Merger by absorption meaning

Merger by absorption describes a transaction in which one company is folded into an existing company so that all of the transferor’s assets and liabilities pass to the transferee by universal succession, and the transferor’s members receive securities in the transferee (with or without a cash component). The transferor is dissolved without going into liquidation. The term is used as a defined form of statutory cross-border merger in EU law and in Ireland (under the European Communities (Cross-Border Mergers) Regulations 2008, as amended, implementing Directive (EU) 2017/1132). Key features include court or administrative approval, creditor and employee protection measures, member approval, consideration primarily in securities, and automatic transfer of contracts, proceedings and employees. In the UK (England and Wales, Scotland and Northern Ireland), the cross-border mergers regulations 2007 have been revoked, so UK companies can no longer carry out an EU-style merger by absorption. The term is now mainly of historical relevance in the UK and when advising on Irish or other EEA mergers. Similar commercial outcomes in the UK are typically achieved via schemes of arrangement or business and asset transfers, but these do not provide the same statutory universal succession as a merger by absorption.