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On 17 June 2024, the Irish High Court made an order approving the first cross-border division of an entity incorporated in an EEA member state into Ireland. This pioneering inbound division involved the Dutch subsidiary of the PTC Group, a global software and services group headed by its publicly traded parent PTC Inc., transferring part of its assets into an Irish company without dissolving the original entity. ALG advised PTC on the transaction, setting a new precedent in corporate mobility within the EEA.
The division was carried out in accordance with Directive (EU) 2019/2121, which amends Directive (EU) 2017/1132 regarding cross-border conversions, mergers, and divisions (the Mobility Directive), the European Union (Cross-Border Conversions, Mergers, and Divisions) Regulations 2023 (as amended)(the Irish Mobility Regulations) and Dutch legislation implementing the Mobility Directive. This is the first instance of a cross-border division application reviewed and approved by the Irish Courts. The process, being less disruptive and more streamlined than traditional methods, offers a viable option for companies looking to optimize their corporate footprint in the EEA.
PTC were advised on the matter by an ALG team led by Berni Hosty (Corporate and M&A Partner), Brendan McGrath (Senior Associate, Litigation & Dispute Resolution) and Ciara Fagan (Solicitor, Corporate and M&A). The ALG team advised PTC on all Irish legal and corporate governance aspects of the transaction, with Greenberg Traurig LLP advising on Dutch legal aspects.
What is a cross-border division?
A cross-border division allows a limited liability company, without being wound up or going into liquidation, to transfer parts or all of its assets and liabilities to one or more newly formed companies in different EEA jurisdictions. There is no requirement for the dividing company to be dissolved, which is the case for a division under domestic Irish law.
In essence, such divisions allow companies with limited liability to move assets, liabilities, contracts or employees between jurisdictions within the EEA while the original entity retains the remaining assets or liabilities. The process is, therefore, far less disruptive to the operations of a company than traditional means of transferring businesses across borders, such as international asset transfers or cross-border mergers.
The process
As an inbound partial division, the PTC division process involved several steps, primarily:
One unique aspect of the PTC division was how the Irish courts handled the division notice requirements. The new Rules of the Superior Courts in respect of Cross Border Divisions provide that, at the first date fixed for hearing, the High Court can make such orders or give directions as appear convenient including directions for the further publication of notice of the application to approve the division in Ireland or for the service of the application papers on any person. It was successfully submitted to the Court that there was no requirement for publication of the application or service on any party as the issuance of the pre-division certificate in the Netherlands meant that any parties potentially impacted by the division had already received proper notice of all substantive aspects of the division through the Dutch process. The PTC division process was completed within the original timeline, showcasing the effectiveness of the Mobility Directive in facilitating business restructures within the EEA.
Looking ahead
The successful completion of this cross-border division demonstrates the practical benefits of the Mobility Directive for corporate restructurings within the EEA. The ability to efficiently transfer assets and liabilities across borders while maintaining corporate integrity and continuity is a significant advancement.
Further reading
If you would like to read more about the Mobility Directive and the Irish Mobility Regulations, you can read our previous publications:
If you wish to discuss this topic or require any advice, please contact Berni Hosty, Partner, or your usual ALG contact.
Date published: 12 July 2024
