Can Cross Border Mergers Continue Between Spain And UK After Brexit?

The continuous insecurity of whether there will be a deal or no-deal Brexit puts international companies in a difficult position to understanding what type of Brexit they should be planning for, if at all.

Therefore, UK companies being able to still carry out cross-border mergers with Spanish companies if the UK leaves the EU is a question on many companies’ minds.

At present, Directive 2005/56/EC on cross-border mergers of limited liability companies (Cross-border Mergers Directive) was repealed and codified with effect from 20 July 2017 by Directive (EU) 2017/1132 relating to certain aspects of company law (codification) (New Cross-border Mergers Directive) which facilities cross-border mergers.  Currently, there is no evidence that Spain is intending to implement regulatory measures which expressly and specifically maintain such uniformity for merger processes with companies in the UK. However, neither is there any evidence that any measure is going to be implemented in Spain to restrict the possibility of undertaking such merger processes with companies outside the EU and it is even less likely that such restriction will be imposed in relation to UK companies.

Spain’s cross border mergers with non-EEA companies, until 2005, was governed under basic legislation (Article 9.11.2 of the Spanish Civil Code and Article 233 et seq of the Spanish Mercantile Registry Regulations) which did not contain any specific express references to mergers between companies located in other jurisdictions.  However, the Cross-border Mergers Directive was embodied into Spanish national law by Law 3/2009 on Structural Modifications of Companies (LME), Article 27 which specifically allowed mergers between companies in different jurisdictions whether within or outside the EU framework.

In essence under Spanish law the key characteristics of a cross border merger are generally the same as any other domestic merger i.e. dissolution (without liquidation) of an entity with a transfer at the same time of all its assets and liabilities in succession to an acquiring company which is in a state other than that of one or more of the companies being acquired.

The issue is to ensure that the provisions of each of the personal laws of the participating companies are complied with which can become complicated in cases where there is a lack of uniformity of regulations.

The Cross-border Mergers Directive has established a uniform regulated framework for cross-border mergers which only relate to the general aspects of the process. Therefore, “domestic” mergers will be treated in a particular manner to those between different EU jurisdictions. Nevertheless, such legislation has allowed the establishment of the main pillars required to achieve a uniform process. Although some management will be needed of the requirements and demands which will arise from the different regulations.  Therefore, with merger processes with non-EEA companies, such synchronisation is also required.

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Mandeep Johal's picture

Mandeep is an experienced and organised U.K qualified solicitor with numerous years of experience. Accustomed to multi-tasking with the ability to work under pressure to exceed client expectations. Excellent legal and business skills, with the experience and capability to manage a team to achieve excellent results. As Head of International Development at Manubens Abogados she is responsible for managing relationships with the firm’s commercial and private clients.