The Companies Act 2014 was signed into law by the President on 23 December 2014. This new Act will replace the Companies Acts 1963 – 2013. The Act is planned to be commenced as of 1 June 2015, with a further 18 month transitional implementation period. The comprehensive Act consolidates all existing Irish company law into 17 schedules. It is the largest reform of company law the State has seen in over 50 years and it is intended to make running a business in Ireland easier.

One of the most innovative procedures to be introduced by the Act relates to mergers.

Under existing Irish company law, Irish incorporated entities can only effect mergers using the European Communities (Cross-Border Mergers) Regulations, 2008 (implementing Directive 2005/56/EC on Cross-Border Mergers). Part 9 of the Act now deals exclusively with re-organisations, acquisitions, mergers and divisions of companies. The law is modelled on the Regulations, which have been successfully utilised by Irish companies to merge with companies incorporated in another European Union Member State (and those EEA States that have implemented the Directive).

Exciting times lie ahead as, once the Act is in force, for the first time under Irish Law, there will be a statutory procedure allowing two Irish private companies (of which at least one must be limited) to merge so that the assets and liabilities of one transfer by operation of law to the other, after which the former company is dissolved. Under the Act, a merger will be capable of being effected in one of three ways, essentially mirroring the existing provisions for Cross-Border Mergers:

Merger by Absorption, whereby an existing company acquires all the assets and liabilities of its wholly owned subsidiary. On being dissolved and without going into liquidation, the subsidiary transfers all of its assets and liabilities to its parent;
Merger by Acquisition, whereby a company (other than a company formed for the purpose of the operation) acquires all of the assets and liabilities of another company in exchange for the issue to the members of the transferor company of securities or shares in the acquiring company, either with or without any cash payment. The transferor company is then dissolved without going into liquidation; and
Merger by Formation of a New Company, whereby two or more companies (on being dissolved without going into liquidation) transfer all of their assets and liabilities to a successor company that they form and exchange for the issue to their members of securities or shares representing the capital of that new company, with or without any cash payment.
Under the new Act, mergers can be implemented by either (i) Court Order or, (ii) by utilising the summary approval procedure (SAP). SAP is a concept introduced by the Act to facilitate a simplified written approval process by Directors and/or Members and its key benefit in relation to mergers is that no court order need be obtained when utilising this process. This represents a radical change in direction for the future of mergers in Ireland. The ability to use the simple SAP mechanism will significantly lower the costs of mergers and is sure to increase their prevalence. There is no doubt that the popularity of domestic mergers will increase quickly and steadily once the Act is commenced in June 2015.

Irish Law already provides for tax neutrality in relation to Cross-Border Mergers. It will be interesting to hear from the Revenue Commissioners of Ireland as to whether Irish tax legislation will continue to provide for tax neutrality in the case of the new merger regime.

The changes introduced by the Act for mergers are a significant legal development as now mergers will be a more accessible option when considering acquisition and corporate restructuring possibilities. Although funding for potential investors and purchasers of Irish companies and assets continues to be in short supply on the home front, foreign investment is likely to continue to play a major role in Ireland. Ireland’s gradual recovery from the recession and the subsequent austerity measures should continue to be reflected in an improved market in 2015 and the provisions of the new Act for mergers will certainly contribute to this.

Angela Cleary

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Peter Walsh, Managing Partner


Tel: + 353 1 6376200

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John O’Donovan, Partner


Tel: + 353 1 6376200

Fax: + 353 1 6376262

Angela Cleary, Associate


Tel: + 353 1 6376233

Fax: + 353 1 6376262

Disclaimer: This document is for information purposes only and does not purport to represent legal advice. If you have any queries or would like further information relating to any of the above matters, please refer to the contacts above or your usual contact in Orpen Franks Solicitors LLP

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