CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

8/14/2019 CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

1/4

CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

This Directive aims to facilitate cross-border mergers between limited liability companies

in the European Union. The measures envisaged by the EU are designed to reduce the

cost of such operations, to guarantee their legal certainty and to offer this option to themaximum number of companies, particularly those not wishing to set up a European

Company, (SE).

ACT

Directive 2005/56/EC of the European Parliament and of the Council of 26 October

2005 on cross-border mergers of limited liability companies [Official Journal L 310

of 25.11.2005, p. 1].

SUMMARY

The Directive sets out to facilitate cross-border mergers of limited liability companies by

proposing a simplified legislative framework.

It is an important stage in the EU efforts to implement the Lisbon Strategy and is

designed to identify the legislation applicable in the event of a merger to each of the

merging companies. Once the new entity emanating from the merger has been set up, a

single body of national legislation applies: that of the Member State in which the entityhas established its registered office.

Scope

The Directive applies to mergers of limited liability companies:

formed in accordance with the law of a Member State;

with their registered office, central administration or principal place of business within

the Community; if at least two of them are governed by the law of different Member States.

Member States may decide not to apply the Directive to cross-border mergers involving a

cooperative society even in the cases where the latter would fall within the definition of

"limited liability company". Lastly, companies the object of which is the collective
http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=Directive&an_doc=2005&nu_doc=56http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=Directive&an_doc=2005&nu_doc=56


2/4

investment of capital provided by the public (UCITS) are excluded from the scope of the

Directive.

Procedures governing cross-border mergers

The management or administrative organ of each of the merging companies is required to

draw up the common draft terms of cross-border merger. The Directive contains a list

of the twelve compulsory particulars that constitute the minimum content of the common

draft terms, which must be published in the manner prescribed by the law of each

Member State in accordance with the Directive on disclosure by limited liability

companies at least one month before the date of the general meeting which is to decide on

them.

The management or administrative organ of the merging companies must prepare a reporton the proposed cross-border merger for the members and employees that explains the

legal and economic aspects of the cross-border merger and its implications.

An independent expert report on the merger must be drawn up. It will not be required if

all the members of each of the companies involved in the merger have so agreed. The

expert report and the proposed cross-border merger report must be made available at least

one month before the date of the general meeting.

On the basis of the documents referred to above, the general meeting of each of the

merging companies must decide on the approval of the common draft terms of cross-

border merger.

Scrutiny of legality

Each Member State must designate the authority competent for scrutinising the legality of

the cross-border merger as regards that part of the procedure that concerns each merging

company subject to its national law. That authority must issue a pre-merger certificate

attesting to the proper completion of the pre-merger acts and formalities.

Each Member State must designate the authority competent for scrutinising the legality of

the cross-border merger as regards that part of the procedure that concerns the completion

of the cross-border merger and, where appropriate, the formation of a new company

resulting from the cross-border merger where the company created by the cross-border
http://europa.eu/legislation_summaries/internal_market/single_market_services/financial_services_banking/l24036a_en.htmhttp://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26003_en.htmhttp://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26003_en.htmhttp://europa.eu/legislation_summaries/internal_market/single_market_services/financial_services_banking/l24036a_en.htmhttp://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26003_en.htmhttp://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26003_en.htm


3/4

merger is subject to its national law. That authority must ensure that the merging

companies have approved the common draft terms of cross-border merger in the same

terms.

Legal effects

Following scrutiny of legality, the law of the Member State to whose jurisdiction the

company resulting from the cross-border merger is subject must determine the date on

which the cross-border merger takes effect and the arrangements for publicising

completion of the merger in the public register. The old registration must not be deleted

until that notification has been received.

Cross-border mergers have the following effects:

the companies being acquired or the merging companies cease to exist;

all the assets and liabilities of the companies concerned by the merger are transferred to

the new entity (either the acquiring company or the new company);

the members of the companies being acquired become members of the new entity.

Where the laws of the Member States require the completion of special formalities before

the transfer of certain assets, rights and obligations by the merging companies becomes

effective against third parties, the company resulting from the cross-border merger is

responsible for carrying out those formalities.

Worker participation

The general principle as regards the employees' rights of participation is that national

laws governing the company resulting from the cross-border merger apply.

By way of exception, the principles and arrangements relating to worker participation

laid down by the relevant regulation and the Directive on the European Company (SE)

apply as follows:

where at least one of the merging companies has, in the six months before publication of

the draft terms of the cross-border merger, an average number of employees that exceeds

500 and is operating under an employment participation system;

where the national legislation applicable to the company resulting from the cross-border

merger does not provide for at least the same level of employee participation as operated
http://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26016_en.htmhttp://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26016_en.htm


4/4

in the relevant merging companies, measured by reference to the proportion of employee

representatives amongst the members of the administrative or supervisory organ which

covers the profit units of the company, subject to employee representation;

where the national legislation applicable to the company resulting from the cross-border

merger does not provide for employees of establishments of that company that are

situated in other Member States, the same entitlement to exercise participation rights as is

enjoyed by those employees employed in the Member State where the company resulting

from the cross-border merger has its registered office.

Under the Directive supplementing the Statute for a European Company with regard to

the involvement of employees, the threshold for applying the benchmark provisions laid

down for the European Company is increased to 331/3% of the total number of workers

in the merging companies that have had to operate under any form of worker

participation system. For a period of three years after the cross-border merger has taken

effect, the rights of the workers are protected in the event of any subsequent domestic

mergers.

The provisions on worker participation apply to any domestic merger subsequent to a

cross-border merger for a period of three years after the cross-border merger has taken

effect.

Context

Back in 1984 the Commission presented a draft Directive on cross-border mergers of

companies [COM(1984) 727]. The proposal was the subject of lengthy and abortive

negotiations. The new proposal for a Directive is based on the provisions of the Statute of

the SE. This Directive forms part of the Financial Services Action Plan (FSAP) and is a

key measure in the action plan on modernising company law and enhancing cooperate

governance.
http://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26016_en.htmhttp://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=COMfinal&an_doc=1984&nu_doc=727http://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26016_en.htmhttp://europa.eu/legislation_summaries/internal_market/single_market_services/financial_services_general_framework/l24210_en.htmhttp://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26016_en.htmhttp://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=COMfinal&an_doc=1984&nu_doc=727http://europa.eu/legislation_summaries/internal_market/businesses/company_law/l26016_en.htmhttp://europa.eu/legislation_summaries/internal_market/single_market_services/financial_services_general_framework/l24210_en.htm

CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

Documents

Transcript of CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES