Acquisitions

Part 9 – Reorganisations, Acquisitions, Mergers and Divisions

The rules in relation to acquisitions are as follows:

  1. The right to buy out shareholders who dissent from a scheme or a contract which has been approved by a majority is dealt with in Section 457. This section also deals with the right of dissenting shareholders to be bought out.
  1. Practitioners will recognise in Section 457 a carry-over from parts of Section 204 of the 1963 Act. It should be noted that the terms “transferor” and “transferee” have been done away with, in favour of “offeror” and “offeree”. The party which used to be referred to as the transferee is now referred to as the offeror. The offeree company is the target company. It should further be noted that all references to an offeror include persons and companies, but references to an offeree apply only to companies.
  1. The main aim of Section 457 is to enable an offeror to buy all the shares of a target company (the offeree company) where the offeror has obtained acceptances of its offer in respect of at least 80% of the shares in the target company.
  1. Section 458 sets out additional requirements, and is only relevant where an offeror wishes to serve a call notice on a dissenting shareholder, or to acquire the shares of a dissenting shareholder. If the dissenting shareholder wishes to be bought out, Section 458 will not be relevant.
  1. If court applications need to be made in relation to the above, the procedures for doing so are set out in Section 459. Practitioners should note that subsections (1) to (4) are new and deal with notice requirements.

Finally, Section 460 is an important new section because it deals with the interpretation of this part of the Act. In subsection (3), for example, Tempany v Hynes [1976] IR 101 is reversed. This was a Supreme Court decision which suggested that where the entire purchase money for an asset had not been paid (after agreement to purchase had been reached) the unpaid seller retained a beneficial interest in the asset. This decision is reversed because it had the effect of impeding Section 204 of the 1963 Act. In a Tempany v Hynes situation, the new Act says that the unpaid seller retains a non-possessory lien, not a beneficial interest in the asset.

Subsection (4) states for clarity that shares are not in the beneficial ownership of the offeror merely because they become subject to a charge in favour of another, or because the shares are the subject of an undertaking on the part of their holder to accept an offer if one is made.

Practitioners will recognise in subsections (1) and (2) the older Sections 204(11) and 204(3) of the 1963 Act.