Proposal for a Directive of the European Parliament and of the Council amending Council Directive 78/855/EEC concerning mergers of public limited liability companies and Council Directive 82/891/EEC concerning the division of public limited companies as regards the requirement for an independent expert's Report on the occasion of a merger or a division [SEC(2007) 298] [SEC(2007) 300]
Date: 2007-03-06
Institutions: European Commission
Subjects: company law, demerger, merger, public limited company, simplification of legislation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 6.3.2007 
COM(2007) 91 final 

2007/0035 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

amending Council Directive 78/855/EEC concerning mergers of public limited liability 
companies and Council Directive 82/891/EEC concerning the division of public limited 
companies as regards the requirement for an independent expert's report on the 
occasion of a merger or a division 

(presented by the Commission) 

[SEC(2007) 298] 
[SEC(2007) 300] 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

A  large  part  of  EC  legislation  was  introduced  to  correct  market  failures  and  ensure  a  level 
playing field. These goals could often only be achieved by imposing obligations on businesses 
to provide information and report on the application of the legislation.  

With  time,  some  of  these  procedures  have  become  needlessly  time-consuming  or  obsolete. 
These  unnecessary  administrative  burdens  hamper  economic  activity  and  have  a  negative 
impact on the competitiveness of European enterprises. 

The Commission is committed to reducing these unnecessary burdens to the maximum extent 
possible.  This  is  a  part  of  the  Better  Regulation  strategy  and  it  is  of  vital  importance  for 
achieving our "Lisbon" targets of more growth and jobs. 

•  General context 

On 14 November 2006, the Commission presented a Strategic Review of Better Regulation in 
the  European  Union  (COM  (2006)  689),  including  a  proposal  for  a  target  to  reduce  the 
administrative burdens on businesses by 25% by 2012. 

Ten concrete proposals for "fast track action" were thereupon identified  in  Annex III of the 
Action Programme for reducing administrative burdens in the EU (COM (2007) 23), based on 
broad stakeholder consultation and suggestions from Member States and Commission experts. 
The  "fast  track  actions"  aim  at  significantly  reducing  administrative  burdens  on  businesses 
through minor legislative changes without challenging the level of protection or the original 
purpose of the legislation. 

One of these "fast track action" proposals concerns Council Directive 78/855/EEC concerning 
mergers of public limited liability companies and Council Directive 82/891/EEC concerning 
the  division  of  public  limited  liability  companies.  The  aim  of  this  proposal  is  to  remove 
unnecessary  administrative  burdens  on  businesses  by  giving  shareholders  the  direct1 
possibility to renounce to the written expert report on the draft terms of merger or division, if 
they so desire. This will bring the two directives in line with the current requirements in the 
Tenth Company Law Directive (Directive 2005/56/EC of the European Parliament and of the 
Council of 26 October 2005 on cross-border mergers of limited liability companies). 

•  Existing provisions in the area of the proposal 

The  existing  provisions  that  this  proposal  seeks  to  modify  are  Articles  9  and  11  of  Council 
Directive 78/855/EEC concerning mergers of public limited liability companies and Articles 8 
and  9  of  Council  Directive  82/891/EEC  concerning  the  division  of  public  limited  liability 
companies. 

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Council  Directive  82/891/EEC  currently  allows  the  Member  States  to  provide  a  possibility  for  the 
shareholders to renounce to the expert report on the draft terms of division. 

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2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Consultation methods 

In  the  Action  Programme  of  24  January  2007,  the  Commission  presented  ten  concrete 
proposals for "fast track actions". These proposals were based on consultations with experts 
and  in  particular  on  a  pilot  project  comparing  the  baseline  measurements  of  administrative 
burdens in the Czech Republic, Denmark, The Netherlands and the United Kingdom in 2006. 

One  of  these  "fast  track  actions"  concerned  Company  Law  and  proposed  to  "ease 
requirements  regarding  written  reports  to  the  stockholders  in  case  of  merger  and  division". 
Council Directives 78/855/EEC and 82/891/EEC provide for the company having to set up an 
expert  report  on  the  draft  terms  of  a  merger  or  a  division.  Council  Directive  82/891/EEC 
leaves Member States the possibility not to apply these provisions if all the shareholders and 
holders  of  other  securities  giving  the  right  to  vote  have  so  agreed.  Following  an  indication 
from  some  Member  States,  consultations  with  the  Commission's  Advisory  Group  on 
Corporate Governance and Company Law were held. 

Summary of responses  

Consultations  with  the  Commission's  Advisory  Group  on  Corporate  Governance  and 
Company  Law  have  confirmed  that  this  requirement  of  Council  Directive  78/855/EEC 
concerning the expert report on the draft terms of mergers is excessive. As it has already been 
recognised in the context of the adoption of Directive 2005/56/EC, this requirement becomes 
an unnecessary formality where the shareholders of all companies involved in the merger do 
not consider such a report necessary. 

Furthermore, the Commission has received positive responses to the presentation of its Action 
Programme, including the fast track proposal related to Company Law. A few responses have 
underlined concerns about transparency and shareholder protection. These concerns have been 
taken  into  account  in  the  current  proposal.  It  seems  therefore  appropriate  to  align  the 
provisions of Council Directives 78/855/EEC and 82/891/EEC with the exemption contained 
in Directive 2005/56/EC. 

•  Impact assessment 

The Impact Assessment considered three policy options:  

Option 1 

No-Policy Change.  

Option 2 

Abolition of the requirements unless shareholders ask for it.  

Option 3 
needed. 

Abolition  of  the  requirements  where  all  the  shareholders  agree  that  it  is  not 

Option 3 is the preferred option  because it provides a satisfactory level of transparency and 
shareholder protection whilst contributing to the objective of reducing administrative burdens 
on companies. 

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3. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposal action 

It is proposed to align the provisions of Council Directives 78/855/EEC and 82/891/EEC on 
the  expert  report  on  the  draft  terms  of  merger  or  division  with  the  corresponding  rule  in 
Article 8 of Directive 2005/56/EC. 

•  Legal basis 

The legal base of Community action in this area is laid down in Article 44 EC Treaty. 

•  Subsidiarity principle 

Action by the Member States would not suffice to reduce administrative burdens in this area 
as  the  information  requirements  were  imposed  for  mergers  and  divisions  of  public  limited 
liability companies by way of EC Directives. 

EU  action  will  ensure  that  all  future  mergers  and  divisions  of  public  limited  liability 
companies taking place in Europe can benefit from this administrative burdens reduction. 

The proposal therefore complies with the subsidiarity principle. 

•  Proportionality principle 

By proposing to modify the relevant Articles of Council Directive 78/855/EEC and Council 
Directive 82/891/EEC by way of a Directive, the Member States still have sufficient scope for 
transposing the Directive and achieving the required result in a manner that they see fit and 
that is best suited for their national legal system.  

This proposal ensures that the administrative burdens falling upon the economic operators in 
the case of mergers and divisions of public limited liability companies are minimized. 

•  Choice of instruments 

Proposed instruments: Directive 

The  objective  of  reducing  administrative  burdens  caused  by  the  information  requirements 
imposed  by  the  Council  Directive  78/855/EEC  and  Council  Directive  82/891/EEC  can  only 
be reached by modifying these Directives, which can only be done by way of a binding EC 
legal instrument of the same type and level, a Directive. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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5. 

ADDITIONAL INFORMATION 

•  Simplification 

The proposal provides for simplification of administrative procedures for private parties. 

The administrative procedure to be followed by public limited liability companies in case of 
mergers and divisions will be simplified in the sense that certain information obligations will 
be made voluntary instead of mandatory. 

•  Correlation table 

The  Member  States  are  required  to  communicate  to  the  Commission  the  text  of  national 
provisions  transposing  the  Directive  as  well  as  a  correlation  table  between  those  provisions 
and this Directive. 

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2007/0035 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

amending Council Directive 78/855/EEC concerning mergers of public limited liability 
companies and Council Directive 82/891/EEC concerning the division of public limited 
companies as regards the requirement for an independent expert's report on the 
occasion of a merger or a division 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 44(2)(g) thereof, 

Having regard to the proposal from the Commission2, 

Having regard to the opinion of the European Economic and Social Committee3, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty4, 

Whereas: 

(1) 

Community policies on Better Regulation, in particular the Communication from the 
Commission  to  the  Council,  the  European  Parliament,  the  European  Economic  and 
Social  Committee  and  the  Committee  of  the  Regions:  "A  strategic  review  of  Better 
Regulation in the European Union"5 and the Communication from the Commission to 
the Council, the European Parliament, the European Economic and Social Committee 
and the Committee of the Regions: "Action Programme for Reducing Administrative 
Burdens in the European Union"6, stress the importance of reducing the administrative 
burdens  imposed  on  enterprises  by  existing  legislation  as  a  crucial  element  for 
improving  their  competitiveness  and  for  achieving  the  objectives  of  the  Lisbon 
agenda. 

(2) 

Directive  2005/56/EC  of  the  European  Parliament  and  of  the  Council  of  26  October 
2005  on  cross-border  mergers  of  limited  liability  companies7  provides  for  an 
exemption  from  the  obligation  to  have  the  draft  terms  of  merger  examined  by  an 
independent  expert  and  to  have  a  report  established  by  that  expert,  if  all  the 
shareholders agree that such a report is not needed. 

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6 
7 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
COM (2006) 689. 
COM (2007) 23. 
OJ L 310, 25.11.2005, p. 1. 

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(3) 

(4) 

(5) 

Council Directive 78/855/EEC8 does not contain any similar exemption, and Council 
Directive  82/891/EEC9 leaves it to the Member States whether to provide for such a 
possibility with a view to the expert report on the draft terms of division. 

There is no reason to require such an examination by an independent expert if all the 
shareholders agree that it may be dispensed with. 

Directive  78/855/EEC  and  Directive  82/891/EEC  should  therefore  be  amended 
accordingly, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Directive 78/855/EEC is amended as follows: 

(1) In Article 10, the following paragraph 4 is added: 

"4. Neither an examination of the draft terms of merger nor an expert report shall be 
required if all the shareholders and the holders of other securities giving the right to 
vote of each of the companies involved in the merger have so agreed." 

(2) In Article 11 (1), point (e) is replaced by the following: 

"(e) where applicable, the reports provided for in Article 10." 

Article 2 

Directive 82/891/EEC is amended as follows: 

(1) In Article 9 (1), point (e) is replaced by the following: 

"(e) where applicable, the reports provided for in Article 8." 

(2) Article 10 is replaced by the following: 

"Article 10 

1.  Neither  an  examination  of  the  draft  terms  of  division  nor  an  expert  report  as 
provided for in Article 8 (1) shall be required if all the shareholders and the holders 
of other securities giving the right to vote of each of the companies involved in the 
division have so agreed. 

2.  Member  States  may  permit  the  non-application of Article 7  and Article 9 (1) (c) 
and (d) if all the shareholders and the holders of other securities giving the right to 
vote of the companies involved in the division have so agreed." 

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9 

OJ L 295, 20.10.1978, p. 36. Directive as last amended by Council Directive 2006/99/EC (OJ L 363, 
20.12.2006, p. 37). 
OJ L 378, 31.12.1982, p. 47. 

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Article 3 
Transposition 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions  necessary  to  comply  with  this  Directive  by  31 July 2008  at  the  latest. 
They  shall  forthwith  communicate  to  the  Commission  the  text  of  those  provisions 
and a correlation table between those provisions and this Directive. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

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

Article 4 

Article 5 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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