On 18 April 2019, the European Parliament resolved to adopt, with amendments, the European Commission's proposal for an amending Directive as regards cross-border conversions, mergers and divisions.
The Commission claims that the new rules on cross-border conversions, mergers and divisions of companies will generate savings for companies of between EUR 176 million and EUR 280 million over five years. The Commission's proposal would introduce a new legal institution: cross-border conversion. This would allow companies that wish to move from one Member State to another the possibility of changing their country of incorporation without losing their legal personality or having to re-negotiate their business contracts. The Commission argues that a conversion is a particularly attractive option for small companies that do not have enough financial resources to search for expensive legal advice and conduct a cross-border merger.
Currently, companies wishing to move their registered offices between Member States need to rely on national laws (if they exist). However, the laws are often incompatible and more than half of the Member States do not provide any specific rules allowing for cross-border conversions. Under the process of conversion, a company registered in one Member State could change its legal form in that Member State into a similar legal form of another Member State, without losing its legal personality, and without the need to dissolve or liquidate. The proposal also provides harmonised rules for protection of creditors and shareholders as regards cross-border mergers and divisions.
The amendments to the Commission's proposal include:
- Cross-border conversions: Alterations to the conditions for carrying out a cross-border conversion, such that not all insolvency proceedings will be an automatic bar; changes to the scope of the independent expert's report such that it will focus on the adequacy of the cash consideration offered to members rather than on whether the intended cross-border conversion constitutes an artificial arrangement and will be addressed to the members rather than to the competent authority; amended provisions concerning the protection of members and creditors; additional provisions concerning employee's information and consultation; and the replacement of measures to ensure that the relevant transaction is not an artificial arrangement with measures to prevent cross-border conversions set up for abusive or fraudulent purposes, aiming to evade or circumvent national or EU law, or for criminal purposes.
- Cross-border mergers: Alterations to the conditions and provisions for carrying out cross-border mergers as are made in respect of cross-border conversions, as well as the deletion of proposed provisions relating to accounting date, the addition of provisions relating to the transmission of the pre-merger certificate and the addition of certain provisions relating to registration.
- Cross-border divisions: Alterations to the conditions and provisions for carrying out cross-border divisions as are made in respect of cross-border conversions, as well as the deletion of proposed provisions relating to accounting date.
The European Parliament's resolution and adopted text is available here.
The Commission's proposal is available here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.