EU Cross-Border Mergers: AIG Europe Ltd & Anor, Re

[2018] EWHC 2818 (Ch)

Court sanctions Part VII scheme involving an EU cross-border merger ahead of Brexit

The applicant English insurance company sought approval of the court under Part VII of the Financial Services and Markets Act 2000 ("Part VII") for its proposed transfer of insurance business. In order to allow it to continue to service its existing business and to write new business across the UK and the rest of Europe after Brexit, it intended (with effect from 1 December 2018) to: (1) transfer the UK and non-EEA part of its business to a new English company, regulated by the FCA and PRA; and (2) transfer the EEA part of its business to a new Luxembourg company by an EU cross-border merger between the existing English company and the new Luxembourg company. The applicant would then cease to exist. The applicant intended to use a cross-border merger company because it was advised that this would maximise the prospect of recognition in overseas jurisdictions.

Snowden J has now approved the scheme. In so doing, he noted that the use of a Part VII scheme which involves an EU cross-border merger is novel and held as follows:

(1) He had jurisdiction to sanction a scheme where the transfer of insurance policies is to be achieved in part by an order under section 112 of the FSMA and in part by means of a cross-border merger under EU Directive 2017/1132 and the Cross-Border Mergers ("CBM") Regulations.

(2) Although there are no express provisions in the Directive or the CBM Regulations dealing with the continuity of legal proceedings in the event of a cross-border merger, the judge thought that such a result could be implied. In any event, he believed he could make an order under section 112 in relation to the continuation of proceedings and claims by and against the new Luxembourg company.

(3) The judge noted that the current situation regarding Brexit differs from previous applications to sanction a scheme: "The evidence of [the applicant] is that the uncertainty over the Brexit negotiations means that if it delayed further and did nothing, there is a...