Proposal for a Directive of the European Parliament and of the Council on cross border mergers of companies with share capital
Date: 2003-11-18
Institutions: European Commission
Subjects: company law, company with share capital, merger

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 18.11.2003
COM(2003) 703 final

2003/0277 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on cross-border mergers of companies with share capital

(presented by the Commission)

EXPLANATORY MEMORANDUM

1.

PURPOSE OF AND GROUNDS FOR THE PROPOSAL

The purpose of the Directive, which is to be viewed against the background of the Financial
Services  Action  Plan  and  the  Communication  from  the  Commission  to  the  Council  and  the
European  Parliament  of  21 May 2003  entitled  Modernising  Company  Law  and  Enhancing
Corporate  Governance  in  the  European  Union  –  A  Plan  to  Move  Forward,  is  to  fill  a
significant  gap  in  company  law  left  by  the  need  to  facilitate  cross-border  mergers  of
commercial companies without the national laws governing them – as a rule the laws of the
countries where their head offices are situated – forming an obstacle.

At present, as Community law now stands, such mergers are possible only if the companies
wishing  to  merge  are  established  in  certain  Member States.  In  other  Member States,  the
differences  between  the  national  laws  applicable  to  each  of  the  companies  which  intend  to
merge are such that the companies have to resort to complex and costly legal  arrangements.
These arrangements often complicate the operation and are not always implemented with all
the requisite transparency and legal certainty. They result, moreover, as a rule in the acquired
companies being wound up – a very expensive operation.

There  is  an  increasing  need  today  in  the  Community  of  Fifteen  for  cooperation  between
companies  from  different  Member States,  as  there  will  be  tomorrow  in  the  future  enlarged
Union, not forgetting the EFTA countries.

For a number  of  years  now, Community  companies have  been  calling for  the  adoption  of  a
Community legal instrument that meets their needs for cooperation and consolidation between
companies  from  different  Member States  and  that  enables  them  to  carry  out  cross-border
mergers.

More  than  ever,  all  companies,  whether  they  be  public  limited  liability  companies  or  any
other  type  of  company  with  share  capital,  must  have  at  their  disposal  a  suitable  legal
instrument  enabling  them  to  carry  out  cross-border  mergers  under  the  most  favourable
conditions. The costs of such an operation must therefore be reduced, while guaranteeing the
requisite legal certainty and enabling as many companies as possible to benefit. The scope of
the  Directive  will  therefore  be  drawn  in  such  a  way  as  to  cover  above  all  small  and
medium-sized  enterprises,  which  stand  to  benefit  because  of  their  smaller  size  and  lower
capitalisation  compared  with  large  enterprises  and  for  which,  for  the  same  reasons,  the
European company Statute does not provide a satisfactory solution.

2.

HISTORICAL CONTEXT

On 14 December 1984 the Commission adopted a proposal for a tenth Council Directive on
cross-border  mergers  of  companies.1  Several  committees  of  the  European  Parliament
examined the proposal, including the Committee on Legal Affairs, which adopted its report on
21 October 1987.2 However, Parliament  did not deliver its  opinion  owing  to  the  difficulties
raised by the problem of employee participation in companies’ decision-making bodies. This
situation of deadlock, which was linked to the fate of the proposal for a European company

1

2

OJ C 23 25.1.1985, p. 11.
PE/113303/JUR/FIN, A2/1987/186.

2

                                                
Statute, lasted more than 15 years. In 2001, against the backdrop of a wholesale withdrawal of
proposals which had been pending for several years or which had become devoid of purpose,
the Commission withdrew this first proposal for a tenth Directive with a view to presenting a
fresh  proposal  based  on  the  latest  developments  in  Community  law.  A  resolution  of  the
European  company  (SE)  question  having  been  reached  on  8  October  2001,  the  work  on
preparing  a  new  proposal  for  a  Directive  on  cross-border  company  mergers  accordingly
resumed.  In  the  light  of  this  state  of  affairs  and  of  the  fact  that  the  parties  have  had  an
opportunity to comment on the broad lines of the proposal, both as part of the consultations
carried  out  by  the  High-Level  Group  of  Company  Law  Experts  and  as  part  of  those  on  the
above-mentioned  Commission  communication  of  21  May  2003,  further  consultations  and
impact assessment on the present proposal, the speedy adoption of which is wished for by the
interests concerned, have not been considered necessary.

3.

FEATURES OF THE PROPOSAL

The  present  proposal  differs  from  the  original  proposal  of  1984  mainly  in  scope  and  in  the
way  it  takes  account,  with  regard  to  the  participation  of  employees  in  the  decision-making
bodies of the acquiring company or of the new company created by the cross-border merger,
of the principles  and solutions incorporated  in  Council  Regulation (EC)  No  2157/2001  of  8
October  2001  on  the  Statute  for  a  European  company  (SE)3  and  in  Council  Directive
2001/86/EC  of  8  October  2001  supplementing  the  Statute  for  a  European  company  with
regard to the involvement of employees.4

3.1.

Scope

The  original proposal covered only  public  limited  liability  companies.  The  present  proposal
extends that scope to include all companies with share capital which, in the unanimous view
of  the  Member States,  may  be  typified  as  companies  having  legal  personality  and  separate
assets  which  alone  serve  to  cover  the  company’s  debts.  It  is  aimed  primarily  at  companies
which  are  not  interested  in  forming  an  SE,  i.e.  for  the  most  part  small  and  medium-sized
enterprises.

3.2.

Principles governing the cross-border merger procedure

The basic principle underlying the cross-border merger procedure is that – save as otherwise
provided by the Directive for reasons to do with the cross-border nature of the merger – the
procedure is governed in each Member State by the principles and rules applicable to mergers
between companies governed exclusively by the law of that State (domestic mergers).

The  aim  is  to  approximate  the  cross-border  merger  procedure  with  the  domestic  merger
procedures with which operators are already familiar through use.

In order to take account of the cross-border aspects, the principle of the application of national
law  is  incorporated  -  but  no  more  than  is  strictly  necessary  –  via  provisions  based  on  the
relevant principles and rules already laid down for the formation of an SE.

Protection under national law is also afforded to the interests of creditors, debenture holders,
the holders  of  securities  other than shares,  minority  shareholders  and  employees,  as  regards

3

4

OJ L 294, 10.11.2001, p. 1.
OJ L 294, 10.11.2001, p. 22.

3

                                                
rights other than those related to participation in the company, vis-à-vis each of the merging
companies. Reference may be made here to Council Directive 2001/23/EC of 12 March 2001
relating  to  the  safeguarding  of  employees'  rights  in  the  event  of  transfers  of  undertakings,5
Directive  2002/14/EC  of  the  European  Parliament  and  of  the  Council  of  11  March  2002
establishing  a  general  framework  for  informing  and  consulting  employees  in  the  European
Community,6 and Council Directive 94/45/EC of 22 September 19947 and Council Directive
97/74/EC8  of  15  December  1997,  both  of  which  concern  the  establishment  of  a  European
works council or a procedure in Community-scale undertakings and Community-scale groups
of  undertakings  for  the  purposes  of  informing  and  consulting  employees.  These  Directives
also apply to companies created by a cross-border merger.

The Directive, as is the case for  comparable previous legal acts9, is without prejudice to the
application of the legislation on the control of  concentrations between undertakings,  both at
the Community level10 and at the level of Member States.

3.3.

Employee participation and company law coordination

Employee participation in a company created by  cross-border merger, which was the reason
for the deadlock over the original proposal of 1984, is coordinated by the present proposal for
a Directive with a view to ensuring freedom of establishment.

The overriding fear concerning cross-border mergers was that the process might be hijacked
by  companies  which,  faced  with  having  to  live  with  employee  participation,  might  try  to
circumvent it by means of such a merger.

Regulation  (EC)  No  2157/2001  and  Directive  2001/86/EC  have  come  up  with  a  solution
which  can  be  used,  mutatis  mutandis,  also  with  a  view  to  coordinating  company  law  under
Article 44(2)(g) of the EC Treaty, as is the purpose of this Directive.

The  context  in  which  the  Regulation  and  the  Directive  on  the  SE  operate  is  different,
however, from that surrounding the application of this Directive. By virtue of its Community
nature, the SE is not subject to any existing national rules on compulsory participation in the
Member State in which its registered office is situated. By contrast, companies created by the
cross-border merger operations covered by the present Directive will be companies governed
by  the  law  of  a  Member State.  Such  companies  will  accordingly  remain  subject  to  the
compulsory participation rules applicable in that Member State. It may well be, however, that,
following a cross-border merger, the registered office of the company created by the merger is
situated in a Member State which does not have this type of rule, whereas one or more of the
companies taking part  in  the merger were operating under  a  participation  system  before  the
merger. To deal with this eventuality, provision is made for extending to companies covered
by the present Directive the same protection of rights acquired with respect to participation as
is  granted  under  the  system  set  up  by  the  SE  Regulation  and  Directive.  The  protection  of
acquired  rights  of  participation  is  entirely  justified  in  this  case.  In  cases  where  the  national

5

6

7

8

9

10

OJ L 82, 22.3.2001, p. 16.
OJ L 80, 23.3.2002, p. 29.
OJ L 254, 30.9.1994, p. 64.
OJ L 10, 16.1.1998, p. 22.
Third  Council  Directive  concerning  mergers  of  public  limited  liability  companies  (78/855/EEC)
(OJ L 295, 20.10.1978, p.36).
Council  Regulation  (EEC)  No  4064/89  on  the  control  of  concentrations  between  undertakings,
OJ L 395, 30.12.1989, p.1; corrected version OJ L 257, 21.9.1990, p. 13, Regulation as last amended by
Regulation (EC) No 1310/97, OJ L 180, 9.7.1997, p.1; corrigendum in OJ L 40, 13.2.1998, p. 17.

4

                                                
law of the Member State by whose law the company created by the merger is governed does
have rules on compulsory employee participation, such specific protection is unnecessary as
the company in question will be subject to those rules.

4.

COMMENTS ON THE ARTICLES

Article  1  contains  definitions  which  serve  to  delimit  the  scope  of  the  Directive.  The
definitions of merger by acquisition and merger by the formation of a new company are taken
from  Directive  90/434/EEC,  which  also  covers  mergers  between  companies  from  different
Member States  and  forms  of  company  other  than  public  limited  liability  companies.  These
definitions are in keeping with those in Directive 78/855/EEC concerning  domestic mergers
of  public  limited  liability  companies.11  The  scope  includes  all  Community  companies  with
share  capital  which,  in  the  unanimous  view  of  the  Member States,  may  be  typified  as
companies  having  legal  personality  and  separate  assets  which  alone  serve  to  cover  the
company’s  debts.  It  is  wider  than  that  of  Directive  78/855/EEC  in  that  it  is  not  limited  to
public limited liability companies but covers all companies with share capital.

Article 2 is designed to identify the law applicable in the event of a cross-border merger to
each  of  the  merging  companies.  Save  as  otherwise  provided  by  the  present  Directive  for
reasons to do with the cross-border nature of the operation, each company remains subject to
its national law on domestic mergers.

to 

the  cross-border  merger, 

the  relevant  provisions  applicable 

As  to  the  protection  of  employees,  the  cross-border  merger  remains  subject,  with  regard  to
rights  other  than  those  of  participation  in  the  acquiring  company  or  in  the  new  company
created  by 
the
Member States, as harmonised inter alia by Council Directive 2001/23/EC of 12 March 2001
relating  to  the  safeguarding  of  employees'  rights  in  the  event  of  transfers  of  undertakings,
Directive  2002/14/EC  of  the  European  Parliament  and  of  the  Council  of  11  March  2002
establishing  a  general  framework  for  informing  and  consulting  employees  in  the  European
Community  and  Directives  94/45/EC  and  97/74/EC  concerning  the  establishment  of  a
European works council and the informing and consulting of  employees. By virtue  of  these
provisions, the change of employer resulting from the merger operation must have no effect
on the contract of employment or employment relationship in force at the time of the merger,
which is automatically transferred to the new owner. Likewise protected after the merger are
all  acquired  rights  of  employees  agreed  under  a  collective  agreement,  and  their  rights  to
old-age, invalidity or survivor’s benefits under statutory social security schemes.

in 

Article 3 lists the points that have to be included in the draft terms of cross-border merger. It
includes  the  items  already  harmonised  by  Directive  78/855/EEC  for  domestic  mergers  of
public  limited  liability  companies,  to  which  have  been  added,  as  in  the  case  of  the  SE,  a
number of further items dictated by the cross-border nature of the operation, such as the name
and registered office proposed for the new company. The place where the registered office is
situated determines which law will be applicable to the new company – an important piece of
information as far as all interested parties, including creditors, are concerned. The draft terms
must  also  contain  information  on  the  arrangements  for  employee  involvement  in  decisions
taken by the company created by the cross-border merger.

11

OJ L 295, 20.10.1978, p. 36.

5

                                                
Article 4 deals with publication of the draft terms of cross-border merger and the information
that must be furnished.

Article  5  provides  for  the  possibility,  as  already  laid  down  by  Directive  78/855/EEC  for
domestic mergers of public limited liability companies and by Regulation (EC) No 2157/2001
for  the  European  company,  of  providing  for  a  single  expert  report  on  behalf  of  all
shareholders.

Article 6 lays down the requirement of approval of the draft terms of cross-border merger by
the general meeting. A similar requirement exists in the case  of  domestic mergers of public
limited liability companies and in that of the formation of an SE by merger.

Articles 7 and 8 govern scrutiny of the legality of cross-border mergers. They are based on
the corresponding principles and  techniques provided  for in Regulation (EC)  No  2157/2001
for the SE.

Article 9 concerns the date on which the cross-border merger takes effect. The relevant date
is to be that provided for by the law of the Member State by which the acquiring company is
governed in the case of cross-border merger by acquisition or by which the new company is
governed  in  the  case  of  cross-border  merger  by  the  formation  of  a  new  company.  The  date
must be after all the checks on all the companies taking part in the operation have been carried
out.

Article 10 deals with the disclosure that must be effected upon completion of a cross-border
merger. It is based on the corresponding provisions of Article 3 of Directive 68/151/EEC on
the safeguards required to protect the interests of members and others,12 this being the article
that  governs  the  publicising  of  all  essential  documents  relating  to  companies  with  share
capital.

Article 11 is based on Articles 19 and 23 of Directive 78/855/EEC, which already coordinate
the effects of a domestic merger for public limited liability companies.

Article 12 is based on Article 29 of Regulation (EC) No 2157/2001, according to which, after
the date on  which  a cross-border  merger takes effect,  it  is  no  longer  possible  to  declare  the
merger null and void, the aim being to ensure absolute certainty for all third parties affected
by the merger in the various Member States concerned. It would be highly dangerous for third
parties  subject  to  the  laws  of  different  Member States  to  be  faced  with  the  nullity  of  an
operation after all the checks in each Member State had been carried out conclusively.

Article  13  seeks  to  simplify  the  cross-border  merger  procedure  in  the  case  of  a  merger
between two companies where the acquiring company already holds all or most of the shares
or other securities of the company being acquired that confer the right to vote at the latter’s
general meetings. In such cases, a number of steps can in fact be dispensed with.

12

OJ L 65, 14.3.1968, p. 8.

6

                                                
Article 14 deals with the participation of employees in the company created by a cross-border
merger where the protection  of  acquired  rights  of  participation  is  put  at  risk  by  the  merger.
Article  14  is  relevant  only  in  a  situation  where  one  of  the  merging  companies  has  a
participation regime, be it compulsory or voluntary and the law  of the Member  State where
the company created by merger is to be incorporated does not impose compulsory employee
participation. In all other cases, the national law applicable to the company created by merger
determines the rules on employees' involvement. Article 14 reflects the balance already found
in the context of the European Company Statute, in particular the negotiation procedure which
should  enable  the  interested  parties  to  negotiate  an  appropriate  regime  to  be  applied  for
employee participation. For this purpose,  article 14 incorporates by  reference  the provisions
of Directive 2001/86/EC and Part 3 of the Annex which are specifically relevant to mergers.
Accordingly, it is only if the merging companies fail to reach a negotiated solution, that the
participation system which best protects the acquired rights of the workers and which already
exists in one of the merging companies is extended to the company created by merger.

Articles 15 and 16 contain the usual final provisions concerning implementation, entry into
force and the addressees of the Directive.

7

2003/0277 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on cross-border mergers of companies with share capital

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article
44(1) thereof,

Having regard to the proposal from the Commission,13

Having regard to the opinion of the European Economic and Social Committee,14

Having regard to the opinion of the Committee of the Regions,15

Acting in accordance with the procedure laid down in Article 251 of the Treaty,

Whereas:

(1)

(2)

(3)

13

14

15

The  need  for  cooperation  and  consolidation  between  companies  from  different
Member States  and  the  difficulties  encountered,  at  the  legislative  and  administrative
levels,  by  cross-border  mergers  of  companies  in  the  Community  make  it  necessary,
with  a  view  to  the  completion  and  functioning  of  the  single  market,  to  lay  down
Community provisions to facilitate the carrying-out of cross-border  mergers  between
various  types  of  company  with  share  capital  governed  by  the  laws  of  different
Member States.

The above-mentioned objectives cannot be sufficiently attained by the Member States
in  so  far  they  involve  laying  down  rules  with  common  features  applicable  at
transnational  level;  owing  to  the  scale  and  impact  of  the  proposed  action,  they  can
therefore best be achieved at Community level, it being possible for the Community to
take measures in accordance with the principle of subsidiarity laid down in Article 5 of
the  Treaty.  In  accordance  with  the  principle  of  proportionality  as  set  forth  in  that
article,  this  Directive  does  not  go  beyond  what  is  necessary  to  achieve  those
objectives.

In  order  to  facilitate  cross-border  merger  operations,  it  should  be  laid  down  that,
unless  this Directive  provides  otherwise,  each  company  taking  part  in  a  merger,  and
each third party concerned, remains subject to the provisions of national law by which

OJ C [...], [...], p. [...].
OJ C [...], [...], p. [...].
OJ C [...], [...], p. [...].

8

                                                
(4)

(5)

(6)

(7)

(8)

(9)

(10)

the company is governed, being those provisions which are applicable in the event of a
merger with other companies governed by the same law.

The common draft terms of cross-border merger must be drawn up in the same terms
for  each  of  the  companies  concerned  in  the  various  Member States.  The  minimum
content of such common draft terms should therefore be specified,  while leaving the
companies free to agree on other items.

In order to protect the interests of members and others, both the draft terms of merger
and the completion of the merger must be publicised for each merging company via an
entry in the appropriate public register.

The laws of all the Member States provide for the drawing-up of a report on the draft
terms of merger by one or more experts  on behalf  of  each of the  companies that  are
merging at national level. In order to limit experts’ costs connected with cross-border
mergers,  provision  should  be  made  for  the  possibility  of  drawing  up  a  single  report
intended for all members of companies taking part in a cross-border merger operation.
The  common  draft  terms  of  cross-border  merger  must  be  approved  by  the  general
meeting of each of these companies.

In  order  to  facilitate  cross-border  merger  operations,  it  should  be  provided  that
monitoring  of  the  completion  and  legality  of  the  decision-making  process  in  each
merging  company  should be carried  out by  the national authority having jurisdiction
over each of  those  companies, whereas  monitoring of the  completion and  legality  of
the merger should be carried out by the national authority having jurisdiction over the
company created by the merger. The latter authority may be a court, a notary or any
other competent authority appointed by the Member State concerned. The national law
determining the date on which the merger takes effect - this being the law to which the
company created by the merger is subject - should also be specified.

In  order  to  protect  the  interests  of  members  and  others,  the  legal  effects  of  the
cross-border merger - distinguishing according to whether the company created by the
merger  is  an  acquiring  company  or  a  new  company  -  should  be  specified.  In  the
interests of legal certainty, it should no longer be possible, after the date  on which  a
cross-border merger takes effect, to declare the merger null and void.

This Directive is without prejudice to the application of the legislation on the control
of  concentrations  between  undertakings,  both  at  the  Community  level16  and  at  the
level of Member States.

Employees’  rights  other  than  rights  of  participation  should  remain  subject  to  the
national provisions referred to in Council Directive 98/59/EC of 20 July 1998 on the
approximation of the laws of the Member States relating to collective redundancies,17
Council  Directive  2001/23/EC  of  12  March  2001  on  the  safeguarding  of  employees'
rights  in  the  event  of  transfers  of  undertakings,18  Directive  2002/14/EC  of  the
European  Parliament  and  of  the  Council  of  11  March  2002  establishing  a  general

16

17

18

Council  Regulation  (EEC)  No  4064/89  on  the  control  of  concentrations  between  undertakings,  OJ
L 395, 30.12.1989, p. 1; corrected version OJ L 257, 21.9.1990, p. 13, Regulation as last amended by
Regulation (EC) No 1310/97, OJ L 180, 9.7.1997, p.1; corrigendum in OJ L 40, 13.2.1998, p. 17.
OJ L 225, 12.8.1998, p. 16.
OJ L 61, 5.3.1977, p. 26.

9

                                                
framework for informing and consulting employees in the European Community19 and
Council Directive 94/45/EC of 22 September 1994 on the establishment of a European
Works  Council  or 
and
Community-scale groups of undertakings for the purposes of informing and consulting
employees.20

in  Community-scale  undertakings 

a  procedure 

(11)

If  at  least  one  of  the  companies  taking  part  in  the  cross-border  merger  is  operating
under a participation system and if the national law of the Member State in which the
registered  office  of  the  company  created  by  the  merger  is  situated  does  not  impose
compulsory employee participation on that company, the participation of employees in
the  company  created  by  the  cross-border  merger  and  their  involvement  in  the
definition of such rights must be regulated. To that end, the principles and procedures
provided  for  in  Council  Regulation  (EC)  No  2157/2001  of  8  October  2001  on  the
Statute for a European company21 and in Council Directive 2001/86/EC of 8 October
2001 supplementing the Statute for a European company22 should be taken as a basis,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

For the purposes of this Directive:

- 

"merger" means an operation whereby:

(a) 

(b) 

one  or  more  companies,  on  being  dissolved  without  going  into  liquidation,
transfer  all  their  assets  and  liabilities  to  another  existing  company  -  the
acquiring  company  -  in  exchange  for  the  issue  to  their  shareholders  of
securities  or  shares  respresenting  the  capital  of  that  other  company  and,  if
applicable, a cash payment not exceeding 10% of the nominal value, or, in the
absence of a nominal value, of the accounting par value of those securities or
shares; or

two  or  more  companies,  on  being  dissolved  without  going  into  liquidation,
transfer  all  their  assets  and  liabilities  to  a  company  that  they  form  -  the  new
company  -  in  exchange  for  the  issue  to  their  shareholders  of  securities  or
shares representing the capital of that new company and, if applicable, a cash
payment  not  exceeding  10%  of  the  nominal  value,  or  in  the  absence  of  a
nominal value, of the accounting par value of those securities or shares; or

(c) 

a company, on being dissolved without going into liquidation, transfers all its
assets  and  liabilities  to  the  company  holding  all  the  securities  or  shares
representing its capital;

"cross-border merger" means a merger within the meaning of the first indent which
involves  companies  with  share  capital  formed  in  accordance  with  the  law  of  a
Member State  and  having  their  registered  office,  central  administration  or  principal

OJ L 80, 23.3.2002, p. 29.
OJ L 254, 30.9.1994, p. 64; Directive amended by Directive 97/74/EC (OJ L 10, 16.1.1998, p. 22).
OJ L 294, 10.11.2001, p. 1.
OJ L 294, 10.11.2001, p. 22.

10

- 

19

20

21

22

                                                
place of business within the Community, provided at least two of them are governed
by the laws of different Member States;

- 

"company with share capital" means a company having legal personality, possessing
separate  assets  which  alone  serve  to  cover  its  debts  and  subject  under  the  national
law  governing  it  to  conditions  concerning  guarantees  such  as  are  provided  for  by
Council  Directive  68/151/EEC23  for  the  protection  of  the  interests  of  members  and
others.

Article 2

Save  as  otherwise  provided  in  this  Directive,  each  company  taking  part  in  a  cross-border
merger shall be governed, as far as the merger formalities are concerned, by the provisions of
national law to which it is subject that apply to mergers of this type of company with other
companies  with  share  capital  subject  to  the  same  national  law.  The  said  provisions  shall
include  those  concerning  the  decision-making  process  relating  to  the  merger  and  the
protection  of  creditors,  debenture  holders  and  the  holders  of  securities  other  than  shares  to
which special rights are attached, as  well as of employees as regards rights other than those
governed by Article 14.

Article 3

1.

The  Member States  shall  provide  that  each  management  or  administrative  organ  of
each  of  the  merging  companies  must  draw  up  common  draft  terms  of  cross-border
merger. The common draft terms of cross-border merger shall include the following
particulars:

(a) 

the  form,  name  and  registered  office  of  the  merging  companies  and  those
proposed for the company created by the merger;

(b) 

the  ratio  applicable  to  the  exchange  of  securities  or  shares  representing  the
company capital and the amount of any compensation;

(c) 

the terms for the allotment of securities or shares representing the capital of the
company created by the merger;

(d) 

the  date  from  which  the  holding  of  such  securities  or  shares  representing  the
company  capital  will  entitle  the  holders  to  share  in  profits  and  any  special
conditions affecting that entitlement;

(e) 

the date from which the transactions of  the merging  companies will be treated
for accounting purposes as being those of the company created by the merger;

(f) 

the  rights  conferred  by  the  company  created  by  the  merger  on  members
enjoying  special  rights  or  on  other  holders  of  securities  or  shares  representing
the company capital, or the measures proposed concerning them;

23

OJ L 65, 14.3.1968, p. 8.

11

                                                
(g)  any  special  advantages  granted  to  the  experts  who  examine  the  draft  terms  of
merger  or  to  members  of  the  administrative,  management,  supervisory  or
controlling organs of the merging companies;

(h) 

the statutes of the company created by the merger;

(i) 

information  on  the  procedures  by  which  arrangements  for  the  involvement  of
employees  in  the  definition  of  their  rights  to  participation  in  the  company
created by the merger are determined pursuant to Article 14.

2.

In addition to the items provided for in paragraph 1, the merging companies may, by
common accord, include further items in the common draft terms of merger.

Article 4

The  Member States  shall  provide  that,  for  each  of  the  merging  companies,  the  following
particulars at least must be published, not less than one month before the date of the general
meeting referred to in Article 6, in the manner laid down by the law of each Member State in
accordance with Article 3 of Directive 68/151/EEC:

(a) 

(b) 

(c) 

1. 

2. 

the form, name and registered office of each merging company  and  those proposed
for the company created by the merger;

the public register in which  the  documents  of  each  merging  company  are  filed  and
their identification number in that register;

an indication, for each of the merging companies, of the arrangements made for the
exercise  of  the  rights  of  creditors  and  of  any  minority  shareholders  of  the  merging
companies  and  the  address  at  which  complete  information  on  those  arrangements
may be obtained free of charge.

Article 5

An expert report intended for members and made available not less than one month
before the date of the general meeting referred to in Article 6 shall be drawn up for
each merging company.

As an alternative to experts operating  on  behalf of  each of the  merging companies,
one or  more  independent  experts,  appointed  for  that  purpose  at  the  joint  request  of
the companies by a judicial or administrative authority in the Member State of one of
the  merging  companies  or  of  the  future  company,  may  examine  the  draft  terms  of
cross-border  merger  and  draw  up  a  single  written  report  to  all  the  shareholders.
Depending on the law of  each  Member State, such experts may be  natural  persons,
legal persons or companies.

The  experts  shall  be  entitled  to  secure  from  each  of  the  merging  companies  all
information they consider necessary for the discharge of their duties.

12

1. 

2. 

1. 

2. 

Article 6

After taking note of the expert report referred to in Article 5, the  general meeting of
each of the merging companies shall approve the common draft terms of cross-border
merger.

The general meeting of each of the merging companies may reserve the right to make
implementation of the cross-border merger conditional on express ratification by it of
the  arrangements  decided  on  with  respect  to  the  involvement  of  employees  in  the
company created by the merger.

Article 7

Each Member State shall designate the authorities competent to scrutinise the legality
of  the  merger  as  regards  that  part  of  the  procedure  which  concerns  each  merging
company subject to its national law.

In  each  Member State  concerned  the  competent  authorities  shall  issue  to  each
merging  company  subject  to  that  State’s  national  law  a  certificate  conclusively
attesting to the proper completion of the pre-merger acts and formalities.

Article 8

Each Member State shall designate the authorities competent to scrutinise the legality of the
merger as regards that part of the procedure which concerns the completion of the merger and,
where appropriate, the formation of a new company created by the merger where the company
created  by  the  merger  is  subject  to  its  national  law.  The  said  authorities  shall  in  particular
ensure  that  the  merging  companies  have  approved  the  common  draft  terms  of  cross-border
merger  in  the  same  terms  and  that  arrangements  for  employee  participation  have  been
determined in accordance with Article 14.

To  that  end  each  merging  company  shall  submit  to  the  competent  authorities  the  certificate
referred to in Article 7(2) within six months of its issue together with the common draft terms
of cross-border merger approved by the general meeting referred to in Article 6.

Article 9

The  law  of  the  Member State  to  whose  jurisdiction  the  company  created  by  the  merger  is
subject shall determine the date on which the cross-border merger takes effect. That date must
be after the supervision as referred to in Article 8 has been carried out.

Article 10

The  law  of  each  of  the  Member States  to  whose  jurisdiction  the  merging  companies  were
subject  shall  determine,  with  respect  to  the  territory  of  that  State,  the  arrangements  for
publicising completion of the cross-border merger in the public register in which each of the
companies is required to file documents.

13

Article 11

1. 

A merger carried out as laid down in point (a) of the first indent of Article 1 shall,
from the date referred to in Article 9, have the following consequences:

(a)

(b)

 all the assets and liabilities of each company being acquired are transferred, by
way of universal succession, to the acquiring company;

the  shareholders  of  the  company  being  acquired  become  shareholders  of  the
acquiring company;

(c) 

the company being acquired ceases to exist.

2. 

A merger carried out as laid down in point (b) of the first indent of Article 1 shall,
from the date referred to in Article 9, have the following consequences:

(a)  all the assets and liabilities of the merging companies are transferred, by way of

universal succession, to the new company;

(b) 

the  shareholders  of  the  merging  companies  become  shareholders  of  the  new
company;

(c) 

the merging companies cease to exist.

3. 

Where, in the case of a merger of companies covered by this Directive, 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, those formalities shall be carried out by the company created by
the merger.

A cross-border merger which has taken effect as provided for in Article 9 may not be declared
null and void.

Article 12

Article 13

1. 

2. 

Where a cross-border merger by acquisition is carried out by a company which holds
all the shares and other securities conferring the right to vote at general meetings of
the company being acquired, Articles 3(1)(b) and (c), 5 and 11(1)(b) shall not apply.

Where a merger by acquisition is carried out by a company which holds 90% or more
but  not  all  of  the  shares  and  other  securities  conferring  the  right  to  vote  at  general
meetings  of  another  company,  reports  by  the  management  or  administrative  body,
reports by an independent expert or experts and the documents necessary for scrutiny
shall  be  required  only  to  the  extent  that  the  national  law  governing  either  the
acquiring company or the company being acquired so requires.

14

Article 14

Where  at  least  one  of  the  merging  companies  is  operating  under  an  employee  participation
system and where the national law applicable to the company created by the merger does not
impose  compulsory  employee  participation,  the  participation  of  employees  in  the  company
created by the merger and their involvement in the definition of such rights shall be regulated
by the Member States in accordance with the principles and procedures laid down in Article
12(2), (3) and (4) of Regulation (EC) No 2157/2001 and the following provisions of Directive
2001/86/EC:

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

Article  3(1),  (2)  and  (3),  (4)  first  subparagraph,  first  indent,  and  second
subparagraph, (5), (6) first and second subparagraphs and (7);

Article 4(1),(2), point (g), and (3);

Article 5;

Article 6;

Article 7(1), (2) first subparagraph, point (b), and second subparagraph, and (3);

Articles 8 to 12;

Part 3 of the Annex.

Article 15

Member States  shall  bring  into  force  the  laws,  regulations  and  administrative  provisions
necessary to comply with this Directive within eighteen months of its publication. They shall
forthwith  inform  the  Commission  thereof  and  communicate  a  table  of  equivalence  between
those provisions and this Directive.

When Member States adopt such measures, they shall contain a reference to this Directive or
shall be accompanied by such reference at the time of their official publication. The procedure
for such a reference shall be adopted by Member States.

This Directive shall enter into force on the twentieth day following that of its publication in
the Official Journal of the European Union.

Article 16

This Directive is addressed to the Member States.

Done at Brussels,

For the European Parliament
The President

For the Council
The President

15

THE IMPACT OF THE PROPOSAL ON BUSINESS WITH SPECIAL REFERENCE
TO SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs)

TITLE OF PROPOSAL

Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on  cross-border
mergers of companies with share capital

REFERENCE NO

COM(2003) 703

THE PROPOSAL

1. Taking account of the principle of subsidiarity, why is Community legislation necessary in
this area and what are its main aims?

In  accordance with the principles of subsidiarity and proportionality as laid down in  Article
3b of the Treaty, the objectives of the proposed action, namely to facilitate mergers between
companies  from  different  Member States,  cannot  be  sufficiently  achieved  by 
the
Member States  acting  alone.  No  one  Member State  is  able  to  organize  the  operation  in  full
because  it  has  a  dimension  which  goes  beyond  national  frontiers.  These  objectives  can
therefore  be  achieved  only  at  Community  level.  The  Directive  is  confined  to  the  minimum
required in order to achieve those objectives and does not go beyond what is necessary to that
end.

THE IMPACT ON BUSINESS

2. Who will be affected by the proposal?

The  scope  of  the  Directive  covers  all  companies  with  share  capital.  Besides  public  limited
companies  and  partnerships  partly  limited  by  shares,  it  includes  incorporated  private
companies and other national forms of company with share capital which offer safeguards as
coordinated by Directive 68/151/EEC. The proposal will therefore benefit above all small and
medium-sized enterprises (SMEs) as defined in the Commission Recommendation of 3 April
1996.24 Owing to their smaller size and lower capitalisation compared with large enterprises,
SMEs are rarely set up in the form of a public limited company but rather in that of a private
company. SMEs  account  for  about  nine  out  of  ten  enterprises,  almost  three  out  of  ten  jobs,
and  just  over  one  fifth  of  value  added  in  the  EU.  The  removal  of  legal  obstacles  to
cross-border mergers will help to internationalise such enterprises’ activities as advocated by
the Commission in its Third Multiannual Programme for Small and Medium-sized Enterprises

24

Commission  Recommendation  (COM(1996)  261  final)  of  3  April  1996  concerning  the  definition  of
small and medium-sized enterprises (OJ L 107, 30.4.1996, p. 4).

16

                                                
in the European Union (1997-2000).25 No distinction is made according to sector of activity,
size of business or geographical area.

3. What will business have to do to comply with the proposal?

Companies  which wish to merge will basically  have  to  draw  up  draft  terms  of  cross-border
merger and publicise them sufficiently in each Member State concerned. The general meeting
of each merging company will have to approve the draft terms. The legality of the procedure
will have to be certified by the competent authorities. Measures are provided  for in order to
protect the rights of creditors and the holders of securities. The completion of the cross-border
merger will also have to be sufficiently publicised. As in the case of the European company, a
single  expert  report  is  permitted,  which  is  likely  to  reduce  costs.  Most  of  the  measures
proposed already exist in Member States’ laws on domestic mergers of companies with share
capital  and  in  the  measures  for  implementing  Directive  78/855/EEC  concerning  mergers  of
public  limited  liability  companies.  Responsibility  for  implementing  the  proposal  will  rest
primarily with the Member States.

4. What economic effects is the proposal likely to have?

The  key  provisions  of  the  proposal  should  allow  companies  which  wish  to  carry  out  a
cross-border  merger to benefit from  substantially  reduced legal and  economic  requirements,
which are currently highly complex and expensive. This benefit will accrue to all companies
with share capital in the EU and should therefore  have  a favourable impact on employment
and competitiveness.

5. Does the proposal contain measures to take account of the specific situation of small and
medium-sized firms (reduced or different requirements, etc.)?

The proposal is basically attuned to serving the needs of SMEs, which account for about nine
out  of  ten  enterprises,  but  other  companies  will  also  be  able  to  benefit  from  it  on  the  same
terms.

CONSULTATION

6. The present proposal is an appropriate response to the needs which  companies have been
expressing  for  many  years  now,  and  in  particular  since  progress  on  the  original  proposal,
which  was  presented  in  1984,  came  to  a  halt.  Other  voices  have  joined  in  the  chorus,
including  that  of  UNICE.  The  High-Level  Group  of  Company  Law  Experts  recently
conducted  a  wide-ranging  consultation  exercise  which  elicited  numerous  responses  and
expressions of opinion in favour of the present proposal. The Commission’s communication
to the Council and Parliament of 21 May 2003 on modernising company law and enhancing
corporate  governance  has  likewise  been  the  object  of  extensive  consultations.  Under  the
circumstances, it has not been considered necessary to carry out any further consultations, this
time  on  the  final  draft,  all  the  more  so  since  they  would  result  in  the  present  proposal’s
adoption being considerably delayed.

25

“Maximising European SMEs’ full potential for employment, growth and competitiveness” – proposal
for a Council Decision adopted by the Commission on 20 March 1996 (COM(96) 98 final; OJ C 156,
31.5.1996,  p. 5).

17