a date which, save in exceptional cases, shall not be later than 6 months after the appointed date by which such steps must be taken and for that purpose may order that the dissolution of such company shall take effect on that date.

20. An order of the court shall not be made under these Regulations in respect of a proposed merger to which the Mergers, Take-overs and Monopolies (Control) Act, 1978 applies until either--

(a) the Minister has stated in writing that he has decided not to make an order under section 9 of that Act, in relation to the proposed merger, or

(b) the Minister has stated in writing that he has made a conditional order under that section in relation to the proposed merger, or

(c) the relevant period within the meaning of section 6 of that Act (which relates to a limitation on the commencement of a merger) has elapsed without the Minister's having made an order under the said section 9 in relation to the proposed merger,

whichever first occurs.

21. (1) Where the court has made an order confirming a merger an office copy thereof shall forthwith be sent to the registrar of companies for registration by such officer of the court as the court may direct.

(2) The acquiring company shall cause to be published in Irish Oifigiúil notice of delivery to the registrar of companies of the order of the court confirming the merger within fourteen days of such delivery and if default is made in complying with this paragraph the company and every officer of the company who is in default shall be guilty of an offence.

(3) It shall be a defence for a person charged with an offence under paragraph (2) to show that non-compliance was not due to any delay or negligence on the part of the company or person concerned.

(4) Proceedings in relation to an offence under this regulation may be brought and prosecuted by the registrar of companies.

22. (1) Any shareholder of any of the merging companies who has suffered loss or damage by reason of misconduct in the preparation or implementation of the merger by a director of any such company or by the independent person who has made a report under Regulation 8 shall be entitled to have such loss or damage made good to him by--

(a) in the case of misconduct by a person who was a director of that company at the date of the draft terms of merger -- that person,

(b) in the case of misconduct by any independent person who prepared a report under Regulation 8 in respect of any of the merging companies -- that person.

(2) Without prejudice to the generality of paragraph (1), any shareholder of any of the merging companies who has suffered loss or damage arising from the inclusion of any untrue statement in the draft terms of merger, the explanatory report, the independent person's report or the accounting statement provided for under Regulation 9 shall, subject to paragraphs (3) and (4), be entitled to have such loss or damage made good to him by every person who was a director of that company at the date of the draft terms of merger or, in the case of the independent person's report, by the person who made that report in relation to that company.

(3) A director of a company shall not be liable under paragraph (2) if he proves--

(a) that any of the documents referred to in paragraph (2) was issued without his knowledge or consent and that on becoming aware of their issue he forthwith informed the shareholders of that company that they were issued without his knowledge or consent, or

(b) that as regards every untrue statement he had reasonable grounds, having exercised all reasonable care and skill, for believing and did, up to the time the merger took effect, believe that the statement was true.

(4) A person who makes a report required by Regulation 8 in relation to a company shall not be liable in the case of untrue statements in his own report if he proves--

(i) that on becoming aware of the statement he forthwith informed the company concerned and its shareholders of the untruth, or

(ii) that he was competent to make the statement and that he had reasonable grounds for believing and did up to the time the merger took effect believe that the statement was true.

23. (1) Where any untrue statement has been included in the draft terms of merger, the explanatory report or the accounting statement, each of the directors and any person who authorised the issue of those documents shall be guilty of an offence.

(2) Where any untrue statement has been included in the independent person's report the independent person and any person who authorised the issue of the report shall be guilty of an offence.

(3) It shall be a defence for a person charged with an offence under paragraph (1) or (2) to show that, having exercised all reasonable care and skill, he had reasonable grounds for believing and did, up to the time of the issue of the documents, believe that the statement was true.

PART III Divisions

24. In this Part, unless the context otherwise requires--

"acquiring companies" has the meaning assigned to it by Regulation 25;

"division" means "division by acquisition" or "division by formation of new companies", within the meaning of Regulation 25 (1).

25. (1) In this Part--

(a) "division by acquisition" means an operation whereby two or more companies ("the acquiring companies") of which one or more but not all may be a new company acquire between them all the assets and liabilities of another company in exchange for the issue to the shareholders of that company of shares in one or more of the acquiring companies with or without any cash payment and with a view to the dissolution of the company being acquired, and

(b) "division by formation of new companies" means a similar operation whereby the acquiring companies have been formed for the purposes of such acquisition.

(2) Where a company is being wound up it may--

(a) become a party to a division by acquisition or by formation of new companies, provided that the distribution of its assets to its shareholders has not begun at the date, under Regulation 26 (4), of the draft terms of division, or

(b) opt to avail of the provisions of sections 201 to 204, 260 and 271 of the Act of 1963.

(3) Subject to paragraph (2), the said provisions shall not apply to a division by acquisition or by formation of new companies.

26. (1) Where a division is proposed to be entered into, the directors of the companies involved in the division shall draw up draft terms of the division in writing.

(2) The draft terms of division shall state, at least--

(a) the name and registered office of each of the companies involved in the division;

(b) as to each of such companies, whether it is a public company limited by shares, a public company limited by guarantee and having a share capital or a body corporate to which section 377 (1) of the Act of 1963 relates;

(c) the proposed share exchange ratio and the amount of any cash payment;

(d) the proposed terms relating to allotment of shares in the acquiring companies;

(e) the date from which holders of such shares will become entitled to participate in the profits of one or more of the acquiring companies;

(f) the date from which the transactions of the company being acquired shall be treated for accounting purposes as being those of any of the acquiring companies;

(g) any special conditions, including special rights or restrictions, whether in regard to voting, participation in profits, share capital or otherwise, which will apply to shares or other securities issued by the acquiring companies in exchange for shares or other securities in the company being acquired;

(h) any payment or benefit in cash or otherwise paid or given or intended to be paid or given to any independent person referred to in Regulation 28 and to any director of any of the companies involved in the division insofar as it differs from the payment or benefit paid or given or intended to be paid or given to other persons in respect of the division and the consideration, if any, for any such payment or benefit;

(i) the precise description and allocation of the assets and liabilities of the company being acquired to be transferred to each of the acquiring companies;

(j) the allocation of shares in the acquiring companies to the shareholders of the company being acquired and the criteria on which such allocation is based.

(3) Where the division involves the formation of one or more new companies the draft terms of division shall include or be accompanied by the memorandum or draft memorandum and the articles or draft articles of association of each of the new companies.

(4) The draft terms of division shall be signed and dated on behalf of each of the companies involved in the division by two directors of each such company and that date shall, for the purposes of this Part, be the date of the draft terms of division.

(5) Where an asset of the company being acquired is not allocated by the draft terms of division and where the interpretation of those terms does not make a decision on its allocation possible, the asset or the consideration therefor shall be allocated to the acquiring companies in proportion to the share of the net assets allocated to each of those companies under the draft terms of division.

27. (1) A separate written report ("the explanatory report") shall be drawn up in respect of each of the companies involved in the division by the directors of each such company.

(2) The explanatory report shall at least detail and explain--

(a) the draft terms of division;

(b) the legal and economic grounds for and implications of the draft terms of division with particular reference to the proposed share exchange ratio, organisation and management structures, recent and future commercial activities and the financial interests of holders of the shares and other securities in the company;

(c) the methods used to arrive at the proposed share exchange ratio and the reasons for the use of these methods;

(d) any special valuation difficulties which have arisen.

(3) Where it is proposed that any of the acquiring companies will allot shares for a consideration other than in cash, the explanatory report shall state that the report required by section 30 of the Companies (Amendment) Act, 1983 , is being or has been prepared and that it will be delivered to the registrar of companies for registration in accordance with section 31 of that Act.

(4) The explanatory report shall be signed and dated on behalf of each of the companies involved in the division by two directors of each such company.

28. (1) Each of the companies involved in the division shall appoint an independent person to examine the draft terms of division and to prepare a written report on them to the shareholders of the company concerned.

(2) No person shall act as an independent person for the purposes of paragraph (1) unless he is authorised by the Minister on application by the company concerned to be such a person for the purposes of the proposed division.

(3) One or more independent persons may be authorised by the Minister on joint application by the companies involved in the division for all the said companies.

(4) None of the following persons shall be qualified to act as an independent person in respect of a proposed division--

(a) a person who is or, within 12 months of the date of the draft terms of division, has been an officer or servant of the company;

(b) except with the leave of the Minister, a parent, spouse, brother, sister or child of an officer of the company;

(c) a person who is a partner or in the employment of an officer or servant of the company.

(5) If an independent person becomes disqualified by virtue of this regulation he shall thereupon cease to hold office and shall give notice in writing of his disqualification to the Minister within 14 days thereof, but without prejudice to the validity of any acts done by him in his capacity as independent person.

(6) Any person who acts as an independent person when disqualified from doing so under this regulation or who makes default in complying with paragraph (5) shall be guilty of an offence.

(7) The report referred to in paragraph (1) shall--

(a) state the method or methods used to arrive at the proposed share exchange ratio;

(b) give the opinion of the person making the report as to whether the proposed share exchange ratio is fair and reasonable;

(c) give the opinion of the person making the report as to whether such method or methods are adequate in the case in question;

(d) indicate the values arrived at using each such method;

(e) give the opinion of the person making the report as to the relative importance attributed to such methods in arriving at the values decided on;

(f) any special valuation difficulties which have arisen.

(8) The report required by section 30 of the Companies (Amendment) Act, 1983 , may be prepared by the person preparing the report required by this regulation.

(9) A person making a report under this regulation shall be entitled to require from the companies involved in the division and their officers such information and explanation (whether orally or in writing) and to carry out such investigations as the independent person thinks necessary to enable him to make the report.

(10) Any of the companies involved in the division and any officer thereof who--

(a) fails to supply to an independent person any information or explanation in his power, possession or procurement, and which that person thinks necessary for the purpose of his report, or

(b) knowingly or recklessly makes a statement or provides a document which--

(i) is misleading, false or deceptive in a material particular, and

(ii) is a statement or document to which this paragraph applies,

shall be guilty of an offence.

(11) Paragraph (10) applies to any statement made, whether orally or in writing, or any document provided to any person making a report under this regulation being a statement or document which conveys or purports to convey any information or explanation which that person requires, or is entitled to require, under paragraph (9).

29. (1) Where the latest annual accounts of any of the companies involved in the division relate to a financial year ended more than six months before the date of the draft terms of division, that company shall prepare an accounting statement in accordance with the provisions of this regulation.

(2) The accounting statement shall, where required under paragraph (1), be drawn up--

(i) in the format of the last annual balance sheet and in accordance with the provisions of the Companies Acts; and

(ii) as at a date not earlier than the first day of the third month preceding the date of the draft terms of division.

(3) Valuations shown in the last annual balance sheet shall, subject to the exceptions outlined in paragraph (4), only be altered to reflect entries in the books of account.

(4) Notwithstanding the provisions of paragraph (3), the following shall be taken into account in preparing the accounting statement--

(a) interim depreciation and provisions; and

(b) material changes in actual value not shown in the books of account.

(5) The provisions of the Companies Acts relating to the auditor's report on the last annual accounts shall apply, with any necessary modifications, also to the accounting statement required by paragraph (1).

30. (1) Each of the companies involved in the division shall--

(a) deliver for registration to the registrar of companies a copy of the draft terms of division, signed and dated as required by Regulation 26; and

(b) publish in Iris Oifigiúil and once at least in 2 daily newspapers circulating in the district where the registered office or principal place of business of the company is situate notice of delivery to the registrar of the draft terms of division.

(2) The requirements of paragraph (1) shall be fulfilled by each of the companies at least one month before the date of the general meeting of each such company which by virtue of Regulation 32 is to consider the draft terms of division.

31. (1) Each of the companies involved in the division shall, subject to paragraph (2), make available for inspection free of charge by any member of the company at its registered office during business hours (subject to such reasonable restrictions as the company in general meeting may impose so that not less than 2 hours in each day be allowed for inspection)--

(a) the draft terms of division;

(b) the audited annual accounts for the preceding three financial years of each company, or where a company has traded for less than 3 financial years before the date of the draft terms of division, the audited annual accounts for those financial years for which the company has traded;

(c) the explanatory reports relating to each of the companies referred to in Regulation 27;

(d) the independent person's report relating to each of the companies referred to in Regulation 28;

(e) any accounting statement in relation to any of the companies which is required to be prepared pursuant to Regulation 29.

(2) The provisions of paragraph (1) shall apply in the case of each of the companies for a period of one month before the general meeting which is to consider the draft terms of division.

32. (1) Subject to paragraph (4) of this regulation and to Regulation 33, the draft terms of division shall be approved by a special resolution passed at a general meeting of each of the companies involved in the division.

(2) Where the division involves the formation of one or more new companies, the memorandum or draft memorandum and articles or draft articles of association of each of the new companies shall also be approved by a special resolution of the company being acquired.

(3) The notice convening the general meeting referred to in paragraph (1) shall contain a statement of every shareholder's entitlement to obtain on request, free of charge, full or, if so desired, partial copies of the documents listed in Regulation 31.

(4) This regulation shall not apply in the case of an acquiring company provided that the following conditions are fulfilled--

(i) the provisions of Regulations 30 and 31 are complied with at least one month before the date of the general meeting of the company being acquired, and

(ii) one or more members of the company holding paid up share capital amounting in total value to not less than 5% of such of the paid up share capital as confers the right to vote at general meetings, whether or not the shares held confer such voting right, shall be entitled, under the articles of association of the company, to require the convening of a general meeting of the company to consider the draft terms of division.

(5) The directors of the company being acquired shall inform--

(a) the general meeting of that company, and

(b) the directors of the acquiring companies,

of any material change in the assets and liabilities of the company being acquired between the date of the draft terms of division and the date of the general meeting.

(6) The directors of each acquiring company shall inform the general meeting of that company of the matters referred to in paragraph (5).

(7) This regulation shall not apply in the case of the company being acquired where the acquiring companies together hold all the shares and other securities conferring the right to vote at general meetings of that company and where the information delivered under paragraph (4) covers any material change in the assets and liabilities after the date of the draft terms of division.

33. Where the share capital of any of the companies involved in a division is divided into shares of different classes, section 38 of the Companies (Amendment) Act, 1983 , shall apply.

34. (1) Any of the shareholders in any of the companies involved in a division who voted against the special resolution of the company concerned relating to the draft terms of division may, not later than 15 days after the relevant date, request the acquiring company in writing to acquire his shares for cash.

(2) In this regulation "the relevant date" in relation to a company means the date on which the latest general meeting of that company to consider the draft terms of division, or of any class of the holders of shares or other securities of such company, as required by these Regulations, is held.

(3) Nothing in this regulation shall prejudice the power of the court to make any order necessary for the protection of the interests of a dissenting minority in a company involved in a division.

35. (1) An application to the court for an order confirming a division shall be made by all the companies involved in a division.

(2) The application shall be accompanied by a statement of the size of the shareholding of any shareholder who has requested the purchase of his shares under Regulation 34 and of the measures which the acquiring companies propose to take to comply with such shareholder's request.

36. (1) A creditor of any of the companies involved in a division who, at the date of publication of the notice under Regulation 30 (1) (b), is entitled to any debt or claim against the company, shall be entitled to object to the confirmation by the court of the division.

(2) If the court deems it necessary in order to secure the adequate protection of creditors of any of the companies involved in the division it may--

(a) determine a list of creditors entitled to object and the nature and amount of their debts or claims, and may publish notices fixing a period within which creditors not entered on the list may have a claim for inclusion on that list considered;

(b) where an undischarged creditor on the list referred to in subparagraph (a) does not consent to the division, the court may dispense with the consent of that creditor, on the company securing payment of the debt or claim by appropriating to that creditor such following amount as the court may direct--

(i) if the company concerned admits the full amount of the debt or claim, that amount;

(ii) if the company concerned does not admit the debt or claim, or if the amount is contingent or not ascertained, an amount fixed by the court after the like inquiry and adjudication as if the company were being wound up by the court.

(3) If, having regard to any special circumstances of the case, it thinks proper so to do, the court may direct that paragraph (2) shall not apply as regards any class of creditors.

(4) Each of the acquiring companies shall be jointly and severally liable for all the liabilities of the company being acquired.

37. (1) Subject to paragraph (2), holders of securities, other than shares, in any of the companies being acquired, to which special rights are attached shall be given rights in the acquiring companies at least equivalent to those they possessed in the company being acquired.

(2) Paragraph (1) shall not apply--

(a) where the alteration of the rights in an acquiring company has been approved--

(i) by a majority of the holders of such securities at a meeting held for that purpose, or

(ii) by the holders of those securities individually, or

(b) where the holders of those securities are entitled under the terms of those securities to have their securities purchased by an acquiring company.

38. (1) The court, on being satisfied that--

(a) the requirements of these Regulations have been complied with,

(b) proper provision has been made for--

(i) any dissenting shareholder of any of the companies involved in the division who has made a request under Regulation 34, and

(ii) any creditor of any of the companies who objects to the division in accordance with Regulation 36, and

(c) the rights of holders of securities other than shares in any of the companies being acquired are safeguarded in accordance with Regulation 37,

may make an order confirming the division with effect from such date as the court appoints ("the appointed date").

(2) The order of the court confirming the division shall, with effect from the appointed date, have the following effects--

(a) all the assets and liabilities of the company or companies being acquired shall stand transferred to the acquiring companies in accordance with the draft terms of division as approved by the court;

(b) the shareholders of the company being acquired shall become shareholders in the acquiring companies or any of them in accordance with the draft terms of division as approved by the court;

(c) the company or companies being acquired shall, subject to paragraph (4), be dissolved;

(d) all legal proceedings pending by or against any of the dissolved companies shall be continued with the substitution, for the dissolved company, of the acquiring companies or such of them as the court having seisin of the proceedings may order.

(3) The court may, either by the order confirming the division or by a separate order, make provision for such matters as the court considers necessary to secure that the division shall be fully and effectively carried out.

(4) The court may, in particular, by order--

(a) direct that an acquiring company shall, on a date specified by the court, purchase the shares of a dissenting shareholder who has made a request under Regulation 34 and pay therefor the sum determined by the court, being not less than the market sale price of the shares on the appointed date, and

(b) provide for the reduction accordingly of the company's capital.

(5) If it is necessary for the company being acquired to take any steps to ensure that its assets and liabilities are fully transferred, the court may specify a date which, save in exceptional cases, shall not be later than 6 months after the appointed date, by which such steps must be taken and for that purpose may order that the dissolution of such company shall take effect on that date.

(6) Section 41 (1) of the Companies (Amendment) Act, 1983 (which restricts the right of a company to purchase its own shares) shall not apply to the purchase of any shares in pursuance of an order of the court under this regulation.

39. An order of the court shall not be made in respect of a proposed division which involves a take-over to which the Mergers, Take-overs and Monopolies (Control) Act, 1978 applies until either--

(a) the Minister has stated in writing that he has decided not to make an order under section 9 of that Act, in relation to the proposed take-over, or

(b) the Minister has stated in writing that he has made a conditional order under that section in relation to the proposed take-over, or

(c) the relevant period within the meaning of section 6 of that Act (which refers to a limitation on the commencement of a take-over) has elapsed without the Minister's having made an order under the said section 9 in relation to the proposed take-over,

whichever first occurs.

40. (1) Where the court has made an order confirming a division an office copy thereof shall forthwith be sent to the registrar of companies for registration by such officer of the court as the court may direct.

(2) Each of the acquiring companies shall cause to be published in Iris Oifigi--il notice of delivery to the registrar of companies of the order of the court confirming the division within fourteen days of such delivery and if default is made in complying with this paragraph each company and every officer of the company who is in default shall be guilty of an offence.

(3) It shall be a defence for a person charged with an offence under paragraph (2) to show that non-compliance was not due to any delay or negligence on the part of the company or person concerned.

(4) Proceedings in relation to an offence under this regulation may be brought and prosecuted by the registrar of companies.

41. (1) Any shareholder of any of the companies involved in a division who has suffered loss or damage by reason of misconduct in the preparation or implementation of the division by a director of any such company or by the independent person who has made a report under Regulation 28 shall be entitled to have such loss or damage made good to him by--

(a) in the case of misconduct by a person who was a director of that company at the date of the draft terms of division -- that person,

(b) in the case of misconduct by any independent person who prepared a report under Regulation 28 in respect of any of the companies -- that person.

(2) Without prejudice to the generality of paragraph (1), any shareholder of any of the companies who has suffered loss or damage arising from the inclusion of any untrue statement in the draft terms of division, the explanatory report, the independent person's report or the accounting statement shall, subject to paragraphs (3) and (4), be entitled to have such loss or damage made good to him by every person who was a director of that company at the date of the draft terms of division or, in the case of the independent person's report, by the person who made that report, in relation to that company.

(3) A director of a company shall not be liable under paragraph (2) if he proves--

(a) that any of the documents referred to in paragraph (2) was issued without his knowledge or consent, and that on becoming aware of their issue he forthwith informed the shareholders of that company that they were issued without his knowledge or consent, or

(b) that as regards every untrue statement he had reasonable grounds, having exercised all reasonable care and skill, for believing and did, up to the time the division took effect, believe that the statement was true.

(4) A person who made a report required by Regulation 28 in relation to a company shall not be liable in the case of untrue statements in his own report if he proves--

(i) that on becoming aware of the statement, he forthwith informed the company concerned and its shareholders of the untruth, or

(ii) that he was competent to make the statement and that he had reasonable grounds for believing and did up to the time the division took effect believe that the statement was true.

42. (1) Where any untrue statement has been included in the draft terms of division, the explanatory report or the accounting statement, each of the directors and any person who authorised the issue of those documents shall be guilty of an offence.

(2) Where any untrue statement has been included in the independent person's report, the independent person and any person who authorised the issue of the report shall be guilty of an offence.

(3) It shall be a defence for a person charged with an offence under paragraph (1) or (2) to show that, having exercised all reasonable care and skill, he had reasonable grounds for believing and did, up to the time of the issue of the documents, believe that the statement was true.

GIVEN under my Official Seal, this 22nd day of May, 1987.

ALBERT REYNOLDS,

Minister for Industry and Commerce.

EXPLANATORY NOTE.

These Regulations implement the EEC Third and Sixth Company Law Directives concerning the mergers and divisions of public limited companies. The Regulations apply only to public limited companies, and certain unregistered companies defined in the Regulations.

Mergers

In the case of a merger, the Regulations apply to an operation whereby all the assets and liabilities of one or more companies are transferred to another company (the acquiring company), the shareholders of the company or companies being acquired become shareholders in the acquiring company and the company or companies being acquired are dissolved.

Divisions

In the case of a division, the Regulations apply to an operation whereby all the assets and liabilities of a company are transferred to more than one other company, the shareholders of the company being acquired become shareholders in the acquiring company or companies and the company being acquired is dissolved.

The provisions of the Companies Acts in relation to arrangements and reconstructions (Sections 201 to 204) are expressly disapplied in the case of the specific mergers and divisions covered in the Regulations.

The Regulations are divided into three Parts. Part I contains the usual preliminary provisions relating to interpretation and penalties. Part II sets out the new procedure and requirements in respect of mergers and Part III sets out the new procedure and requirements in respect of divisions.

The provisions of Parts II and III broadly cover;

(a) reporting requirements by directors of a company and by an independent person to the members of the company,

(b) approval of the merger or division by general meeting of the companies involved,

(c) inspection of relevant documents by members of the companies involved,

(d) confirmation of the merger or division by the High Court and registration and publication of the Court's decision,

(e) protection of the interests of creditors, dissenting minorities and holders of securities other than shares.

The Regulations also provide for civil liability of directors and the independent person to shareholders for misconduct in relation to the merger or division and for criminal liability for false statements in any document published in connection with the merger or division.

The Regulations come into effect on 1 June, 1987.