Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions
Date: 2018-04-25
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: access to information, codification of EU law, company law, company with share capital, cross-frontier data flow, economic concentration, merger control, right of establishment, single market, transfer of businesses

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   EUROPEAN COMMISSION  Brussels, 25.4.2018  COM(2018) 241 final 2018/0114 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions  (Text with EEA relevance) {SWD(2018) 141 final} - {SWD(2018) 142 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

The EU economy needs healthy  and flourishing companies  which can  easily operate in  the 
Single Market. Such companies play a crucial role in promoting economic growth, creating 
jobs and attracting investment in the European Union. They help to deliver greater economic 
as well as social value for society at large. To achieve this end, companies need to operate in 
a  legal  and  administrative  environment  which  is  both  conducive  to  growth  and  adapted  to 
face  the  new  economic  and  social  challenges  of  a  globalised  and  digital  world,  while 
pursuing also other legitimate public interests such as the protection of employees, creditors 
and minority shareholders and providing authorities with all necessary safeguards to combat 
fraud or abuse.  

It is with this objective that the Commission is putting forward this proposal, together with 
the  proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending 
Directive (EU) 2017/11321 as regards the use of digital tools and processes in company law - 
a comprehensive set of measures for fair, enabling and modern company law rules in the EU. 

The freedom of establishment plays a crucial role in the development of the Single Market as 
it allows corporate entities to pursue economic activities in other Member States on a stable 
basis. In  order to foster the cross-border  mobility of companies in  the EU, it is essential to 
take into account their needs and characteristics. There are around 24 million companies in 
the EU, out of which approximately 80% are limited liability companies. Around 98-99% of 
limited liability companies are SMEs.  

However,  in  practice  the  exercise  of  the  freedom  of  establishment  by  companies  remains 
difficult.  One  of  the  reasons  for  these  difficulties  is  that  company  law  is  not  sufficiently 
adapted to cross-border mobility in the EU: it does not offer companies optimal conditions in 
terms  of  a  clear,  predictable  and  suitable  legal  framework  which  could  lead  to  enhanced 
economic activity, in particular for SMEs as recognised by the 2015 Single Market Strategy2.  

Corporate restructurings and transformations such as cross-border conversions, mergers and 
divisions,  are  part  of  companies'  life-cycle  and  represent  a  natural  way  for  companies  to 
grow,  adapt  to  a  changing  environment  and  explore  opportunities  in  new  markets.  At  the 
same  time,  they  also  entail  consequences  for  companies'  stakeholders,  in  particular  for 
employees,  creditors  and  shareholders.  Therefore,  it  is  essential  that  the  protection  of 
stakeholders keeps pace with  the ever-growing trans-nationalisation of the corporate world. 
However, today the legal uncertainty, partial inadequacy and also the lack of rules governing 
certain  cross-border  operations  of  companies  means  that  there  is  no  clear  framework  to 
ensure  effective  protection  of  these  stakeholders.  In  this  situation,  the  protection  offered  to 
stakeholders  may  therefore  be  ineffective  or  insufficient.  The  cross-border  operations  of 

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Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to 
certain aspects of company law OJ L 169, 30.6.2017, p. 46. 
Communication  from  the  Commission  to  the  European  Parliament,  The  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions,  Upgrading  the  Single  Market: 
more opportunities for people and business, COM(2015) 550 final. 

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companies  can  also  be  facilitated  by  a  legal  environment  that  creates  trust  in  the  Single 
Market by providing for safeguards against abuse. 

Therefore,  it  is  important  to  unleash  the  potential  of  the  Single  Market  by  breaking  down 
barriers  to  cross-border  trade,  facilitating  access  to  markets,  increasing  confidence  and 
stimulating competition while offering effective and proportionate protection to stakeholders. 
The objective of this proposal is two-fold: provide specific and comprehensive procedures for 
cross-border  conversions,  divisions  and  mergers  to  foster  cross-border  mobility  in  the  EU 
while,  at  the  same  time,  offering  company  stakeholders  adequate  protection  in  order  to 
safeguard the fairness of the Single Market. Such action forms part of creating a deeper and 
fairer Single Market, which is one of the priorities of the current Commission. 

Cross-border conversions 

A  cross-border  conversion  offers  an  efficient  solution  for  companies  that  wish  to  move  to 
another  Member  State  without  losing  their  legal  personality  or  having  to  re-negotiate  their 
business  contracts.  A  conversion  is  particularly  attractive  for  small  companies  that  do  not 
have  enough  financial  resources  to  search  for  expensive  legal  advice  and  conduct  a  cross-
border  merger.3  This  reasoning  applies  in  particular to cross-border conversions against  the 
background of the recent jurisprudence of the European Court of Justice. The Court of Justice 
of the European Union (ECJ) has considered that the freedom of establishment enshrined in 
Article 49 TFEU entails the right, for companies established in a Member State, to transfer 
their  seat  to  another  Member  State  through  a  cross-border  conversion  without  losing  their 
legal personality.4
In  particular  in  its  recent  judgement  Polbud5  the  ECJ  confirmed  the  right  of  companies  to 
carry  out  cross-border  conversions  on  the  basis  of  the  freedom  of  establishment.  The  ECJ 
held that the freedom of establishment is applicable when the registered office alone, without 
the real head office, is transferred from one Member State to another if the Member State of 
new  incorporation  accepts  the  registration  of  a  company  even  without  the  exercise  of  an 
economic  activity  there:  in  that  case  Article  49  TFEU  does  not  require  such  an  economic 
activity as a precondition for its applicability.6 The ECJ also recalled that, in the absence of 
harmonisation, Member States are competent to decide the connecting factor of a company to 
its  national  order  and  thus  apply  their  own  incorporation  requirements  to  incoming 
companies.7 The ECJ further recalled its previous jurisprudence whereby the fact that either 
the registered office or real head office of a company was established in accordance with the 
legislation  of  a  Member  State  for  the  purpose  of  enjoying  the  benefit  of  more  favourable 
legislation  does  not,  in  itself,  constitute  abuse.  In  Polbud,  it  was  ruled  that  a  national  rule 

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See also the European Added Value Assessment - Directive on the cross-border transfer of a company’s 
registered office 14th Company Law Directive (European Parliament). 
Cartesio,  C-210/06,  EU:C:2008:723,  paragraphs 109  to  112;  VALE,  C-378/10,  EU:C:2012:440, 
paragraph 32. 
Polbud – Wykonawstwo, Case C-106/16, ECLI:EU:C:2017:804. 
Polbud – Wykonawstwo, Case C-106/16, ECLI:EU:C:2017:804., paragraphs. 33 et seq. 
Polbud – Wykonawstwo, Case C-106/16, ECLI:EU:C:2017:804, paragraph 40; Daily Mail and General 
Trust,  81/87,  EU:C:1988:456,  paragraphs 19 
to  21;  Cartesio,  C-210/06,  EU:C:2008:723, 
paragraphs 109 to 112; VALE, C-378/10, EU:C:2012:440, paragraph 32. 

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which  imposes  the  winding-up  prerequisite  of  cross-border  transfer  of  a  company  is  an 
unjustified and disproportionate restriction and thus unlawful.8

The Polbud judgement clarified the context for cross-border conversions. But the ECJ, being 
a judiciary organ, may not create any procedure for making such conversions possible or set 
out  the  related  substantive  conditions.  In  the  absence  of  EU  harmonisation  on  cross-border 
conversions, national legislation may still set out rules for the procedure to be followed  and 
for the protection of minority shareholders, creditors or workers or for the fight against tax-
related or other abuses in case of cross-border company conversion. However, it is necessary 
to  assess  case-by-case  whether  such  rules  comply  with  EU  law  and,  in  particular,  with  the 
right  of  establishment.  This  leads  to  an  unsatisfactory  situation  in  terms  of  legal  certainty, 
which negatively affects companies, stakeholders and Member States. 

Currently,  companies  wishing  to  move  their  registered  offices  cross-border  need  to  rely  on 
Member  States'  laws.  Such  laws,  where  they  exist,  are  often  incompatible  or  difficult  to 
combine with each other. Moreover, more than half of the Member States do not provide any 
specific  rules  allowing  for  cross-border  conversions.  SMEs  are  in  particular  negatively 
impacted  since  often  they  lack  resources  to  perform  cross-border  procedures  through  costly 
and complicated alternative methods. 

This also means that the protection of stakeholders such as employees, creditors or minority 
shareholders  is  often  ineffective  or  insufficient  due  to  the  lack  of,  overlapping  or 
contradictory rules. As regards employee protection, in the absence of harmonised safeguards 
for employee participation rights, companies might use a cross-border conversion and the lack 
of  relevant  safeguards  for  employee  participation  rights,  when  moving  to  another  Member 
State,  to  lower  the  level  of  participation  or  abandon  it.  Furthermore,  the  absence  of 
harmonised  rules  may  also  lead  to  increased  use  of  letterbox  companies  for  fraudulent 
purposes, allowing for instance, in most serious cases, organised crime organisations to hide 
and obscure the beneficial ownership of companies to launder proceeds of crime. 

Therefore, the EU legislator needs to step in and provide for rules on cross-border conversion 
with  adequate  and  proportionate  safeguards  for  employees,  creditors  and  shareholders  to 
create a dynamic and fair Single Market. The European Parliament9 has already made calls for 
it.  In  particular,  it  is  important  that  workers  or  their  representatives  are  involved  in  the 
procedure, in line with the 8th principle of the Pillar of European Social Rights: notably, they 
should be informed and consulted in good time on matters relevant to them in the context of 
companies' cross-border conversions. The mobility of companies must go hand in hand with 
the protection of national social and labour law prerogatives.  

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Polbud – Wykonawstwo, Case C-106/16, ECLI:EU:C:2017:804, paragraph 40; Daily Mail and General 
Trust,  81/87,  EU:C:1988:456,  paragraphs 19 
to  21;  Cartesio,  C-210/06,  EU:C:2008:723, 
paragraphs 109 to 112; VALE, C-378/10, EU:C:2012:440, paragraph 32). 
European  Parliament  resolution  of  13  June  2017  on  cross-border  mergers  and  divisions 
(2016/2065(INI)),  European  Parliament  resolution  of  10  March  2009  with  recommendations  to  the 
Commission  on  the  cross-border  transfer  of  the  registered  office  of  a  company  (2008/2196(INI)). 
European  Parliament  resolution  of  2  February  2012  with  recommendations  to  the  Commission  on  a 
14th company law directive on the cross-border transfer of company seats (2011/2046(INI)). 

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In light of the foregoing considerations, the main objectives of the harmonised rules for cross-
border conversions are two-fold: 

-  enabling  companies,  particularly  micro  and  small,  to  convert  cross-border  in  an  orderly, 
efficient and effective manner; 

- protecting the most affected stakeholders such as employees, creditors and shareholders in a 
suitable and proportionate manner. 

The proposal would enable companies to convert cross-border by changing their legal form of 
one Member State into a similar legal form of another Member State. This should ensure that 
companies keep their legal personality throughout the process without the need to dissolve or 
liquidate  in  the  departure  Member  State,  and  form  a  new  entity  in  the  destination  Member 
State.  

The objective is to provide a specific, structured and multi-layered procedure for cross-border 
conversions which ensures a scrutiny of the legality of the cross-border conversion firstly by 
the  competent  authority  of  the  departure  Member  State  and  secondly  by  the  destination 
Member  State  in  the  light  of  all  relevant  facts  and  information.  A  crucial  element  of  the 
procedure  is  that  it  would  prevent  a  cross-border  conversion  where  it  is  determined  that  it 
constitutes an abuse, namely in cases where it constitutes an artificial arrangement aimed at 
obtaining  undue  tax  advantages  or  at  unduly  prejudicing  the  legal  or  contractual  rights  of 
employees, creditors or minority members.   

The first step in the procedure would be the preparation of the draft terms of the cross-border 
conversion  and  two  targeted  reports  addressed  to  shareholders  and  employees  on  the 
implications  that  the  cross-border  conversion  will  have.  In  addition,  medium  size  and  large 
companies  would  need  to  apply  to  the  competent  authority  for  the  appointment  of  an 
independent  expert  examining  the  accuracy  of  the  draft  terms  and  reports  prepared  by  the 
company. The  written report of the independent  expert would also provide the factual  basis 
for the assessment to be carried out by the competent authority as regards inter alia the risk of 
an abuse referred to  above. The report of the expert  which will be disclosed cannot contain 
any confidential information provided by the company. The draft terms and reports would be 
made publicly available and could be commented upon by the affected stakeholders. 

Thereafter, the company is to take a decision at the general meeting on whether to pursue the 
cross-border conversion. That decision, together with the relevant information and documents, 
would then be submitted to the competent national authority of the Member State of departure 
which  is  responsible  to  decide  whether  to  issue  a  pre-conversion  certificate  or  not.  The 
scrutiny  conducted  by  that  authority  would  consist  of  two  possible  phases:  during  the  first 
phase,  which  is  limited  to  one  month,  the  competent  authority  would  examine  whether  the 
cross-border  conversion  is  lawful.  The  authority  would  determine  if  all  conditions  for  the 
cross-border conversion laid down in the Directive and in national law are fulfilled, including 
whether  the  company  is  solvent,  the  requisite  majority  of  shareholders  has  approved  the 
conversion  at  a  general  meeting  and  employees,  minority  shareholders  and  creditors  are 
protected within the remit prescribed by the Directive. During this phase, the authority would 
also determine whether there is an artificial arrangement. If at the end of the 1-month period 
laid down for the first phase of investigation the authority has no objections, it would issue a 
pre-conversion  certificate.  If  at  the  end  of  1  month  it  is  certain  that  the  cross-border 
conversion is unlawful, it would refuse to grant a pre-conversion certificate. Alternatively, if 
at the end of the 1-month period it has serious concerns that the conversion may be unlawful, 
it  would  inform  the  company  that  it  will  carry  out  an  in-depth  examination  as  regards  the 
existence of abuse as referred to above. The in-depth examination must be concluded and a 
final decision must be taken within two months. 

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If after such scrutiny, the pre-conversion certificate is issued, it would be transmitted without 
delay to the competent authority of the Member State of destination. Then, the Member State 
of  destination  would  carry  out  a  scrutiny  as  regards  that  part  of  the  procedure  which  is 
governed  by  the  law  of  the  destination  Member  State.  The  competent  authority  of  the 
destination Member State shall ensure that the converted company complies with provisions 
of its national law on the incorporation of companies (for example, whether the company has 
a  real  seat  in  its  territory)  and,  where  appropriate,  that  arrangements  for  employee 
participation have been determined lawfully. Once the legality check has been carried out, a 
company  would  be  registered  in  the  register  of  a  Member  State  of  destination  and  de-
registered in the register of a Member State of departure. The conversion shall then become 
legally  effective.  All  contacts  between  the  registers  should  be  done  via  the  system  of 
interconnection of business registers (BRIS). 

Cross-border mergers 

A  company  may  also  wish  to  exercise  their  freedom  of  establishment  and  thereafter  benefit 
from  the  opportunities  offered  by  the  Single  Market  by  carrying  out  a  cross-border  merger. 
Companies  may  merge  cross-border  for  various  reasons  including  group  reorganisations, 
cutting  organisational  costs  as  well  as  business-oriented  considerations  in  order  to  enjoy 
greater returns to scale, consolidated branding, or other synergies between different business 
activities.   

The introduction of the Cross-Border Merger Directive10 laid down a harmonised procedure at 
EU level for limited liability companies. It led to a substantial increase in cross-border merger 
activity in the EU and EEA. The number of cross-border mergers rose by 173% between 2008 
and 2012, which indicates that the procedure set up by the Directive substantially enhanced 
cross-border  activity.  Stakeholders  (such  as  law  firms,  business  registers  and  trade  unions) 
interviewed  for  the  2013  study  on  the  application  of  the  Directive  welcomed  the  new 
procedures,  the  procedural  simplification  and  reported  lower  costs  and  shorter  timeframes 
thanks to the harmonised framework.  
However,  despite  the  overall  positive  assessment,  the  evaluation11  of  the  functioning  of  the 
the  full 
Cross-Border  Merger  Directive 
effectiveness and efficiency of the existing rules.  
The 2015 Single Market Strategy12 mentioned uncertainties over company law as one of the 
obstacles that SMEs complain about in the Single Market and announced that the Commission 
would  "examine  the  need  to  update  the  existing  rules  on  cross-border  mergers  and  the 
possibility to complement them with rules as regards cross-border divisions".  

identified  certain  problems  which 

impede 

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Directive 2005/56/EU of the European Parliament and of the Council of 26 October 2005 (OJ L 310, 
25.11.2005, p. 1); replaced and repealed on 19 July 2017 by Directive (EU) 2017/1132 of the European 
Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (codification) 
(OJ L 169, 30.6.2017, p. 46). 
Annex 5 to the Impact Assessment accompanying this proposal. 
COM(2015) 550 final. Communication from the Commission to the European Parliament, the Council, 
the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Upgrading  the 
Single Market: more opportunities for people and business. 

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The  European  Parliament  stressed  the  positive  effects  of  the  Directive  which  has  facilitated 
cross-border mergers between limited liability companies in the European Union and reduced 
the associated costs and administrative procedures13. However, the European Parliament also 
noted the necessity to revise it in order to improve its functioning14. 

The  main  identified  obstacles  concern  the  lack  of  harmonisation  of  substantive  rules  in 
particular  for  creditor  protection  and  minority  shareholder  protection  as  well  as  the  lack  of 
fast track (i.e. simplified procedures for less "complex" mergers). In addition, it was observed 
that  the  cross-border  merger  procedure  does  not  sufficiently  integrate  digital  tools  and 
processes  (e.g.  as  regards  submitting  the  documents  to  public  authorities  or  sharing  those 
between them). It has also been criticised that employees are not sufficiently informed about 
the details and implications of a cross-border merger. These inefficiencies were confirmed by 
stakeholders throughout the consultation process.  

Concerning the protection of creditors and minority shareholders, the existing rules on cross-
border  mergers  lay  down  minimum,  mainly  procedural  rules  and  leave  the  substantive 
protection  to  national  laws.  Therefore,  the  differences  between  Member  States  laws  persist. 
For example, the Directive only lays down that creditors shall be protected subject to national 
rules, without further specifications. Similarly, the Directive lays down some rules concerning 
shareholders  in  general  (e.g.  information  via  the  draft  merger  terms,  expert  reports,  voting 
during  the  general  meetings)  but  leaves  it  to  Member  States  to  decide  whether  to  introduce 
further protection for minority shareholders. As to the employee participation on board level, 
the  existing  rules  set  out  a  comprehensive  framework.  However,  the  rules  do  not  require 
merging  companies  to  provide  any  specific  and  comprehensive  information  about  a  cross-
border merger to the employees. Currently, the situation of employees is only considered in a 
general manner in the management report addressed predominantly to shareholders. 

As  to  simplified  procedures,  the  current  rules  offer  limited  possibilities.  For  example,  the 
rules allow waiving an independent expert report if all shareholders agree and do not require 
an expert report or the approval by the general meeting in case of a merger between a parent 
company and its wholly-owned subsidiary.  

This proposal aims to address these shortcomings. It provides harmonised rules for protection 
of creditors and shareholders. The company would need to provide the envisaged protection 
of creditors and shareholders in the draft terms of the cross-border conversion. The creditors 
who  would  be  dissatisfied  with  the  protection  offered,  may  apply  to  the  appropriate 
administrative  or  judicial  authority  for  adequate  safeguards.  Creditors  of  the  merging 
companies  should  be  presumed  not  to  be  prejudiced  by  a  cross-border  merger,  if  an 
independent  expert  assessed  their  situation  and  considered  no  prejudice  or  creditors  were 
offered  a  right  to  payment,  either  against  a  third  party  guarantor,  or  against  the  company 
resulting from the merger. 

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European  Parliament  resolution  of  13  June  2017  on  cross-border  mergers  and  divisions 
(2016/2065(INI). 
The  Action  Plan  on  Company  Law  and  Corporate  Governance  (COM/2012/0740  final)  also  stressed 
that Cross-border Mergers Directive was a big step forward for cross-border mobility of companies in 
the  EU  and,  at  the  same  time,  acknowledged  that  it  might  need  to  be  adjusted  to  meet  the  changing 
needs of the single market. 

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Member  States  may  still  apply  their  laws  concerning  the  protection  of  payment  of  taxes  or 
social  security  contributions,  if  such  rules  are  different  to  the  protection  offered  by  this 
proposal.   

Shareholders who did  not  vote for the cross-border mergers or  have  no voting rights  would 
have  the  right  to  exit  the  company  (dispose  of  their  shares)  and  receive  the  adequate 
compensation. Moreover, Member States should also ensure that shareholders of the merging 
companies who did not oppose the cross-border merger, but who considered that the proposed 
share-exchange  ratio  was  inadequate  may  challenge  that  ratio  set  out  in  the  common  draft 
terms  of  the  cross-border  merger  before  a  national  court.  In  addition,  the  proposed  rules 
ensure  that  employees  will  be  duly  informed  about  the  implications  of  the  planned  cross-
border  merger  on  employees.  The  proposal  also  provides  for  use  of  digital  tools  and 
procedures throughout the cross-border merger procedure as well as for the exchange of the 
relevant  information  through  the  interconnection  of  business  registers.  Finally,  where 
possible, the proposal introduces further possibilities for simplified procedures.  

Cross-border divisions 

A company may also wish to exercise their freedom of establishment by carrying out a cross-
border  division.  In  a  similar  manner  to  cross-border  conversions  and  mergers,  cross-border 
divisions offer a way for companies to change or simplify their organisational structure, adapt 
to  changing  market  conditions  and  realise  new  business  opportunities  in  another  Member 
State. This was confirmed by respondents to  the 2015 consultation  on cross-border  mergers 
and  division15.  However,  the  current  situation  concerning  cross-border  divisions  across  the 
EU Member States also provides a very fragmented picture. 

There  is  no  harmonised  legal  framework  for  cross-border  divisions  of  companies,  although 
divisions also play an important role in the economic environment of Member States.  

The current EU legal framework provides rules only for cross-border mergers of companies, 
while cross-border divisions are subject to national rules if such rules exist. Today only less 
than half of the Member States have national rules on cross-border divisions of companies. In 
the  absence  of  a  reliable  legal  framework  for  cross-border  divisions,  companies  have 
difficulties to access markets in other Member States and often need to find costly alternatives 
to direct procedures. 

Different national requirements make it difficult to structure the cross-border operations and 
render  it  more  complex  and  costly.  Even  when  Member  States  allow  companies  to  divide 
cross-border, the relevant  national provisions are often divergent or  even incompatible. In a 
number of Member States carrying out a direct cross-border division is not possible. 

The legal uncertainty and lack or complexity of rules for cross-border mobility of companies 
also  means  that  there  is  no  clear  framework  to  ensure  effective  protection  of  stakeholders. 
This may even lead to a situation whereby the freedom of establishment could be abused by 
some  companies.  Thus,  it  is  crucial  to  create  a  legal  framework  that  ensures  a  fair  balance 
between the need to provide companies a favourable business environment in the EU and the 
need at the same time to protect legitimate interests of stakeholders.  

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The 2015 Single Market Strategy16 mentioned uncertainties over company law as one of the 
obstacles that SMEs complain about in the Single Market and announced that the Commission 
"examine the need to update the existing rules on cross-border mergers and the possibility to 
complement them with rules as regards cross-border divisions".  

This  part  of  the  proposal  aims  to  introduce  a  new  legal  framework  regulating  cross-border 
divisions. Its main objective is to address matters related to cross-border mobility by making 
it easier for any limited liability company to be able to divide cross-border.  

The provisions relating to cross-border divisions are inspired by the existing framework of the 
cross-border  merger  directive as  well  as  the existing  rules  for  domestic  divisions.  The  rules 
are  adapted  to  cater  for  a  situation  where  a  company  is  split  instead  of  where  one  or  more 
companies  transfer  all their  assets  and liabilities to  another company.  At the same  time, the 
objectives  of  the  harmonised  rules  on  cross-border  divisions  remain  similar  to  cross-border 
conversions: 

- enable companies to divide cross-border in an orderly, efficient and effective manner; 

-  protect  the  most  affected  stakeholders  such  as  employees,  creditors  and  shareholders  in  a 
suitable and proportionate manner.  

Given the similar risks inherent to cross-border divisions as to cross-border conversions, the 
structured  and  multi-layered  procedure  as  proposed  for  conversions  would  also  be  required 
for  divisions.  Such  procedure  would  ensure  the  scrutiny  of  legality  of  the  cross-border 
division  by the competent authority of the company being divided and by the authorities of 
the recipient companies in the light of all relevant facts and information. As in conversions, a 
crucial  element  of  the  procedure  would  be  preventing  a  cross-border  division  where  it  is 
determined  that  it  constitutes  an  abuse,  namely  in  cases  where  it  constitutes  an  artificial 
arrangement  aimed  at  obtaining  undue  tax  advantages  or  at  unduly  prejudicing  the  legal  or 
contractual rights of employees, creditors or minority members.  

Given  the  complexity  of  dealing  with  risks  of  abuse  in  a  situation  where  a  company  being 
divided transfers assets and liabilities to existing companies in different Member States, it was 
decided  to  regulate  a  situation  where  new  companies  are  created  in  a  cross-border  division 
and  not  to  regulate  at  this  stage  the  cross-border  division  by  acquisition,  i.e.  the  situation 
where  a  company  transfers  assets  and  liabilities  to  more  than  one  existing  company.  In  a 
domestic context (where such situations are addressed in the current rules), such a procedure 
involves the examination of the protection of interests of stakeholders in one Member State, 
whereas in the cross-border context, it could necessitate the involvement of many authorities 
from different Member States. Whether to also include cross-border divisions by acquisition 
into the scope of the directive could be evaluated once first experiences with the new rules on 
cross-border divisions have been gained. 

Similarly to cross-border conversions, the first step in the procedure would be the preparation 
of  the  draft  terms  of  the  cross-border  division  and  two  targeted  reports  addressed  to 
shareholders  and  employees  on  the  implications  that  the  cross-border  division  will  have  for 
them.  In  addition,  medium  size  and  big  companies  would  need  to  apply  to  the  competent 

16 

COM(2015) 550 final. 

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authority  to  appoint  an  independent  expert  examining  the  accuracy  of  the  draft  terms  and 
reports  prepared  by  the  company.  The  written  report  of  the  independent  expert  would  also 
provide  the  factual  basis  for  the  assessment  to  be  carried  out  by  the  competent  authority  as 
regards inter alia the risk of an abuse as referred to above. The report of the expert which will 
be disclosed cannot contain any confidential information provided by the company. The draft 
terms  and  reports  would  be  made  publicly  available  and  could  be  commented  upon  by  the 
affected stakeholders. 

Thereafter, the company being divided is to take a decision at the general meeting on whether 
to pursue the cross-border division. This decision, together with the relevant information and 
documents,  would then be submitted to the competent authority of the Member State of the 
dividing company which is responsible to decide whether to issue a pre-division certificate or 
not.  The  scrutiny  conducted  by  that  authority  would  be  divided  into  two  phases:  one  being 
mandatory and the other one being optional. In the first phase, which is limited to one month, 
the  competent  authority  would  examine  whether  the  cross-border  division  is  lawful.  The 
authority  would  determine  if  all  conditions  for  the  cross-border  division  laid  down  in  the 
Directive  and  in  national  law  are  fulfilled,  including  whether  the  company  is  solvent,  the 
requisite majority of shareholders has approved the cross-border division at a general meeting 
and employees, minority shareholders and creditors are protected within the remit prescribed 
by  the  Directive.  It  would  also  determine  whether  there  is  an  artificial  arrangement  being 
created which is aimed at obtaining undue tax advantages or at unduly prejudicing the legal or 
contractual  rights  of  employees,  creditors  or  minority  members.  If  at  the  end  of  a  1-month 
period, the authority has no objections, it would issue a pre-division certificate; if it is certain 
that the cross-border division is unlawful, it would adopt a decision refusing to grant a pre-
division certificate; or if it has serious concerns that the division may be unlawful, it would 
inform the company being divided that it will carry out an in-depth investigation with a view 
to performing an in-depth examination as regards the existence of abuse as referred to above. 
The in-depth examination must be concluded and a final decision must be taken within two 
months from the start of the in-depth investigation. 

If  after  such  scrutiny,  the  pre-division  certificate  is  issued,  it  would  be  transmitted  without 
delay to the competent authorities of the Member States of the recipient companies. Then, the 
competent authorities would carry out a scrutiny as regards that part of the procedure which is 
governed  by  their  respective  laws.  The  competent  authorities  of  the  Member  States  of  the 
recipient companies must ensure that the companies comply with provisions of their national 
laws on the incorporation of companies where appropriate (for example, whether the company 
has a real seat in its territory). They should also check whether the arrangements for employee 
participation have been determined lawfully. Once the legality check has been carried out, the 
division  would  be  registered  and  recorded  in  all  relevant  business  registers.  All  contacts 
between the registers should be done via the system of interconnection of business registers 
(BRIS). 

Consistency with existing policy provisions in the policy area 

This proposal will complement and amend the existing rules on EU company law that are now 
codified  in  Directive  (EU)  2017/1132.  It  aims  to  revise  the  existing  rules  on  cross-border 
mergers  and  to  provide  a  suitable  and  clear  legal  framework  for  companies  to  divide  or  to 
transfer their registered office cross-border. From a procedural perspective, the proposed rules 
are  fully  coherent  with  the  existing  rules  aiming  at  facilitating  cross-border  activity  by 
companies  through  cross-border  mergers;  from  a  substantive  perspective  the  proposed  rules 
are fully in line with the principle of freedom of establishment enshrined under Articles 49 – 
55  TFEU  as  well  as  with  the  need  for  protection  of  employees,  minority  shareholders  and 
creditors.  Furthermore,  the  proposal  is  coherent  with  rules  relating  to  cross-border  mobility 

EN 

9 

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that  are  laid  down  in  Council  Regulation  (EC)  No  2157/200117.  In  addition,  the  proposed 
rules are consistent with the approach taken in EU rules on shareholders' rights laid down in 
Directive  2007/36/EC18and  in  applicable  law  rules  in  Regulation  2015/848  on  insolvency 
proceedings19.  

The use of digital tools, and, in particular, the exchange of company information concerning 
cross-border  conversions,  mergers  and  divisions  between  business  registers  through  the 
system of interconnection of business registers (BRIS)20 is fully in line with the objective of 
digitalising the company law procedures within the framework of the Digital Single Market 
and complementary with the digitalisation elements included in the proposal on digitalisation 
aimed at the promotion of digital tools and processes throughout a company's lifecycle.  

The  proposed  rules  are  in  line  with  and  intended  to  be  complementary  to  Directive 
2009/38/EC  of  the  European  Parliament  and  of  the  Council  of  6  May  2009  on  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 (Recast), Council Directive 98/59/EC of 20 July 1998 on the approximation of the 
laws of the Member States relating to collective redundancies, Council Directive 2001/23/EC 
of  12  March  2001  on  the  safeguarding  of  employees'  rights  in  the  event  of  transfers  of 
undertakings, and 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. In particular, the rights of employees of the companies involved in a 
cross-border  merger  or  division  may  also  be  protected  in  accordance  with  Directive 
2001/23/EC. The proposed rules are intended to provide additional protection to employees, 
by  proving  more  transparency  and  enhanced  information  to  employees  about  the  planned 
cross-border conversion, merger or division.  

The  proposal  will  further  contribute  to  the  cross-border  mobility  of  companies  by 
harmonising  substantive  and  procedural  aspects  of  creditor  and  minority  shareholder 
protection and in turn further enhance cross-border activity by increasing legal certainty and 
thus reducing cost for companies due to expensive legal advice and the need to comply with 
unharmonised Member States' rules.  

Consistency with other Union policies 

This  initiative  will  contribute  to  the  success  of  many  Commission  initiatives  which  aim  to 
improve the functioning of the Single Market  by making it deeper  and fairer  and to build a 

17 

18 

19 

20 

Council Regulation (EC) No. 2157/2001 of the 8th October 2001 on the Statute for a European company 
(SE). 
Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of 
certain rights of shareholders in listed companies. 
Regulation  (EU)  2015/848  of  the  European  Parliament  and  of  the  Council  of  20  May  2015  on 
insolvency proceedings. 
Directive  2012/17/EU  of  the  European  Parliament  and  of  the  Council  of  13 June  2012  amending 
Council  Directive  89/666/EEC  and  Directives  2005/56/EC  and 2009/101/EC  of  the  European 
Parliament  and  of  the  Council  as  regards  the  interconnection  of  central,  commercial  and  companies 
registers 

EN 

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digital  Europe.21  This  initiative  will  also  contribute  to  the  Investment  Plan  for  Europe,  in 
particular  the  third  pillar  thereof  which  focusses  on  improving  the  business  environment  in 
Europe  by  removing  regulatory  barriers  to  investment  both  nationally  and  at  EU  level;  it 
additionally  contributes  to  the  Capital  Markets  Union22  by  making  the  legal  framework  for 
companies clearer, more suitable and effective in order to incentivise investments in Europe. 

At the same time, this initiative is also coherent with the objective of creating a deeper and 
fairer economic union and its European Pillar of Social Rights, in particular the 8th Principle, 
which  sets  out  a  number  of  key  principles  and  rights  to  support  fair  and  well-functioning 
labour  markets  and  welfare  systems.23
.  In  particular,  by  enhancing  the  transparency  for 
relevant  stakeholders  including  employees,  the  initiative  will  directly  contribute  to  the 
principle stipulating that employees or their representatives have the right to be informed and 
consulted in good time on matters relevant to them, in particular on the transfer, restructuring 
and merger of undertakings and on collective redundancies.  

This initiative is in line with the objective of creating a fair and efficient corporate tax system 
in  the  European  Union24.  The  Council  has  adopted  a  number  of  measures  to  counteract 
corporate  tax  avoidance  in  recent  years.  Council  Directive  2015/237625  provides  for 
mandatory  automatic  exchange  of  information  on  advance  tax  rulings  and  advance  pricing 
arrangements  between  Member  States.  Furthermore,  Council  Directive  2016/88126  provides 
for  mandatory  automatic  exchange  of  information  of  country-by-country  reporting  by 
multinational  enterprises.  Council  Directive  (EU)  2016/116427  lays  down  rules  against  tax 
avoidance  practices  that  directly  affect  the  functioning  of  the  internal  market,  including 
provisions  on  exit  tax  to  prevent  companies  from  avoiding  tax  when  re-locating  assets. 
Political  agreement  within  the  Council  was  reached  on  13  March  2018  on  the  Commission 
proposal28  for  a  Directive  on  mandatory  disclosure  by  intermediaries  for  tax  planning 
schemes, which should be adopted shortly.   

In  particular  increased  cross-border  accessibility  to  company  related  information  will 
contribute to ensuring fair taxation where profits are generated. The safeguards against abuse 
of the conversion and division procedures to create artificial arrangements aimed at obtaining 
undue tax advantages will contribute to EU efforts to fight tax evasion and avoidance.  

21 

22 

23 
24 

25 

26  

27 

28 

COM(2015) 550 final. Communication from the Commission to the European Parliament, the Council, 
the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Upgrading  the 
Single Market: more opportunities for people and business. 
COM(2015) 468 final. Communication from the Commission to the European Parliament, the Council, 
the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Action  Plan  on 
Building a Capital Markets Union. 
C(2017) 2600 final. Commission recommendation establishing the European Pillar of social rights. 
COM (2015) 302 final. A Fair and Efficient Corporate Tax System in the European Union: 5 Key Areas 
for Action. 
Council  Directive  (EU)  2015/2376  of  8  December  2015  amending  Directive  2011/16/EU  as  regards 
mandatory automatic exchange of information in the field of taxation (OJ L. 332, 18.12.2015, p. 1). 
Council  Directive  (EU)  2016/881  of  25  May  2016  amending  Directive  2011/16/EU  as  regards 
mandatory automatic exchange of information in the field of taxation (OJ L. 146, 3.6.2016, p. 8). 
Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices 
that directly affect the functioning of the internal market (OJ L. 193, 19.7.2016, p. 1). 
COM(2017) 335 final  

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Through the inclusion of clearer and more harmonised rules aiming at protecting companies’ 
shareholders and at enhancing the scrutiny of the legality of the cross-border conversion, this 
initiative also brings an additional step in the mitigating measures against the risks posed by 
organised crime organisations in the creation and business activities of legal entities, such as 
companies.  These  risks  have  been  highlighted  by  the  Commission  in  its  Report  on  the 
assessment  of  the  risks  of  money  laundering  and  terrorist  financing  affecting  the  internal 
market and relating to cross-border activities, adopted on 26 June 201729. In this report, the 
Commission  has  underlined  the  vulnerability  of  corporate  structures,  such  as  companies,  to 
the  risk  of  infiltration  by  organised  crime  organisations  and  terrorist  groups.  This  initiative 
will complement the ambitious rules that are already in place under Directive (EU) 2015/849 
on the prevention of the use of the financial system for the purposes of money laundering or 
terrorist  financing  and  under  which  corporate  structures  should  disclose  their  beneficial 
owners  to  entities  in  charge  of  applying  anti-money  laundering  and  terrorist  financing 
requirements30.  

2. 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The proposal is based on Article 50 of the Treaty on the Functioning of the European Union 
(TFEU) which is the legal basis for the EU competence to act in the area of company law. In 
particular,  Article  50(2)  (f)  provides  for  progressive  abolition  of  restrictions  on  freedom  of 
establishment  and  Article  50(2)  (g)  provides  for  coordination  measures  concerning  the 
protection of interests of companies’ members and other stakeholders.  

Subsidiarity (for non-exclusive competence) 

There is clear added value to address the problems at EU level rather than through individual 
action by Member States. The main difficulties in carrying out cross-border conversions and 
divisions are due to divergent, conflicting or overlapping national procedural rules, and also 
on  rules  related  to  creditor,  employee  (including  employee  participation)  and  minority 
shareholders  protection,  lack  of  use  of  the  interconnection  of  business  registers.  The  main 
inefficiencies  in  the  functioning  of  the  existing  rules  on  cross-border  mergers  are  mainly 
caused  by  divergent,  conflicting  or  overlapping  national  rules  on  creditor  and  minority 
shareholders  protection,  lack  of  use  of  the  interconnection  of  business  registers  or  other 
incoherencies or legal uncertainty caused by different Member States rules such as accounting 
rules. These challenges by their very nature require action at EU level. Member States acting 
individually  could  not  satisfactorily  remove  the  difficulties  with  respect  to  creating  a  more 
efficient  functioning  of  the  cross-border  operations  because  national  rules  and  procedures 
would  need  to  be  compatible  in  order  to  work  in  a  cross-border  situation  and  to  enhance 
cross-border  operations.  Those  barriers  cannot  be  removed  solely  by  relying  on  direct 
application  of  Article  49  TFEU,  given  that  this  would  entail  addressing  them  on  a  case-by-
case basis through infringement procedures against the Member States concerned, and, since 
the  lifting  of  many  barriers  requires  prior  coordination  of  national  legal  schemes,  including 
the setting up of administrative cooperation. 

29 
30 

COM(2017)340 final 
The beneficial ownership information should, in addition, be held in a national central register.  

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It  appears,  therefore,  that  without  any  action  at  EU  level  only  non-harmonised  national 
solutions would be available so that companies, in  particular  SMEs, would continue to  face 
divergent  national  regimes  making  the  effective  exercise  of  the  freedom  of  establishment 
more  difficult  without  ensuring  adequate  protection  of  stakeholders  and  the  resulting  costs 
would in particular affect the companies but also the stakeholders, be it employees, creditors 
or minority shareholders.  

Whereas  the  substantive  levels  of  protection  of  employees,  minority  shareholders  and 
creditors would still be set at national level, a procedural framework for their pursuit in case 
of cross-border operations would need to be set at EU level for the sake of legal certainty and 
the effectiveness of such protection. 

In light of the above, the targeted EU intervention complies with the principle of subsidiarity. 

Proportionality 

As  regards  the  principle  of  proportionality,  the  proposed  rules  seem  suitable  to  achieve  the 
objectives  of  clear  and  suitable  rules  for  companies  and  also  providing  protection  to 
stakeholders as set out in the impact assessment. The impact assessment explains the cost and 
benefits of the options considered therein for companies, stakeholders and Member States by 
taking into account all necessary elements including societal benefits and political feasibility. 
For example, the proposed cross-border conversion procedure is estimated to result in a cost 
saving of EUR 12 000 – 19 000 per operation and companies operating in the internal market 
could in total save EUR 176 – 280 million over 5 years.  

It  appears  that  the  proposed  actions  do  not  go  beyond  what  is  necessary  to  achieve  the 
objectives  and  that  the  positive  impacts  of  the  proposed  measures  exceed  the  possible 
negative impacts (Section 6.3 of the impact assessment). 

Choice of the instrument 

The legal basis for company law operations is Article 50 TFEU which requires the European 
Parliament and the Council to act by means of directives. Directive (EU) 2017/1132 governs 
company law at EU level. For reasons of cohesion and consistency of EU company law, the 
present proposal will amend and add to that Directive. 

3. 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The proposal introduces a new legal framework for a procedure of  cross-border conversions 
and divisions of limited liabilities companies.  

The  ex-post  evaluation31  of  the  existing  Cross  Border  Mergers  Directive32  was  carried  out 
against the evaluation criteria in line with 'Better regulation' requirements. Main inputs to the 

31 
32 

Annex 5 to the Impact Assessment accompanying this proposal. 
Directive  2005/56/EC  of  the  European  Parliament  and  of  the  Council  of  26  October  2005  on  cross-
border mergers of limited liability companies (OJ L 310, 25.11.2005, p. 1); the directive has now been 

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evaluation  were  the  study  on  "The  Application  of  the  Cross-Border  Mergers  Directive" 
carried out by an external contractor for the Commission33, additional studies34 and two public 
consultations  (2015  and  2017)  which  collected  the  views  of  stakeholders  about  the 
functioning of the cross-border mergers. 

The analysis resulted in an overall positive evaluation of the Cross-Border Merger Directive 
in terms of effectiveness, efficiency, relevance, coherence and EU added value. Overall, the 
Cross-Border  Merger  Directive  has  led  to  a  significant  increase  in  the  cross-border  merger 
activity,  in  line  with  its  objective  to  facilitate  cross-border  mergers  and  increase  the 
opportunities offered by the Internal Market. 

However,  despite  the  overall  positive  assessment,  the  evaluation  identified  certain  problems 
which  impede  the  full  effectiveness  and  efficiency  of  the  Directive.  The  main  obstacles 
concern the lack of harmonisation of substantive rules in particular for creditor protection and 
minority shareholder protection as well as the lack of fast track (i.e. simplified) procedures in 
the  Directive.  Making  more  use  of  the  interconnection  of  business  registers  could  increase 
synergies and thus coherence with other company law legislation. 

This proposal is coherent with the evaluation and aims to address the main shortcomings to 
the existing cross-border merger rules identified in it.  

Stakeholder consultations 

The  Commission  has  actively  engaged  with  stakeholders  and  conducted  comprehensive 
consultations throughout the impact assessment process. The consultation process consisted of 
online  public  consultation,  stakeholder  meetings  including  discussions  with  Member  State 
experts,  several  studies.  The  information  gathered  through  all  these  means  fed  into  the 
proposal. 

In 2012, the Commission carried out a public consultation in order to assess the key interests 
of stakeholders in regard to European company law and determine where the future priorities 
of  EU  company  law  should  lie.  496  responses  were  received  from  a  wide  range  of 
stakeholders,  such  as  public  authorities,  trade  unions,  civil  society,  business  federations, 
liberal  professions,  investors, universities, think tanks, consultants  and individuals.  The vast 
majority  of  the  stakeholders  focussed  on  improving  the  business  environment  and  fostering 
cross-border  mobility.  Furthermore,  emphasis  was  also  put  on  enhancing  the  protection  of 
creditors,  shareholders  and  employees  in  cross-border  situations  as  well  as  facilitating  the 
creation of companies and fostering regulatory competition. 

A more detailed online public consultation was launched in 2013 on the cross-border transfers 
of registered offices of companies aiming to acquire more in-depth information on the costs 

33 

34 

replaced by Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 
relating to certain aspects of company law (codification) (OJ L 169, 30.6.2017, p. 46). 
Bech-Bruun/Lexidale, Study on the application of the cross-border mergers directive (September 2013) 
http://ec.europa.eu/internal_market/company/docs/mergers/131007_study-cross-border-merger-
directive_en.pdf. 
Schmidt, Cross-border mergers and divisions, transfers of seat: Is there a need to legislate? Study for 
the JURI Committee, June 2016. Reynolds/Scherrer/Truli, Ex-post analysis of the EU framework in the 
area of cross-border mergers and divisions, Study for the European Parliament, December 2016. 

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faced  by  companies  transferring  their  registered  offices  abroad  and  on  the range  of  benefits 
that  could  be  brought  by  an  EU  action  in  this  respect.  In  total  86  responses  were  received 
from  public  authorities,  trade  unions,  civil  society,  companies,  business  organisations, 
individuals and universities, allowing for a broad representation of society. Replies have come 
from 20 EU Member States and also from outside the EU. It was found that the majority of 
respondents,  who  would  consider  the  possibility  of  moving  their  company  cross-border, 
would  broadly  welcome  the  introduction  of  a  conversion  procedure.  They  cited  economic 
benefits, cost savings for the internal market and the broader possibilities for SMEs to transfer 
cross-border as reasons for answering in the affirmative. Moreover, it was a majority of 43% 
of respondents who considered that the CJEU jurisprudence did not provide enough clarity on 
the issue. 

A further public consultation was launched in 2015 which focussed on cross-border mergers 
and  cross-border  divisions  where  151  responses  were  received35.  As  regards  cross-border 
divisions, the introduction of a new procedure was broadly welcomed by the respondents as 
the  majority  of  the  participants  identified  the  protection  of  creditors,  the  protection  of 
minority shareholders and the protection of employee rights as the main issues to be treated. 
Approximately 72% of respondents who expressed an opinion thought that harmonisation of 
legal  requirements  concerning  cross-border  divisions  would  help  enterprises  and  facilitate 
cross-border  activities  by  reducing  the  costs  directly  related  with  the  cross-border  division. 
Procedural issues  as  well  as  stakeholder  protection were  identified  as  key issues  to address. 
Moreover, 68% of the respondents cited legal uncertainty due to the lack of EU rules as the 
main  obstacle  to  completing  a  cross-border  division  and  51%  of  the  respondents  cited  the 
duration  and  complexity  of  the  current  procedures  as  being  highly  problematic.  Concerning 
cross-border  mergers,  88%  of  the  respondents  were  in  favour  of  harmonisation  of  creditor 
protection – 75% of which favoured a full harmonisation approach. The vast majority of those 
felt  that  a  guarantee  was  the  best  form  of  protection  and  that  the  date  determining  the 
beginning of the creditor protection period should be harmonised. Furthermore, in regards to 
minority shareholder protection, a majority of 66% were in favour of harmonisation with 71% 
of  which  in  favour  of  harmonisation  on  a  maximum  basis.  70%  of  those  in  favour  of  full 
harmonisation felt  that minority shareholders should  be given an exit right  against adequate 
cash compensation. Moreover, 62% of the respondents welcomed the introduction of a fast-
track procedure. 

The latest  public consultation  on company law  was launched in  2017. It ran from  10th  May 
2017 to the 6th August 2017. There were 207 responses received. In the light of the upcoming 
initiative the Commission sought for answers for detailed questions about the shortcomings of 
the EU legal framework and areas which are considered a priority for the respondents.  

The outcome of the consultation  showed a broad support  for cross-border conversions from 
Member  States  and  stakeholders  alike  as  approximately  85%  of  all  respondents  were  of  the 
opinion  that  there  should  be  an  EU  instrument  on  this  matter.  In  terms  of  stakeholder 
breakdowns,  all  of  the  public  authorities  agreed  that  the  lack  of  procedural  rules  for 

35 

Schmidt, Cross-border mergers and divisions, transfers of seat: Is there a need to legislate? Study for 
the JURI Committee, June 2016. Reynolds/Scherrer/Truli, Ex-post analysis of the EU framework in the 
area of cross-border mergers and divisions, Study for the European Parliament, December 2016. 

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conversions do indeed constitute obstacles to the internal market and that the EU should be 
addressing  this  issue.  Several  authorities  submitted  that  they  were  more  concerned  with  the 
issue of seat than they were with stakeholder protection mechanisms and said that they would 
support a conversion initiative to the extent that companies can only move their real seat for 
genuine  business  purposes  rather  than  conclude  transfers  of  letterbox  companies  for 
fraudulent purposes. 

The  business  groups  supported  the  introduction  of  a  conversion  procedure  with  similar 
percentage  approvals  as  the  public  authorities.  Approximately  44%  of  business  groups 
considered this to be a top EU priority, 22% a priority and 22% a low priority. Trade unions 
and notaries were both moderately supportive of new procedural rules concerning conversions 
(74% and 79%  deeming this a low EU  priority respectively). Both the trade  unions and the 
CNUE  (representative  body  of  notaries)  were  keen  to  stress  that  companies  should  only  be 
allowed to transfer their registered office if it is accompanied by the transfer of their real seat 
with  Trade  Unions  further  stressing  the  need  for  a  horizontal  instrument  for  employee 
information, consultation and participation rights. Academics were also broadly in favour of 
the  introduction  of  a  conversion  procedure.  Some  academics  submitted  that  Member  States 
should  be  able  to  determine  their  own  requirements  to  be  recognised  under  their  law  and 
indeed  whether  they  require  that  the  real  seat  be  transferred.  It  was  further  submitted  that 
digitalisation should be used as much as possible (i.e. for publication of information and for 
the company registries to communicate). Others suggested that a Member State should only 
be able to block a conversion in very exceptional circumstances on grounds of public interest. 

As regards cross-border mergers, similarly to the 2015 public consultation, most stakeholders 
who replied to the 2017 consultation identified the same issues as problematic: the protection 
of creditors, the protection of minority shareholders and the protection of employee rights.  

The majority of the national public authorities that responded to the 2017 consultation were of 
the opinion that there are problems with the existing cross-border merger rules and that those 
problems  constitute  obstacles  to  the  Internal  Market  but  to  a  varying  degree.  There  was  a 
mixed response as to the degree of priority to be given to an EU action to amend the existing 
rules.  In  respect  of  safeguards,  all  national  public  authorities  which  replied  were  of  the 
opinion that creditor protection measures should be addressed, while 70% were of the opinion 
that minority shareholder protection measures should also be addressed. There were 80% that 
found it important to harmonise procedural as well material aspects of creditor protection and 
50%  that  found  it  important  for  minority  shareholders  to  be  able  to  block  the  merger  and 
oppose the share exchange. 

Business  organisations  which  replied  to  the  2017  consultation  also  broadly  welcomed  the 
need to amend the directive for cross-border mergers. Points raised by business organisations 
concerned  simplification  of  rules  (fast-track  procedure),  harmonised  rules  for  creditor  and 
minority  shareholder  protection,  simplified  employee  protection  rules  and  removing  the 
requirement for merger procedures to be signed before public notaries as is the case in certain 
Member States. 

Similarly, trade unions were also receptive to modification of the cross-border merger rules. 
However, they were primarily concerned with strengthening the employee protection by way 
of  stronger  information,  consultation  and  participation  rights.  Conversely,  notaries  were 
overwhelmingly of the opinion that the existing directive functions very well and they do not 
see the need for any new EU measures in this area.  

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Concerning cross-border divisions, all of public authorities who responded to the consultation 
were in favour of new rules for cross-border divisions while 40% considered an initiative in 
this area to be top EU priority.  

The business organisations were strongly in favour of new rules as 44% considered this to be 
a top  priority and 26%  viewed this as  a priority. Notaries expressed moderate support  for a 
new  initiative.  Trade  unions  were  extremely  sceptical  regarding  divisions  due  to  risks  for 
employees but submitted that should Member States decide favourably for divisions, the rules 
concerning information and consultation for employees would have to be strengthened. 

As a general comment, it was submitted by the vast majority of the respondents who were in 
favour of a new procedure for cross-border divisions that the procedure should follow closely 
what is laid out in the existing Cross-border Mergers Directive. 

Furthermore,  the  views  of  stakeholders  were  also  collected  during  numerous  meetings.  The 
process  of  the  consultation  on  the  company  law  package  within  the  Company  Law  Expert 
Group (CLEG) began in 2012. From 2012 – 2014, the CLEG meetings focussed on the 2012 
Action  Plan  of  Company  Law  and  Corporate  Governance  while  in  2015  and  2016  the 
meetings  centred  on  elements  of  digitalisation.  In  2017,  three  CLEG  meetings  took  place 
where  the  relevant  issues  for  the  company  law  package  (namely  digitalisation,  cross-border 
mergers,  divisions  and  conversions)  were  concretely  discussed.  In  these  meetings  the 
Commission called on the Member States’ experts for their opinions on specific questions.  

In 2017, the Commission invited to the CLEG meetings not only Member States’ experts but 
also  the  stakeholders'  representatives  that  emerged  in  the  2013,  2015  and  2017  public 
consultations.  Stakeholders  represented  businesses,  employees,  legal  professions.  The 
stakeholders  highlighted  the  need  to  facilitate  cross-border  operations,  however,  interests  of 
companies'  members,  employees  and  creditors  should  be  protected  through  adequate 
safeguards.  Generally  there  is  broad  support  for  the  initiative  for  cross-border  conversions 
provided there are sufficient safeguards in place. As regards mergers, generally the Member 
State representatives showed support for the initiative, although they indicated that concrete 
solution required deeper discussions. While no stakeholder group was against the revision of 
the  cross-border  merger  rules,  the  opinions  differed  as  to  the  degree  of  priority  of  it. 
Concerning  cross-border  divisions,  generally  the  Member  States'  representatives  showed 
support  for  the  initiative,  although  the  particular  solutions,  especially  originating  from  the 
different legal traditions, appeared to remain to be discussed. There was a general sentiment 
amongst all stakeholders with the exception of Trade Unions that a new procedure for cross-
border  divisions  would be highly useful and should follow closely what is  laid down in  the 
existing Cross-border Mergers Directive. 

In addition to the CLEG meetings, information from stakeholders were also gathered though 
bilateral  meetings.  In  these  meetings,  the  representatives  of  trade  unions  emphasised  the 
importance of preservation of employee participation rights and that companies should only 
move  for  real  purposes,  thus  avoiding  that  letterbox  companies  are  created  through  cross-
border  operations.  The  representatives  of  business  organisations  showed  a  great  support  for 
the initiative on facilitating mobility of companies. 

The proposal addresses the most important issues identified by stakeholders. However, given 
that  stakeholders  have  different  views  as  to  the  detail  approach  how  the  issues  should  be 
addressed, the proposal aims to strike a fair balance between these views. 

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Collection and use of expertise 

In order to assist to the work of the Commission, the Informal Company Law Expert Group 
(ICLEG) was established in May 2014 on issues of company law. The members of the expert 
Group were  highly qualified and experienced  academics and legal practitioners  of  company 
law from several Member States.  

The  Commission  has  also  used  the  results  of  a  study  conducted  in  2017  analysing  specific 
questions  on  cross-border  transfers  of  registered  offices  and  cross-border  divisions  of 
companies.  Furthermore,  the  Commission  collected  expert  feedback  at  several  conferences 
including  a  conference  held  in  September  2017  in  Tallinn,  Estonia  on  21st  European 
Company  Law  and  Corporate  Governance  Conference:  Crossing  Borders,  Digitally  and  the 
Annual Conference on European Company Law and Corporate Governance that took place in 
Trier, Germany, in October 2017. 

Impact assessment 

The Impact Assessment Report covering digitalisation, cross-border operations and conflict of 
law  rules  in  company  law,  was  examined  by  the  Regulatory  Scrutiny  Board  on  11  October 
201736. A negative opinion of the RSB was issued on 13 October 2017. The recommendations 
put  forward were  addressed in  a revised  version of the Impact Assessment submitted to  the 
Board  on  20  October  2017.  The  Board  gave  a  positive  opinion  with  reservations  on  7 
November 2017. 

Concerning the scope of application which would determine which types of companies could 
benefit from the harmonised rules and procedures for cross-border conversions and divisions 
and  modified  rules  on  cross-border  mergers,  the  Impact  Assessment  explained  why  the 
existing scope of application of the cross-border merger rules (i.e. limited liability companies) 
provides  the  most  effective  solution  for  all  cross-border  operations  despite  some  calls  to 
broaden it to cover partnerships and cooperatives. This is because the existing data shows a 
very  limited  use  of  the  cross-border  merger  rules  by  entities  other  than  limited  liability 
companies. 66% of the acquiring companies and 70% of the merging companies involved in 
cross-border  mergers  were  private  limited  liability  companies,  whereas  32%  of  acquiring 
companies and 28% of the merging companies involved in cross-border mergers were public 
limited  liability  companies37  In  addition,  extension  of  the  scope  would  lead  to  potential 
practical  difficulties  related  to  EU  company  law  and  accounting  rules  which  only  apply  to 
limited liability companies.  

As  to  the  introduction  of  new  procedural  rules  for  cross-border  conversions  and 
divisions,  the  Impact  Assessment  examined  the  option  0  (baseline  scenario)  of  having  no 
procedural rules for cross-border conversions and divisions against the option 1 which would 
introduce  harmonised  EU  procedures  to  enable  companies  to  carry-out  direct  cross-border 
conversions and divisions. The lack of procedural rules makes cross-border conversions and 
divisions extremely difficult, if not impossible. National cross-border conversion and division 
procedures exist only in a limited number of Member States and they are often not align with 

36 

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Impact  Assessment  and  Opinion  of 
http://ec.europa.eu/transparency/regdoc/?fuseaction=ia&year=&serviceId=10226&s=Search  
Data relates to period 2008-2012, Bech-Bruun/Lexidale, 2013 p.80 

the  Regulatory  Scrutiny  Board 

is  available  at: 

18 

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each  other.  Companies  must  therefore  rely  on  costly  indirect  procedures,  the  analogous 
application  of  the  Cross-border  Merger  Directive  and  the  CJEU  jurisprudence  where  legal 
practitioners and business registers are aware of the case-law. By introducing new procedural 
rules  for  cross-border  conversions  and  divisions,  companies  would  be  provided  significant 
clarity  and  significantly  reduce  the  costs  for  companies  wishing  to  convert  or  divide  cross-
border. Moreover, it would provide clarity to national business registers to clearly distinguish 
the  point  in  time  to  which  a  company  can  enter  the  business  register  in  the  destination 
Member  State  and  be  struck  off  the  business  register  in  the  departure  Member  State  which 
would avoid situations such as Polbud38 arising. 

As to the protection of minority shareholders, the Impact Assessment assessed the option 0 
(baseline  scenario)  consisting  of  the  existing  rules  on  minority  shareholders'  protection 
against  the  options  1  and  2.  Option  1  would  provide  harmonised  rules  across  the  Single 
Market. It would build on the rules for cross-border mergers, but in addition it would provide 
for harmonised rules. The preferred option 2 would provide for the same harmonised rules as 
option 1 but Member States would be able to provide for additional safeguards.  This option 
would  provide  the  most  adapted  protection  of  minority  shareholders.  While  option  2  could 
potentially cause some compliance costs for companies, it would significantly reduce cost and 
burdens  on  companies  in  comparison  to  the  baseline  scenario  and  would  provide  for  more 
legal certainty, less need for legal advice and thus offer cost savings for companies compared 
to  the  baseline  scenario.  The  preferred  option  2  provides  the  best  balance  between  cost 
reduction, the high level of protection and the flexibility to Member States.  

As  to  the  protection  of  creditors,  the  Impact  Assessment  examined  the  option  0  (baseline 
scenario) of keeping the existing the cross-border mergers rules unchanged and no EU rules 
on  creditor  protection  in  cross-border  conversions  and  divisions  against  the  option  1  of 
providing  harmonised  rules  to  protect  creditors  and  against  option  2  that  would  provide  for 
the  same  harmonised  rules  as  option  1,  but  Member  States  would  be  able  to  provide  for 
additional  safeguards.  The  preferred  option  2  would  provide  the  best  balance  between  cost 
reduction, a high level of protection and flexibility to Member States. Both options 1 and 2 
would  significantly  reduce  cost  and  burdens  on  companies  in  comparison  to  the  baseline 
scenario,  as  the  harmonised  rules  on  creditor  protection  would  provide  for  more  legal 
certainty and less need for legal advice for any cross-border operation. Option 1 would offer 
the biggest savings for companies, while savings in option 2 might be smaller, since Member 
States could provide for additional safeguards which could be costly or burdensome for some 
companies (e.g. need to provide guarantees for all creditors). In terms of protection offered to 
creditors, option 2 would provide for more complete and targeted protection than option 1 due 
to the possibility granted to MS to assess the national specificities of creditor protection and to 
introduce more safeguards.  

As  to  the  employee  information,  consultation  and  participation,  the  Impact  Assessment 
compared  the  option  (base-line  scenario)  of  applying  the  existing  rules  on  the  employee 
participation in the Cross-border Merger Directive against the option 1 that would apply the 
existing  rules  on  the  employee  participation  in  boards  from  cross-border  mergers  to  cross-
border  divisions  and  conversions  and  against  option  2  that  would  consist  of  targeted 
amendments to existing cross-border mergers rules, while at the same time providing specific 

38 

Polbud – Wykonawstwo C-106/16 

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measures  for  the  perceived  higher  risks  for  employees  in  cross-border  divisions  and 
conversions.  The  preferred  option  2  is  composed  of  several  elements  which  as  a  combined 
effect aim to provide the necessary protection for employees. Safeguards would include for all 
cross-border  operations  a  new  special  report  prepared  by  the  company's  management  to 
describe the impact of the cross-border merger on jobs and the situation of employees and a 
so called "anti-abuse" rule providing that during 3 years following the cross-border operation, 
if  performing  a  subsequent  cross-border  or  domestic  operation,  the  company  would  not  be 
able  to  undermine  the  system  of  employee  participation.  The  rule  is  based  on  the  existing 
cross-border  mergers  rules  but  would  be  adapted  to  cover  not  only  subsequent  domestic 
conversions,  mergers  or  divisions  but  also  other  cross-border  and  domestic  operations.  This 
option  would,  in  addition  introduce  specific  rules  as  regards  negotiations  in  case  of  cross-
border divisions and conversions. The Impact Assessment analysed the costs and benefits of 
these  targeted  changes  and  concluded  that  the  limited  additional  compliance  costs  for 
companies due to the possible preparation of the report would be outweighed by the increased 
protection of employees and the resulting societal benefits. 

Finally,  the  Impact Assessment also examined the question  of how to  tackle risks of  abuse, 
including a proliferation of "letter-box" companies for abusive purposes such as for avoiding 
labour  standards  or  social  security  payments  as  well  as  aggressive  tax  planning.  During  the 
public  consultations,  certain  stakeholders,  in  particular  trade  unions,  called  for  a  solution 
whereby  the  company  carrying  out  cross-border  conversion  would  need  to  transfer  the 
registered office together with the head office to the destination Member State. However, the 
very  recent  Court  decision  in  the  Polbud  case,  which  was  delivered  after  the  public 
consultations were closed, stipulates that the freedom of establishment applies to cases where 
only  the  registered  office  is  moved  cross-border.  Therefore,  such  a  solution  could  not  be 
envisaged. The Impact Assessment thus examined the option 0 (baseline scenario) of having 
no  harmonised  rules  against  the  option  1  which  would  introduce  rules  and  procedures 
according to which Member States would need to assess on a case-by-case basis whether the 
cross-border  conversion  in  question  constitutes  an  artificial  arrangement  which  aims  at 
obtaining  undue  tax  advantages  or  unduly  prejudicing  the  rights  of  employees,  minority 
shareholders or creditors. The preferred option 1 would directly contribute to the fight against 
circumvention  of  rules  and  thus  against  abusive  or  fraudulent  use  of  letterbox  companies. 
When  compared  to  the  baseline  scenario,  the  option  1  would  be  a  part  of  the  procedure 
allowing  companies  to  convert  cross-border  and  therefore  the  additional  compliance  costs 
would  not  be  specific  to  the  assessment  of  the  possible  artificial  arrangement.  As  to  the 
Member  States,  they  would  need  to  transpose  and  implement  those  rules  which  incur  some 
administrative  and  organisational  costs.  Option  1  would  lead  into  enhanced  stakeholder 
protection. Stakeholders would be able to  provide their views throughout  the procedure and 
ultimately be protected against circumvention of rules by fraudulent companies. 

The Impact Assessment also analysed options related to conflict of laws rules. The preferred 
option  in  this  respect  was  an  instrument  harmonising  relevant  rules,  in  particular  as  regards 
the connecting factor, on the basis of the place of incorporation of the company with further 
specific rules pointing to the law of the real seat and covering only companies established in 
the  EU.  However,  given  that  the instances  in  which  clarity is  most  needed,  namely  specific 
issues  related  to  the  law  applicable  to  limited  liability  companies  in  cross-border  situations, 
will  be  addressed  in  the  proposed  legislation  on  cross-border  conversions,  mergers  and 
divisions,  it  was  decided  not  to  propose  a  specific  legislative  act  on  conflict-of-laws  at  this 
point in time.  

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Regulatory fitness and simplification 

The  proposal  is  expected  to  deliver  considerable  simplification  benefits  to  business  in  the 
Single Market by facilitating cross-border mobility of companies.  

The creation of a comprehensive  set of common rules regulating  cross-border conversions 
and  divisions  will  streamline  and  simplify  procedures  and  reduce  costs  for  business  as 
regards  the  type  and  content  of  documents  to  be  prepared,  the  different  procedures  and  the 
related  deadlines  or  other  additional  requirements.  The  proposed  rules  on  employee 
participation  and  members’  and  creditors’  protection  rules  will  enhance  legal  certainty  and 
predictability  to  these  operations.  The  new  common  rules  on  cross-border  divisions  and 
conversions can be expected to bring savings of EUR 12 000 - EUR 37 000 (divisions) and 
EUR 12 000 – 19 000 (conversions) depending on the size of companies and Member States 
involved. 

The proposed amendments to the existing EU legal framework on cross-border mergers will 
simplify the rules for cross-border mergers of companies and reduce costs and administrative 
burdens through new common and streamlined procedure. The proposed rules on members’ 
and creditors’ protection and disclosure rules will enhance legal certainty and predictability.  

The cost reduction and simplifications will have a particularly positive impact on micro and 
small enterprises.  

The information exchange foreseen in this proposal will be implemented through the existing 
system  of  the  interconnection  of  central,  commercial  and  companies  registers  (BRIS). 
Therefore, no specific IT developments are anticipated.  

Fundamental rights 

The proposed rules of this initiative ensure the full respect of the rights and principles set out 
in  the  Charter  of  Fundamental  Rights  of  the  European  Union  and  contribute  to 
implementation of several of those rights. In particular, the main objective of this initiative is 
to facilitate the rights of establishment in any Member State, as prescribed by Article 15(2) of 
the Charter and ensuring the principle of non-discrimination on grounds of nationality (Article 
21(2)). The initiative aims to reinforce the freedom to conduct a business in accordance with 
Union law and national laws and practices (Article 16). The right to property set out in Article 
17  of  the  Charter  is  also  strengthened  by  the  initiative  through  the  safeguards  that  are 
provided  for  shareholders.  Although  the  initiative  will  provide  rules  for  companies  in  the 
framework  of  company  law,  it  will  also  contribute  to  the  workers'  right  to  information  and 
consultation  within  the  undertaking  (Article  27  of  the  Charter)  by  providing  more 
transparency for employees in case of cross-border operations of companies. The protection 
of personal data shall also be ensured in line with Article 8 of the Charter.  

4. 

BUDGETARY IMPLICATIONS 

No  major  costs have  been identified.  The proposal would cause primarily  costs for national 
administrations  associated  with  the  introduction  of  legislative  rules  at  national  level 
(preparation,  consultation,  adoption,  adaptation  of  existing  ones)  as  well  as  with  the 
introduction  of  scrutiny  procedures.  As  regards  cross-border  conversions  and  divisions,  in 
Member States where there are no cross-border procedures, the impact would be bigger than 
in other Member States where such procedures exist and they would only need to be adapted. 
There is no impact on the EU budget. 

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5. 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  Commission  will  assist  the  Member  States  to  transpose  the  proposed  rules  and  will 
monitor  their  implementation.  In  this  context,  the  Commission  will  cooperate  closely  with 
national authorities e.g. the national company law experts in the Company Law Expert Group 
(CLEG).  In  that  context,  the  Commission  may  provide  assistance  and  guidance  (e.g.  by 
organising implementation workshops or providing advice on bilateral basis).  

The  monitoring  would  consist  of  analysing  trends  in  cross-border  operations  activities  of 
companies  through  the  notifications  of  cross-border  conversions,  mergers  and  divisions  via 
the  system  of  interconnection  of  business  registers  (BRIS),  through  collection  of  costs  for 
cross-border conversions as far as possible, and whether and to what extent stakeholders and 
stakeholder  organisations  indicate  satisfaction  with  the  protection  of  their  rights  in  the 
relevant cross-border operations. The development of the case-law of the Court of Justice of 
the European Union in the area will also be monitored. 

With  a  view  to  gathering  the  required  stakeholder  input,  the  Commission  could  send 
questionnaires to stakeholders or organise specific surveys. 

An evaluation should be  carried out  in  order to assess the impact of the proposed measures 
and verify if the objectives have been achieved. It would be carried out by the Commission on 
the  basis  of  the  information  gathered  during  the  monitoring  exercise  and  additional  input 
collected from the relevant stakeholders, as necessary. An evaluation report should be issued 
after enough experience is gained from the application of proposed.  

The  provision  of  information  for  monitoring  and  evaluation  should  not  impose  any 
unnecessary administrative burden on the stakeholders concerned. 

Explanatory documents (for directives) 

The proposal is amendment to the Directive (EU) 2017/1132 of the European Parliament and 
of  the  Council  of  14  June  2017  relating  to  certain  aspects  of  company  law.  To  ensure  the 
proper implementation of this complex directive, the explanatory document, e.g. in the form 
of correlation tables would be necessary. 

Detailed explanation of the specific provisions of the proposal 

Cross-border conversions 

Article  86a:  this  article  describes  the  scope  of  the  proposal  which  sets  up  an  EU  legal 
framework  regulating  the  cross-border  conversions  of  private  and  public  limited  liability 
companies. 

Article 86b: this article contains definitions. The definition of the cross-border conversion is 
based on the jurisprudence of the Court of Justice and entails the change of a legal form of the 
company  from  the  departure  Member  State  into  the  legal  form  of  the  destination  Member 
State.  

Article 86c: this provision sets out the conditions under which cross-order conversions can be 
carried  out,  the  verification  of  them  and  applicable  law.  In  particular,  it  lays  down  the 
requirement that companies that are subject to insolvency or similar proceedings cannot carry 
out  the  cross-border  conversion  as  regulated  in  this  Directive.  In  addition,  pursuant  to  the 
general principle that EU law cannot be invoked to justify abuse of rights as established in the 
ECJ's case law, a conversion cannot be authorised when it is determined, after examination of 

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the individual case and having regard to all relevant facts and circumstances, that it constitutes 
an artificial arrangement aimed at obtaining undue tax advantages or unlawfully prejudicing 
the legal or contractual rights of employees, creditors or members.  

Article 86d: the provision sets the minimum scope of information to be provided in the draft 
terms of the cross-border conversion which will be made publically available for every person 
interested for this  operation. The draft  terms will have  to  provide information  regarding  the 
change of company form, and regarding the company resulting from the conversion as well as 
the  protection  offered  for  the relevant  stakeholders:  in  particular  shareholders, creditors  and 
employees. This article stresses the importance of draft terms but also increases as much as 
possible the ease in their compilation in that it offers companies a possibility to draft them, in 
addition  to  the  official  language  or  languages  of  the  Member  States  concerned,  also  in  the 
language  most  commonly  used  in  business  transactions;  thereby  the  Member  State  may 
determine which language version is the decisive one in case of discrepancies. 

Article  86e:  this  article  sets  out  the  requirement  for  preparing  a  report  for  shareholders 
explaining  in  detail  the  aim  of  the  cross-border  conversion,  the  company's  plans  and  the 
safeguards for shareholders. The report shall in particular include the impact of the conversion 
on  the  activity  of  the  company  and  its  interests,  on  the  interests  of  shareholders  and  the 
measures to protect them. The report should be also available to the employees. In line with 
the principle of proportionality, the report may be waived if all members of the company so 
agreed.  

Article  86f:  this  article  requires  a  report  to  be  drawn  by  the  company  addressing  issues 
essential  for  the  employees  of  the  company  carrying  out  a  cross-border  conversion.  This 
report shall explain the implications of the cross-border conversion for employees. It shall be 
made available to the representatives of the employees or to the employees themselves in case 
there  are  no  such  representatives.  The  provision  further  clarifies  that  the  provision  of  the 
report is without prejudice to the applicable information and consultation proceeding already 
provided for in the acquis. 

Article 86g: this article concerns the examination by an independent expert. The accuracy of 
the information provided in the draft terms of the cross-border conversion and in the reports 
of  the  management  or  administrative  organ  shall  be  subject  to  the  assessment  by  an 
independent  expert  appointed  by  the  competent  authority.  The  report  shall  also  include  all 
relevant  information  about  the  company  and  intended  cross-border  conversion  allowing  the 
competent  authority  to  assess  inter  alia  whether  the  operation  constitutes  an  artificial 
arrangement. The article further sets out the procedure, timeline and the competences of the 
independent  expert,  including  the  protection  of  confidential  information.  In  line  with  the 
principle of proportionality, micro and small enterprises are exempted from the requirement 
of an independent expert report. 

Article  86h:  this  article  lays  down  for  the  rules  for  the  disclosure  of  the  draft  terms  of  the 
cross-border conversion and the independent expert report which should be publicly available 
free  of  charge.  At  the  same  time,  the  disclosure  will  include  a  notice  inviting  members, 
creditors  and  employees  of  the  company  to  submit  comments.  The  disclosure  requirements 
shall  guarantee  an  immediate  access  to  the  draft  terms  for  the  protection  of  the  relevant 
stakeholders.  This  article  sets  out  the  principle  that  the  draft  terms  shall  be  disclosed  in  the 
business register as the most common point of reference for stakeholders. Member States may 
allow a company to disclose the draft terms on its website, but in that case the most important 
information will still be required to be disclosed in the business register. The article provides 

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for a possibility for Member States to preserve additional publication in the national gazette 
and  charge  fees  for  it.  In  order  to  facilitate  the  access  to  the  disclosed  information,  the 
disclosed draft terms of cross-border conversion, the notice and the independent expert report 
must be accessible to  the public free of charge. Fees  charged for the disclosure may not  go 
beyond the administrative cost of the service. 

Article  86i:  this  article  lays  down  the  requirement  of  approval  of  the  draft  terms  of  cross-
border conversion by the general meeting. A similar requirement exists in the case of cross-
border mergers. Member States may set out the requirements for the qualified majority of the 
votes  cast  for  the  approval  of  the  draft  terms;  however,  the  required  majority  requirements 
may not exceed the requirements applicable for cross-border mergers.  

Article 86j: this article provides for safeguards for shareholders and establishes an exit right 
for those shareholders that oppose the cross-border conversions. This applies for either those 
who  did  not  vote  for  the  cross-border  conversion  or  those  that  do  not  agree  with  the 
conversion  but  do  not  have  voting  rights.  The  company,  remaining  shareholders  or  third 
parties, upon the request of the members concerned, should acquire their shares in exchange 
for an adequate compensation. In case the shareholders consider that the cash compensation 
offered has been inadequately set, they are entitled to challenge its amount before the courts 
of the departure Member State.  

Article  86k:  this  article  provides  for  various  safeguards  for  creditors.  Member  States  may 
provide that the converting company should make a declaration as part of the draft terms of 
the cross-border conversion stating that the conversion will not affect the ability to satisfy the 
obligations towards third parties and that creditors will not be prejudiced. 

Creditors will also have the right to apply to the competent administrative or judicial authority 
to grant them adequate protection. The authorities will apply the rebuttable presumption that 
the creditors are not  prejudiced if an independent  expert report concluded that there was no 
reasonable  likelihood  that  the  rights  of  creditors  would  be  prejudiced  or  if  the  company 
offered  a  right  to  payment  either  against  a  third  party  guarantor  or  against  the  converted 
company for the original value of the claim in question on condition that it may be brought 
before the same jurisdiction as the original claim. The article also clarifies that the provisions 
on creditor protection shall be without prejudice to the application of national laws concerning 
the satisfaction or securing of payments owed to public bodies.  

Article 86l: this article deals with the participation of employees in the company carrying out 
a conversion, where the protection of the rights of participation is put at risk by the operation. 
In principle, the company will have to follow the respective rules of the destination Member 
State, unless the national law of that Member State does not provide for the same level of the 
employees'  participation  in  the  company's  management  or  supervisory  organs.  This  article 
will also apply if the number of the employees exceeds four fifths of the threshold set out in 
the  national  law  of  the  departure  Member  State  triggering  the  employee  participation  right 
pursuant to Article 2 of Directive 2001/86/EC, or irrespective of the number of the employees 
the rules of employees' participation in the destination Member State do not provide for the 
same  level  of  the  participation.  If  this  is  the  case,  the  company  will  have  to  enter  into 
negotiations  with  the  employees  to  determine  their  participation.  The  negotiations  will  be 
obligatory, and will have to result either in a bespoke arrangement regulating the involvement 
of  employees  or,  in  case  no  agreement  is  reached  within  6  months,  the  standard  rules  of 
employees'  participation  as  laid  down  in  the  Annex  (in  particular  point  (a)  of  Part  3)  of 
Directive 2001/86/EC will apply. In accordance with Directive 2001/86/EC, the negotiations 

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have to  start as  soon as possible after the draft terms of the conversion are made  publically 
available.  The  company  will  have  to  preserve  at  least  for  three  years  in  substance  the 
employees'  participation  rights  in  case  of  subsequent  operations  like  mergers,  divisions  or 
conversion. The company will be obliged to communicate the outcome of the negotiations to 
its employees. 

Articles  86m  and  86n:  these  articles  govern  the  assessment  of  the  legality  of  cross-border 
conversions by the competent authority of a departure Member State. This Member State shall 
assess the completion of the cross-border conversion in respect to the procedure governed by 
the respective national law. The rules are based on the corresponding principles provided for 
in Regulation (EC) No 2157/2001 for the SE and in the rules related to cross-border mergers. 
The  competent  authority  of  the  departure  Member  State  shall  conduct  an  assessment  of  the 
formal completion of the procedure by the company and additionally shall determine whether 
the intended conversion does not constitute an artificial arrangement as referred to above. In 
case  the  authority  has  serious  concerns  that  the  cross-border  conversion  may  constitute  an 
artificial arrangement, it may perform an in-depth assessment. 

Article  86o  lays  down  provisions  related  to  review  of  the  decisions  taken  by  the  national 
competent authority as regards the issuance or refusal to issue the pre-conversion certificate. 
It also deals with the availability of such decision through the interconnection system and the 
transmission  of  the  pre-conversion  certificate  to  the  destination  Member  State  by  digital 
means of communication.  

Article 86p governs the scrutiny of legality of the cross-border conversion by the destination 
Member  State.  The  authority  of  that  Member  State  checks  in  particular  the  incorporation 
requirements and the results of the negotiations on employee participation, where applicable. 

Article  86q  governs  the  arrangements  to  disclose  the  completion  of  the  registration  and  the 
information  which  must  be  entered  into  the  registers.  The  information  on  the  registration 
should be exchanged between the registers automatically, so that the departure Member State 
would immediately be able to take actions for the striking off the company from its business 
register.  

Article 86r stipulates that the cross-border conversion takes effect from the day of registration 
of the converted company in the destination Member State.  

Article 86s: this provision describes the consequences of the cross-border conversion.  

Article 86t: the provision stipulates that Member States should lay down rules on the liability 
of the independent expert. 

Article 86u: the validity of the cross-border conversion cannot be challenged if the procedure 
for the cross-border conversion was respected. 

Cross-border mergers 

Article 119 is amended to include into a definition of a cross-border merger as an operation 
between companies in which a company being acquired transfers all its assets and liabilities 
into the acquiring company without issuing new shares. Such an operation will fall under the 
scope  of  this  Article,  if  the  merging  companies  are  owned  by  the  same  person  or  the 

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ownership  structure  in  all  merging  companies  remains  identical  after  the  completion  of  the 
operation. 

Article 120 is extended to cover more situations where companies shall be excluded from the 
scope of application, for example where proceedings of winding-up, liquidation or insolvency 
have been instituted or suspension of payments is on-going.  

Article  121  is  amended  by  deleting  references  to  protection  of  creditors  and  protection  for 
minority shareholders because these will be harmonised under Articles 126a and 126b. 

Article 122 is amended to specify that the common draft terms of cross-border merger shall 
also include the offer of cash compensation for members who did not vote for the merger as 
well as safeguards offered to creditors. Additionally, it provides for a language regime of the 
common draft terms of cross-border mergers 

A new Article 122a is added which introduces rules on determination of the date from which 
the transactions of the merging companies will be treated for accounting purposes  

The amended Article 123 provides, as a default rule, for the disclosure of the common draft 
terms in the business registers of the merging companies. Alternatively, Member States have a 
possibility  to  exempt  companies  from  the  disclosure  obligation  in  the  business  registers,  in 
case companies make the draft terms available on their websites and fulfil specific conditions 
in this regard. In the latter case, companies must disclose certain specific information in the 
business registers. Companies must, in principle, be able to submit the necessary information 
fully on-line without the need for physical presence before any national authority, unless there 
is  a  genuine  suspicion  of  fraud.  The  access  to  such  information  must  be  free  of  charge.  In 
addition, Member States may publish the common draft terms in the national gazette, in this 
case the national register shall submit the relevant information to the national gazette (once-
only principle).  

The amended Article 124 specifies that the report addressed to the members of the merging 
company shall explain the implications of the cross-border merger on the future business and 
the  management's  strategic  plan  as  well  as  the  implications  of  the  cross-border  merger  for 
members.  In  addition,  the  report  shall  explain  the  share  exchange  ratio  and  describe  any 
special  valuation  difficulties  as  well  as  remedies  available  to  certain  members.  The  report 
must  also  be  available  to  the  employees.  The  report  may  be  waived  if  all  members  of  the 
merging companies agree.  

The new Article 124a  sets out that each of the merging  companies  shall  provide employees 
with a report that addresses the important issues for the employees in the context of the cross-
border  merger.  The  representatives  of  the  employees  or  the  employees  themselves  in  cases 
where  there  are  no  representatives  will  have  the  right  to  express  their  opinion.  The  opinion 
must be submitted to shareholders and appended to the report.  

The  new  Article  126a  provides  for  safeguards  for  members.  It  establishes  an  exit  right  for 
those members that oppose the merger. This applies for either those who did not vote for the 
approval of the cross-border merger or those that do not agree with the merger but do not have 
voting  rights.  The  company,  remaining  members,  or  third  parties  in  agreement  with  the 
company  must  acquire  the  shares  of  the  members  exercising  the  exit  right  in  exchange  for 
adequate cash compensation. Since the existing rules on cross-border mergers already provide 
for the appointment of an independent expert (Article 125), this expert shall also review the 
adequacy  of  the  cash  compensation.  If  the  members  consider  that  the  offered  cash 
compensation has been inadequately set, they are entitled to demand for its recalculation by 
the national court.  Members  wishing to  remain in  the company have  also right to  challenge 

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the  share-exchange  ratio  which  shall  be  explained  and  justified  in  the  report  referred  to  in 
Article 124.  

The new Article 126b provides for safeguards for creditors. First, Member States may require 
management  or  administrative  organ  of  the  merging  company  to  make  a  declaration  stating 
that they are not aware of any reason why the company resulting from the merger should not 
be  able  to  meet  its  liabilities.  Secondly,  creditors  who  are  dissatisfied  with  the  protection 
offered  to  them  in  the  draft  terms  of  merger  shall  have  the  right  to  apply  to  the  competent 
authority for adequate safeguards. However, the competent authority shall apply a rebuttable 
presumption that the creditors are not prejudiced by the cross-border merger if the company 
has offered a right to payment (against a third party guarantor or the company resulting from 
the merger) of the equivalent value to their original claim which may be brought before the 
same  jurisdiction  as  the  original  claim,  or  if  the  independent  expert  report,  which  was 
disclosed  to  creditors,  confirmed  that  the  company  would  be  able  satisfy  its  creditors.  The 
provisions on creditor protection shall be without prejudice to the application of national laws 
concerning the satisfaction or securing of payments owed to public bodies.  

The modified Articles 127 and 128 stipulate that for the purposes of the pre-merger certificate 
and  scrutiny  of  legality  of  the  cross-border  merger,  companies  shall  be  able  to  file  any 
information and documents fully on-line. In addition, the Articles set out that the pre-merger 
certificates must be transmitted through the system of interconnection of registers (BRIS) to 
the Member State authority which will scrutinise the legality of the cross-border merger. It is 
further stipulated that the pre-merger certificate(s) must be accepted as a conclusive evidence 
of  the  proper  completion  of  pre-merger  acts  and  formalities.  Member  States,  in  case  of 
genuine  suspicion  of  fraud,  shall  be  able  to  require  physical  presence  before  a  competent 
authority. 

Article 131 is amended by explaining that all the assets and liabilities of the company being 
acquired  or  of  the  merging  companies  include  all  their  contracts,  credits,  rights  and 
obligations.  

Article 132 is amended by extending the simplified formalities to the situation in which the 
cross-border  merger  is  carried  out  by  companies  where  one  person  holds  all  shares.  In 
addition,  in  cases  where  no  general  meeting  is  required  in  any  of  the  merging  companies, 
Article 132 lays down a specific reference date for the disclosure of the common draft terms 
of  cross  border  merger  and  the  reports  of  the  management  or  administrative  organ  of  the 
merging companies. 

Article  133  paragraph  7  which  stipulates  that  during  3  years  following  the  cross-border 
merger,  the  company  would  not  be  able  to  perform  a  subsequent  domestic  merger  which 
would  result  in  undermining  the  system  of  employee  participation  is  amended  to  cover  all 
possible  subsequent  domestic  operations  (i.e.  mergers,  divisions  and  conversions)  and  not 
only  domestic  mergers.  In  addition,  Article  133  is  amended  by  adding  an  obligation  for 
companies  to  communicate  to  their  employees  whether  the  company  decides  to  apply 
standard  rules  or  whether  it  decides  to  enter  into  negotiations  with  employees.  In  the  latter 
case, the company shall inform the employees of the results of the negotiations. 

A  new  Article  133a  is  added  addressing  Member  States'  rules  on  the  civil  liability  of  the 
independent expert. 

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Cross-border divisions 

Article 160a sets out the scope of the proposal which regulates the cross-border divisions of 
private and public limited liability companies. 

Article 160b contains definitions. To ensure the consistency with the existing EU acquis in the 
company law area, the provisions of the cross-border divisions legal framework apply to the 
same companies as the provisions on cross-border conversions.  

Article 160c sets further limitations for the application of this Chapter.  

Article 160d sets out the conditions under which cross-order divisions can be carried out, the 
verification  of  them  and  applicable  law.  In  particular,  it  lays  down  the  requirement  that 
companies  that  are  subject  to  insolvency  or  similar  proceedings  cannot  be  the  object  of 
division as regulated in this Directive. In addition, pursuant to the general principle that EU 
law cannot be invoked to justify abuse of rights as established in the ECJ's case law, a cross-
border  division  cannot  be  authorised  when  it  is  determined,  after  examination  of  each 
individual case and having regard to all relevant facts and circumstances, that it constitutes an 
artificial arrangement aimed at obtaining undue tax advantages or unlawfully prejudicing the 
legal or contractual rights of employees, creditors or members.  

Article 160e: the provision sets the minimum scope of information to be provided in the draft 
terms of the cross-border division  which will  be made  publically available for every person 
interested  in  operation.  The  draft  terns  will  have  to  provide  information  regarding  the 
company  being  divided,  the  registered  office,  the  allotment  of  shares  in  the  recipient 
companies,  share  exchange  ratio,  allotment  of  assets  and  liabilities  between  recipient 
companies  as  well  as  and  the  protection  offered  for  the  relevant  stakeholders:  shareholders, 
creditors and employees. This article stresses the importance of draft terms but also increases 
as much as possible the ease in their compilation in that it offers companies a possibility to 
draft them, in addition to the official language or languages of the Member States concerned, 
also in the language most commonly used in business transactions; in such case, the Member 
State may determine which language version is the decisive one in case of discrepancies. 

Article 160f sets out rules to determine the date from which the transactions of the company 
being  divided  will  be  treated  for  accounting  purposes  as  being  those  of  the  recipient 
companies. 

Article  160g:  this  article  sets  out  the  requirement  for  preparing  a  report  for  shareholders 
explaining  in  detail  the  aim  of  the  division,  the  company's  plans  and  the  safeguards  for 
shareholders. The report shall in particular include the impact of the division on the activity of 
the  company  and  its  interests,  on  the  interests  of  shareholders  and  the  measures  to  protect 
them.  The  report  should  be  also  available  to  the  employees.  In  line  with  the  principle  of 
proportionality, the report may be waived if all members of the company so agreed. 

Article  160h:  this  article  requires  a  report  to  be  drawn  by  the  company  addressing  issues 
essential for the employees of the company carrying out a cross-border division. This report 
shall  describe  and  assess  the  impact  of  the  division  for  the  terms  of  the  employment 
agreements  of  the  employees.  It  shall  be  made  available  to  the  representatives  of  the 
employees  or  to  the  employees  themselves  in  case  there  are  no  such  representatives.  The 
provision further clarifies that the provision of the report is without prejudice to the applicable 
information and consultation proceeding already provided for in the acquis. 

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Article  160i  concerns  the  examination  by  an  independent  expert.  The  accuracy  of  the 
information provided in the draft terms of the cross-border division and in the reports of the 
management  or  administrative  organ  shall  be  subject  to  the  assessment  by  an  independent 
expert report appointed by the competent authority. The report shall also include all relevant 
information  about  the  company  and  intended  division  allowing  the  competent  authority  to 
assess inter alia whether the operation constitutes an artificial arrangement. The article further 
sets out the procedure, timeline and the competences of the independent expert, including the 
protection of confidential information. 

In line with the principle of proportionality, micro and small enterprises are exempted from 
the requirement of an independent expert report. 

Article  160j:  this  article  lays  down  for  the  rules  for  the  disclosure  of  the  draft  terms  of  the 
cross-border  division  and  the  independent  expert  report  which  should  be  publicly  available 
free  of  charge.  At  the  same  time,  the  disclosure  will  include  a  notice  inviting  members, 
creditors  and  employees  of  the  company  to  submit  comments.  The  disclosure  requirements 
shall  guarantee  an  immediate  access  to  the  draft  terms  for  the  protection  of  the  relevant 
stakeholders. This Article sets out the principle that the draft terms shall be disclosed in the 
business register as the most common point of reference for stakeholders. Member States may 
allow a company to disclose the draft terms on its website, but in that case the most important 
information will still be required to be disclosed in the business register. The Article provides 
for a possibility for Member States to preserve additional publication in the national gazette 
and charge fees for it. 

In order to facilitate the access to the disclosed information, the disclosed draft terms of cross-
border  division,  the  notice  and  the  expert  report  must  be  accessible  to  the  public  free  of 
charge.  Fees  charged  for  the  disclosure  may  not  go  beyond  the  administrative  cost  of  the 
service. 

Article 160k: this article lays down the requirement of approval of the draft terms of cross-
border  division  by  the  general  meeting  of  a  company  being  divided.  A  similar  requirement 
exists in the case of cross-border mergers. Member States may set out the requirements for the 
qualified majority of the votes cast for the approval of the draft terms; however, the required 
majority requirements may not exceed the requirements applicable for cross-border mergers.  

Article  160l  provides  for  safeguards  for  shareholders  and  establishes  an  exit  right  for  those 
shareholders that oppose the cross-border divisions. This applies for either those who did not 
vote for the cross-border division or those that do not agree with the division but do not have 
voting rights. The company, remaining shareholders or third parties must acquire the shares of 
the  members  exercising  the  exit  right  in  exchange  for  adequate  cash  compensation.  The 
independent  expert  shall  review  the adequacy  of  the  cash  compensation.  If  the  shareholders 
consider  that  the  offered  cash  compensation  has  been  inadequately  set,  they  are  entitled  to 
challenge  its  amount  before  the  courts  of  the  departure  Member  State. Members  wishing  to 
remain in the company have also right to challenge the share-exchange ratio which shall be 
explained and justified in the report referred to in Article 160g.  

Article  160m  provides  for  safeguards  for  creditors.  Member  States  may  provide  that  the 
company  being  divided  should  make  a  declaration  as  part  of  the  draft  terms  of  the  cross-
border  division  stating  that  the  division  will  not  affect  the  ability  to  satisfy  the  obligations 
towards third parties and that the creditors will not be prejudiced. 

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Creditors will also have the right to apply to the competent administrative or judicial authority 
to grant them adequate protection. The authorities will apply the rebuttable presumption that 
the creditors are not  prejudiced if  an independent  expert report concluded that there was no 
reasonable likelihood that the rights of creditors would be prejudiced or if the company being 
divided  offered  a  right  to  payment  either  against  a  third  party  guarantor  or  against  the 
converted company for the original value of the claim in question on condition that it may be 
brought  before  the  same  jurisdiction  as  the  original  claim.  The  provisions  on  creditor 
protection  shall  be  without  prejudice  to  the  application  of  national  laws  concerning  the 
satisfaction or securing of payments owed to public bodies. 

Article  160n  deals  with  the  participation  of  employees  in  the  management  or  supervisory 
organs  of  the  companies  involved  in  the  cross-border  division,  where  existing  participation 
rights in the company being divided are put at risk by the cross-border division. In principle, 
the  employee  participation  in  the  recipient  companies  would  have  to  follow  the  respective 
rules of Member States where these companies will be registered, unless the national laws of 
these Member States do not provide for the same level of the employees' participation in the 
company's  administrative  or  supervisory  organs  as  existing  in  the  company  being  divided. 
This article will also apply, if the number of the employees exceeds 4/5 of the threshold set 
out  in  the  national  law  of  the  Member  State  of  the  company  being  divided  triggering  the 
employee  participation  right  pursuant  to  article  2  of  Directive  2001/89/EC,  or  despite  the 
number  of  the  employees  the  rules  of  employees'  participation  in  the  Member  States  of 
recipient companies do not provide for the same level of the participation. If this is the case, 
the  company  will  have  to  enter  into  negotiations  with  the  employees  to  determine  their 
participation in the recipient companies. The negotiations will be obligatory, and will have to 
result either with bespoke arrangements regulating the involvement of employees or, in case 
no  agreement  is  reached  within  6  months,  the  standard  rules  of  employees'  participation  as 
laid  down  in  the  Annex  (in  particular  Part  3  of  Directive  2001/86/EC  will  apply).  In 
accordance with Directive 2001/86/EC, the negotiations have to start as soon as possible after 
the  draft  terms  of  the  cross-border  division  are  made  publically  available.  The  recipient 
companies  will  have  to  preserve  at  least  for  three  years  in  substance  the  employees' 
participation  rights  in  case  of  subsequent  operations  like  mergers,  divisions  or  conversions. 
The  company  will  be  obliged  to  communicate  the  outcome  of  the  negotiations  to  its 
employees. 

Article 160o and 160p: these articles govern the assessment of the legality of the cross-border 
division  by  the  competent  authority  of  a  Member  State  to  which  jurisdiction  the  company 
being divided is  subject. This  Member State shall assess the completion of the cross-border 
division  in  respect  to  the  procedure  governed  by  the  respective  national  law.  The  rules  are 
based on the corresponding principles provided for in Regulation (EC) No 2157/2001 for the 
SE and in the rules related to cross-border mergers. The competent authority of that Member 
State shall conduct an assessment of the formal completion of the procedure by the company 
and additionally shall determine whether the intended division does not constitute an artificial 
arrangement as referred to above. 

In case the authority has serious concerns that the cross-border conversion may constitute an 
artificial arrangement, it should perform an in-depth assessment. 

Article  160q  lays  down  provisions  related  to  review  of  the  decisions  taken  by  the  national 
competent authority as regards the issuance or refusal to issue the pre-conversion certificate. 
It also deals with the availability of such decision through the interconnection system and the 

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transmission of the pre-conversion certificate to the destination Member State. These articles 
also  mandate  the  use  of  digital  communication  between  business  registers  in  order  to 
exchange decisions issued by the competent authorities. 

Article  160r  governs  the  scrutiny  of  legality  of  the  cross-border  division  by  each  of  the 
Member  States  concerned.  The  authorities  of  recipient  companies  check,  in  particular,  the 
incorporation  requirements  and  the  results  of  the  negotiations  on  employee  participation, 
where applicable. 

Article  160s  sets  out  the  arrangements  concerning  the  registration  of  a  division  and 
information  that  must  be  made  publically  available.  The  information  on  the  registration 
should be exchanged between the registers automatically via the system of interconnection of 
registers.  

Article 160t: the law of the Member State of the company being divided determines the date 
on which the cross-border division takes effect.  

Article 160u: this provision describes the consequences of the cross-border division. 

Article  160v:  the  provision  stipulates  that  Member  States  should  lay  down  rules  on  the 
liability of the independent expert. 

Article 160w: the validity of the cross-border division cannot be challenged if the procedure 
for the cross-border division was respected. 

Reporting and review 

Article 3: sets out the obligation for the Commission to evaluate this Directive, including an 
assessment of the feasibility of providing rules for types of cross-border divisions which are 
not  covered  by  this  Directive.  Member  States  shall  contribute  to  the  report  by  providing 
relevant data. 

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2018/0114 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and 
divisions  

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 50 (1) and (2) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee1, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The  Directive  (EU)  2017/1132  of  the  European  Parliament  and  of  the  Council2 
regulates cross-border mergers of limited liability companies. These rules represent a 
significant milestone in improving the functioning of the Single Market for companies 
and firms and to exercise the freedom of establishment. However, evaluation of these 
rules  shows  that  there  is  a  need  for  modifications  in  cross-border  merger  rules. 
Furthermore, it is appropriate to provide for rules regulating cross-border conversions 
and divisions.  

Freedom  of  establishment  is  one  of  the  fundamental  principles  of  Union  law.  Under 
the second paragraph of Article 49 of the Treaty on the Functioning of the European 
Union (‘TFEU’), when read in conjunction with Article 54 of the TFEU, the freedom 
of  establishment  for  companies  or  firms  includes,  inter  alia,  the  right  to  form  and 
manage such companies or firms under the conditions laid down by the legislation of 
the Member State of establishment. This has been interpreted by the Court of Justice 
of  the  European  Union  as  encompassing  the  right  of  a  company  or  firm  formed  in 
accordance with the legislation of a Member State to convert itself into a company or 
firm governed by the law of another Member State, provided that the conditions laid 

1 
2 

OJ C , , p. . 
Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to 
certain aspects of company law (codification) (OJ L 169, 30.6.2017, p. 46). 

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(3) 

(4) 

(5) 

(6) 

(7) 

down by the legislation of that other Member State are satisfied and, in particular, that 
the test adopted by the latter Member State to determine the connection of a company 
or firm to its national legal order is satisfied.  

In the absence of harmonisation of Union law, the definition of the connecting factor 
that determines the national law applicable to a company or firm falls, in accordance 
with  Article  54  of  the  TFEU,  within  the  competence  of  each  Member  State  to  so 
define.  Article  54  of  the  TFEU  places  the  factor  of  the  registered  office,  the  central 
administration  and  the  principal  place  of  business  of  a  company  or  firm  at  the  same 
degree of connection. Therefore, as clarified in case-law,3 where the Member State of 
new establishment, namely the destination Member State, requires only the transfer of 
the  registered  office  as  a  connecting  factor  for  the  existence  of  a  company  under  its 
national  legislation,  the  fact  that  only  the  registered  office  (and  not  the  central 
administration or principal place of business) is transferred does not as such exclude 
the applicability of the freedom of establishment under Article 49 of the TFEU. The 
choice  of  the  specific  form  of  company  in  cross-border  mergers,  conversions  and 
divisions or the choice of a Member State of establishment are inherent in the exercise 
of the freedom of establishment guaranteed by the TFEU as part of a Single Market. 

These developments in the case-law have opened up new opportunities for companies 
and  firms  in  the  Single  Market  in  order  to  foster  economic  growth,  effective 
competition  and  productivity.  At  the  same  time,  the  objective  of  a  Single  Market 
without internal borders for companies must also be reconciled with other objectives 
of  European  integration  such  as  social  protection  (in  particular  the  protection  of 
workers),  the  protection  of  creditors  and  the  protection  of  shareholders.  Such 
objectives,  in  the  absence  of  harmonised  rules  specifically  regarding  cross-border 
conversions,  are  pursued  by  Member  States  through  a  number  of  multifarious  legal 
provisions  and  administrative  practices.  As  a  result,  whereas  companies  are  already 
able to merge cross-border, they experience a number of legal and practical difficulties 
when wishing to perform a cross-border conversion. Moreover, the national legislation 
of  many  Member  States  provides  for  the  procedure  of  domestic  conversions  without 
offering an equivalent procedure for converting cross-border. 

This  leads  to  legal  fragmentation  and  legal  uncertainty,  and  thus  to  barriers  to  the 
exercise  of  the  freedom  of  establishment.  It  also  leads  to  a  suboptimal  protection  of 
employees, creditors and minority shareholders within the Single Market.  

It is appropriate therefore to provide procedural and substantive rules on cross-border 
conversions  which  would  contribute  to  the  abolition  of  restrictions  on  freedom  of 
establishment and provide at the same time adequate and proportionate protection for 
stakeholders such as employees, creditors and minority shareholders. 

The right to convert an existing company formed in a Member State into a company 
governed by another Member State may in certain circumstances be used for abusive 
purposes such as for the circumvention of labour standards, social security payments, 
tax  obligations,  creditors',  minority  shareholders'  rights  or  rules  on  employees 

3 

Judgment  of  the  Court  of  Justice  of  25  October  2017,  Polbud  –  Wykonawstwo,  C-106/16, 
ECLI:EU:C:2017:804, paragraph 29. 

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participation.  In  order  to  combat  such  possible  abuses,  a  general  principle  of  Union 
law, Member States are required to ensure that companies do not use the cross-border 
conversion  procedure  in  order  to  create  artificial  arrangements  aimed  at  obtaining 
undue  tax  advantages  or  at  unduly  prejudicing  the  legal  or  contractual  rights  of 
employees,  creditors  or  members.  In  so  far  as  it  constitutes  a  derogation  from  a 
fundamental  freedom,  the  fight  against  abuses  must  be  interpreted  strictly  and  be 
based  on  an  individual  assessment  of  all  relevant  circumstances.  A  procedural  and 
substantive  framework  which  describes  the  margin  of  discretion  and  allows  for  the 
diversity  of  approach  by  Member  States  whilst  at  the  same  time  setting  out  the 
requirements  to  streamline  the  actions  to  be  taken  by  national  authorities  to  fight 
abuses in conformity with Union law should be laid down.  

The  carrying  out  of  a  cross-border  conversion  entails  a  change  of  legal  form  for  a 
company  without  losing  its  legal  personality.  However,  it  should  not  lead  to  the 
circumvention of the requirements for incorporation in the destination Member State. 
Such  conditions,  including  the  requirements  to  have  a  head  office  in  the  destination 
Member  State  and  those  relating  to  the  disqualification  of  directors,  should  be  fully 
respected  by  the  company.  However,  the  application  of  such  conditions  by  the 
destination  Member  State  may  not  affect  the  continuity  of  the  converted  company's 
legal  personality.  A  company  may  convert  into  any  legal  form  which  exists  in  the 
destination Member State, in accordance with Article 49 of the TFEU.  

Given  the  complexity  of  cross-border  conversions  and  the  multitude  of  the  interests 
concerned,  it  is  appropriate  to  provide  for  an  ex-ante  control  in  order  to  create  legal 
certainty.  To  that  effect,  a  structured  and  multi-layered  procedure  should  be  set  out 
whereby the competent authorities of both the departure and the destination Member 
State ensure that a decision on the approval of a cross-border conversion is taken in a 
fair, objective and non-discriminatory manner on the basis of all relevant elements and 
by  taking  into  account  all  legitimate  public  interests,  in  particular,  the  protection  of 
employees, members and creditors.  

(8) 

(9) 

(10)  To allow all stakeholders' legitimate interests to be taken into account in the procedure 
governing a cross-border conversion, the company should disclose the draft terms of 
the  cross-border  conversion  containing  the  most  important  information  about  the 
proposed  cross-border  conversion,  including  the  envisaged  new  company  form,  the 
instrument  of  constitution  and  the  proposed  timetable  for  the  conversion.  Members, 
creditors  and  employees  of  the  company  carrying  out  the  cross-border  conversion 
should be notified in order that they can submit comments with regard to the proposed 
conversion.  

(11) 

In  order  to  provide  information  to  its  members,  the  company  carrying  out  the cross-
border conversion should prepare a report. The report should explain and substantiate 
the legal and economic aspects of the proposed cross-border conversion, in particular 
the implications of the cross-border conversion for members with regard to the future 
business  of  the  company  and  the  management  organ's  strategic  plan.  It  should  also 
include  potential  remedies  available  to  members,  where  they  do  not  agree  with  the 
decision  to  carry  out  a  cross-border  conversion.  This  report  should  also  be  made 
available to the employees of the company carrying our cross-border conversion. 

(12) 

In order to provide information to its employees, the company carrying out the cross-
border conversion should prepare a report explaining the implications of the proposed 
cross-border  conversion  for  employees.  The  report  should  explain  in  particular  the 
implications of the proposed cross-border conversion on the safeguarding of the jobs 

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(13) 

of  the  employees,  whether  there  would  be  any  material  change  in  the  employment 
relationships and the locations of the companies’ places of business and how each of 
these factors would relate to any subsidiaries of the company. This requirement should 
not however apply where the only employees of the company are in its administrative 
organ.  The  provision  of  the  report  should  be  without  prejudice  to  the  applicable 
information  and  consultation  proceedings  instituted  at  national  level  following  the 
implementation  of  Directive  2002/14/EC  of  the  European  Parliament  and  of  the 
Council4 or Directive 2009/38/EC of the European Parliament and of the Council5. 

In  order  to  assess  the  accuracy  of  the  information  contained  in  the  draft  terms  of 
conversion and in the reports addressed to the members and employees and to provide 
factual  elements  necessary  to  assess  whether  the  proposed  conversion  constitutes  an 
artificial arrangement, an independent expert report should be required to be prepared 
in  order  to  assess  the  proposed  cross-border  conversion.  In  order  to  secure  the 
independence of the expert, the expert should be appointed by the competent authority, 
following  an  application  by  the  company.  In  this  context,  the  expert  report  should 
present  all  relevant  information  to  enable  the  competent  authority  in  the  departure 
Member  State  to  take  an  informed  decision  as  to  whether  or  not  to  issue  the  pre-
conversion certificate. To this end, the expert should be able to obtain all the relevant 
company  information  and  documents  and  carry  out  all  necessary  investigations  in 
order  to  gather  all  the  evidence  required.  The  expert  should  use  information,  in 
particular net turnover and profit or loss, number of employees and the composition of 
balance  sheet  collected  by  the  company  in  view  of  the  preparation  of  financial 
statements in accordance with Union law and the law of Member States. However, in 
order  to  protect  any  confidential  information,  including  business  secrets  of  the 
company,  such  information  should  not  form  part  of  the  expert’s  final  report  which 
itself would be publically available.  

(14)  With  a  view  to  avoiding  disproportionate  costs  and  burdens  for  smaller  companies 
carrying out the cross-border conversion, micro and small enterprises, as defined in the 
Commission  Recommendation  2003/361/EC6,  should  be  exempted  from 
the 
requirement to produce an independent expert report. However, these companies can 
resort to an independent expert report to prevent litigation costs with creditors. 

(15)  On the basis of the draft terms of conversion and the reports,  the general meeting of 
the members of the company should decide on whether or not to approve those draft 
terms.  It  is  important  that  the  majority  requirement  for  such  a  vote  should  be 
sufficiently high in order to ensure that the decision to convert is a collective one. In 

4 

5 

6 

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  (OJ  L  80, 
23.3.2002, p. 29). 
Directive  2009/38/EC  of  the  European  Parliament  and  of  the  Council  of  6  May  2009  on  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 
(Recast) (OJ L 122, 16.5.2009, p. 28). 
Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small 
and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36). 

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addition, members should also have the right to vote on any arrangements concerning 
employee participation, if they have reserved that right during the general meeting. 

(16) 

It is appropriate  that those  members who held voting rights and who did  not  vote to 
approve the draft terms of conversion and those members without voting rights, who 
could  not  present  their  position,  should  be  afforded  the  right  to  exit  the  company. 
Those members should be able to leave the company and receive cash compensation 
for their shares equivalent to the value of their shares. Furthermore, they should have a 
right  to  challenge  the  calculation  and  adequacy  of  that  cash  compensation  offered 
before a court.  

(17)  The company carrying a cross-border conversion should also set out in the draft terms 
of  conversion  measures  to  ensure  the  protection  of  creditors.  In  addition,  in  order  to 
strengthen  the  protection  of  creditors  in  the  case  of  insolvency  of  the  company 
following  the  cross-border  conversion,  Member  States  should  be  allowed  to  require 
the  company  to  make  a  declaration  of  solvency  stating  that  it  is  not  aware  of  any 
reason why the converted company should not be able to meet its liabilities. In those 
circumstances,  Member  States  should  be  able  to  make  the  members  of  the 
management  organ  personally  liable  for  the  accuracy  of  that  declaration.  As  legal 
traditions vary amongst Member States with regard to the use of solvency declarations 
and their possible consequences, it should be up to Member States to draw appropriate 
consequences for providing inaccurate or misleading declarations, including effective 
and proportionate sanctions and liabilities in compliance with Union law.  

(18) 

(19) 

In order to guarantee the appropriate protection of creditors in cases where they are not 
satisfied  with  the  protection  offered  by  the  company  in  the  draft  terms  of  the  cross-
border  conversion,  creditors  may  apply  to  the  competent  judicial  or  administrative 
authority  of  the  departure  Member  State  for  the  adequate the  safeguards.  In  order  to 
facilitate  the  assessment  of  prejudice,  certain  presumptions  should  be  laid  down 
whereby creditors would be deemed not to be prejudiced by a cross-border conversion, 
where  the  risk  of  loss  to  a  creditor  is  remote.  A  presumption  should  arise  where  an 
independent  expert  report  concludes  that  there  is  no  reasonable  likelihood  that  the 
creditors would be prejudiced or where creditors are offered a right to payment against 
the  converted  company  or  against  a  third  party  guarantee  of  equivalent  value  to  the 
creditor's  original  claim  and  which  can  be  brought  in  the  same  jurisdiction  as  the 
original claim. The creditor protection provided for in this Directive should be without 
prejudice  to  national  laws  of  the  Member  State  of  departure  concerning  payment  to 
public bodies, including taxation or social security contributions.  

In order to ensure that employee participation is not unduly prejudiced as a result of 
the  cross-border  conversion,  where  the  company  carrying  out  the  cross-border 
conversion  is  operating  under  an  employee  participation  system  in  the  departure 
Member  State,  the  company  should  be  obliged  to  take  a  legal  form  allowing  for  the 
exercise of such participation, including through the presence of representatives of the 
employees in the appropriate management or supervisory organ of the company in the 
destination Member State. Moreover, in such a case, a bona fide negotiation between 
the  company  and  its  employees  should  take  place,  along  the  lines  of  the  procedure 
provided  for  in  Directive  2001/86/EC,  with  a  view  to  finding  an  amicable  solution 
reconciling the right  of the  company  to  carry  out  a  cross-border  conversion  with  the 
employees' rights of participation. As a result of those negotiations, either a bespoke 
and  agreed  solution  or,  in  the  absence  of  an  agreement,  the  application  of  standard 
rules as set out in the Annex to Directive 2001/86/EC should apply, mutatis mutandis. 
In order to protect either the agreed solution or the application of those standard rules, 

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the company should not be able to remove the participation rights through carrying out 
subsequent domestic or cross-border conversion, merger or division within three years.  

(20) 

In order to prevent the circumvention of employee participation rights by means of a 
cross-border conversion, the company carrying out a conversion which is registered in 
the Member State which provides for the employee participation rights, should not be 
able to perform a cross-border conversion without first entering into negotiations with 
its  employees  or  their  representatives  when  the  average  number  of  employees 
employed  by  that  company  is  equivalent  to  four  fifths  of  the  national  threshold  for 
triggering such employee participation.  

(21)  To  ensure  a  proper  allocation  of  tasks  among  Member  States  and  an  efficient  and 
effective  ex-ante  control  of  cross-border  conversions,  both  the  departure  and  the 
destination Member States should designate the appropriate competent authorities. In 
particular, the competent authorities of the departure Member States should have the 
power to issue a pre-conversion certificate without which the competent authorities in 
the  destination  Member  State  should  not  be  able  to  complete  the  cross-border 
conversion procedure.  

(22)  The  issue  of  the  pre-conversion  certificate  by the  departure Member  State  should  be 
scrutinised to ensure the legality of the cross-border conversion of the company. The 
competent authority of the departure Member State should decide on the issue of the 
pre-conversion certificate within one month of the application by the company, unless 
it  has  serious  concerns  as  to  the  existence  of  an  artificial  arrangement  aimed  at 
obtaining undue tax advantages or unduly prejudicing the legal or contractual rights of 
employees, creditors or members. In such a case, the competent authority should carry 
out an in-depth assessment. However, this in-depth assessment should not be carried 
out systematically, but it should be conducted on a case-by-case basis, where there are 
serious concerns as to the existence of an artificial arrangement. For their assessment, 
competent authorities should take into account at least a number of factors laid down 
in this Directive which however should be only considered as indicative factors in the 
overall  assessment  and  not  be  considered  in  isolation.  In  order  not  to  burden 
companies  with  an  overly  lengthy  procedure,  this  in-depth  assessment  should  in  any 
event  be  concluded  within  two  months  of  informing  the  company  that  the  in-depth 
assessment will be carried out.  

(23)  After  having  received  a  pre-conversion  certificate,  and  after  verifying  that  the 
incorporation  requirements  in  the  destination  Member  State  are  fulfilled,  the 
competent authorities of the destination Member State should register the company in 
the  business  register  of  that  Member  State.  Only  after  this  registration  should  the 
competent  authority  of  the  departure  Member  State  strike  the  company  off  its  own 
register.  It  should  not  be  possible  for  the  competent  authority  of  the  destination 
Member  State  to  challenge  the  accuracy  of  the  information  provided  by  the  pre-
conversion certificate. As a consequence of the cross-border conversion, the converted 
company should retain its legal personality, its assets and liabilities and all rights and 
obligations, including rights and obligations arising from contracts, acts or omissions.  

(24) 

In  order  to  provide  for  the  appropriate  level  of  transparency  and  use  of  digital  tools 
and processes, the decisions of competent authorities in the departure and destination 
Member  States  should  be  exchanged  by  means  of  the  system  of  interconnection  of 
business registers and should be made publically available. 

(25)  The  exercise  of  the  freedom  of  establishment  by  a  company  includes  also  the 
possibility  of  a  company  merge  cross-border.  Directive  2017/1132  of  the  European 

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Parliament and of the Council provides, amongst other matters, for rules to enable the 
cross-border  mergers  of  limited  liability  companies  established  in  different  Member 
States.  These  rules  represent  a  significant  milestone  in  improving  the  functioning  of 
the  Single  Market  for  companies  by  enabling  them  to  exercise  the  freedom  of 
establishment through the mechanism of cross-border merger.  

(26)  The  evaluation  of  the  implementation  of  the  cross-border  merger  rules  in  Member 
States  has  shown  that  the  number  of  cross-border  mergers  in  the  Union  has 
significantly 
this  evaluation  has  also  revealed  certain 
shortcomings in relation specifically to creditor protection and shareholder protection 
as well as to the lack of simplified procedures which impede the full effectiveness and 
efficiency of those cross-border merger rules.  

increased.  However, 

(27) 

(28) 

In  its  Communication  entitled  ‘Upgrading  the  Single  Market:  more  opportunities  for 
people  and  business’7,  the  Commission  announced  that  it  would  assess  the  need  to 
update the existing rules on cross-border mergers in order to make it easier for SMEs 
to  choose  their  preferred  business  strategy  and  to  better  adapt  to  changes  in  market 
conditions, whilst at the same time not weakening the existing employment protection. 
In  its  Communication  entitled  ‘Commission  Work  Programme  2017  Delivering  a 
Europe  that  protects,  empowers  and  defends’8,  the  Commission  announced  an 
initiative to facilitate the implementation of cross-border mergers. 

In order to further enhance the existing cross-border merger procedure, it is necessary 
to  simplify  those  merger  rules,  where  appropriate,  whilst  at  the  same  time  ensuring 
that stakeholders, and in particular employees, are adequately protected. Therefore, the 
existing  cross-border  merger  rules  should  be  modified  in  order  to  oblige  the 
management  or  administrative  organs  of  the  merging  companies  to  prepare  separate 
reports  detailing  the  legal  and  economic  aspects  of  the  cross-border  merger  for  both 
members  and  for  employees.  The  obligation  on  the  management  or  administrative 
organ of the company to prepare the report for the members may however be waived, 
where  those  members  are  already  informed  about  legal  and  economic  aspects  of  the 
proposed  merger.  However,  the  report  prepared  for  employees  may  only  be  waived 
where the merging companies and their subsidiaries do not have any employees other 
than those who form part of the management or administrative organ.  

(29)  Furthermore,  in  order  to  enhance  the  protection  afforded  to  the  employees  of  the 
merging company or companies, employees or their representatives may provide their 
opinion on the company report setting out the implications of the cross-border merger 
for  them.  The  provision  of  the  report  should  be  without  prejudice  to  the  applicable 
information  and  consultation  proceedings  instituted  at  national  level  following  the 
implementation of Council Directive 2001/23/EC9, Directive 2002/14/EC or Directive 
2009/38/EC. 

7 
8 
9 

COM(2015) 550 final of 28 October 2015. 
COM(2016) 710 final of 25 October 2016. 
Council  Directive  2001/23/EC  of  12  March  2001  on  the  approximation  of  the  laws  of  the  Member 
States  relating  to  the  safeguarding  of  employees'  rights  in  the  event  of  transfers  of  undertakings, 
businesses or parts of undertakings or businesses (OJ L 82, 22.3.2001, p. 16). 

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(30)  Divergences  in  accounting  rules  may  impede  the  operation  of  cross-border  mergers 
and may lead to legal uncertainty where there is a difference in the date on which the 
acquired  company's  transactions  become  treated  for  accounting  purposes  as  those  of 
the  company  resulting  from  the  merger  between  Member  States.  This  may  lead  to  a 
situation  where,  during  a  specific  time,  transactions  related  to  the  merging  company 
are  not  reported  at  all  or  during  that  period  there  is  a  duplication  of  reporting 
obligations  for  that  merging  company  in  its  original  Member  State  as  a  separate 
accounting entity and in the Member State of the company resulting from the merger. 
Therefore,  the  accounting  date  should  be  determined  according  to  clear  rules  and 
Member States should ensure that this date is treated, for accounting purposes, as the 
single definite date by the national laws of all parties to the merger. 

(31)  The lack of harmonisation of safeguards for members or creditors has been identified 
an obstacle for cross-border mergers by different stakeholders. Members and creditors 
should  be  offered  the  same  level  of  protection  regardless  of  the  Member  States  in 
which  the  merging  companies  are  situated.  This  is  without  prejudice  to  the  Member 
States’ rules on protecting creditors or shareholders which are outside the scope of the 
harmonised measures, such as transparency requirements.  

(32) 

In  order  to  ensure  that  members  of  the  companies  participating  in  the  cross-border 
merger are treated equally, it is appropriate that members who held voting rights and 
who  did  not  vote  to  approve  the  common  draft  terms  of  merger  or  those  members 
without  voting  rights,  who  could  not  present  their  position,  should  be  afforded  the 
right  to  exit  the company.  Those  members  should  be able to  leave the  company  and 
receive  cash  compensation  for  their  shares  equivalent  to  the  value  of  their  shares. 
Furthermore,  they  should  have  a  right  to  challenge  the  calculation  and  adequacy  of 
that cash compensation offered before a court.  

(33)  Following a cross-border merger, the former creditors of the merging companies may 
see  their  claims  diminish  in  value  where  the  liabilities  of  the  acquiring  company 
exceed  its  assets  or  where  the  merging  company  which  is  liable  for  the  debt  is 
thereafter governed by the law of another Member State. Currently, creditor protection 
rules vary across Member States which adds significant complexity to the cross-border 
merger process and leads to uncertainty both for the companies involved and for their 
creditors in relation to the recovery or satisfaction of their claim. 

(34)  Companies  involved  in  a  cross-border  merger  should  propose  adequate  measures  to 
protect  their  creditors  in  the  common  draft  terms  of  merger.  In  addition,  in  order  to 
strengthen the protection of those creditors in case of insolvency following the cross-
border merger, Member States should be allowed to require the merging companies to 
make a declaration of solvency stating that they are not aware of any reason why the 
company resulting from the merger should not be able to meet its liabilities. In those 
circumstances,  Member  States  should  be  able  to  make  the  members  of  the 
management organ personally liable for the accuracy of that declaration statement. As 
legal  traditions  vary  amongst  Member  States  with  regard  to  the  use  of  solvency 
declarations  and  their  possible  consequences,  it  should  be  up  to  Member  States  to 
draw  appropriate  consequences  for  inaccurate  or  misleading  declarations,  including 
effective and proportionate sanctions and liabilities in compliance with Union law.  

(35) 

In order to guarantee the appropriate protection of creditors in cases where they are not 
satisfied with the protection offered by the company in the common draft terms of the 
cross-border  merger,  creditors  who  are  prejudiced  by  the  cross-border  merger  may 
apply  to  the  competent  administrative  or  judicial  authority  of  each  Member  State  of 

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  EN 

 
the merging companies for the safeguards they consider adequate. In order to facilitate 
the  assessment  of  prejudice,  certain  presumptions  should  be  laid  down  whereby 
creditors would be deemed not to be prejudiced by a cross-border merger, where the 
risk of loss to a creditor is remote. A presumption should arise where an independent 
expert  concludes  that  there  is  no  reasonable  likelihood  that  the  creditors  would  be 
prejudiced  or  where  creditors  are  offered  a  right  to  payment  against  the  merged 
company or against a third party guarantee of equivalent value to the creditor's original 
claim and which can be brought in the same jurisdiction as the original claim.  

(36)  The  existing  Union  law  does  not  provide  for  a  legal  framework  for  cross-border 
divisions of companies and firms, since Directive (EU) 2017/1132 only provides rules 
in Chapter III for domestic divisions of public limited companies.  

(37)  The European Parliament has called upon the Commission to adopt harmonised rules 
on cross-border divisions. This harmonised legal framework would further contribute 
to the removal of restrictions on the freedom of establishment whilst at the same time 
providing  adequate  protection  for  stakeholders  such  as  employees,  creditors  and 
members. 

(38)  This  directive  lays  down  rules  on  cross-border  divisions,  both  for  partial  and  full 
divisions, but only through the formation of new companies. However, this directive 
does  not  provide  a  harmonised  framework  for  cross-border  divisions  in  which  a 
company  transfers  assets  and  liabilities  to  more  than  one  existing  company  as  these 
instances  had  been  viewed  as  being  very  complex,  requiring  the  involvement  of 
competent  authorities  from  several  Member  States  and  entailing  additional  risks  in 
terms of fraud and the circumvention of those rules. 

(39) 

In case of a cross-border division involving newly formed recipient companies, those 
recipient  companies,  which  are  governed  by  the  laws  of  Member  States  other  than 
those  of  the  Member  State  of  the  company  being  divided,  should  be  required  to 
comply with the incorporation requirements of those Member States. Such conditions 
include those related to the disqualification of directors.  

(40)  The  right  of  companies  to  carry  out  a  cross-border  division  may  in  certain 
circumstances  be  used  for  abusive  purposes  such  as  for  the  circumvention  of  labour 
standards,  social  security  payments,  tax  obligations,  creditors'  or  members'  rights  or 
rules  on  employees  participation.  In  order  to  combat  such  abuses,  as  a  general 
principle of Union law, Member States are required to ensure that companies do not 
use the cross-border division procedure in order to create artificial arrangements aimed 
at  obtaining  undue  tax  advantages  or  at  unduly  prejudicing  the  legal  or  contractual 
rights of employees, creditors or members. In so far as it constitutes a derogation from 
a fundamental freedom, the fight against abuses must be interpreted strictly and must 
be based on an individual assessment of all relevant circumstances. A procedural and 
substantive  framework  which  describes  the  margin  of  discretion  and  allows  for  the 
diversity  of  approaches  by  Member  States  whilst  at  the  same  time  setting  out  the 
requirements  to  streamline  the  actions  to  be  taken  by  national  authorities  to  fight 
abuses in conformity with Union law should be laid down.  

(41)  Given  the  complexity  of  cross-border  divisions  and  the  multitude  of  the  interests 
concerned,  it  is  appropriate  to  provide  for  an  ex-ante  control  in  order  to  create  legal 
certainty.  To  that  effect,  a  structured  and  multi-layered  procedure  should  be  set  out 
whereby  both  the  competent  authorities  of  the  Member  State  of  the  company  being 
divided and of the Member State of the recipient companies ensure that a decision on 
the  approval  of  a  cross-border  division  is  taken  in  a  fair,  objective  and  non-

EN 

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discriminatory manner on the basis of all relevant elements and by taking into account 
all legitimate public interests, in particular the protection of employees, shareholders 
and creditors.  

(42)  To  allow  all  stakeholders'  legitimate  interests  to  be  taken  into  account,  the  company 
being  divided  should  disclose  the  draft  terms  of  the  division  containing  the  most 
important  information  about  the  proposed  cross-border  division,  including  the 
envisaged the exchange ratio of securities or shares, the instruments of constitution of 
the  recipient  companies  and  the  proposed  timetable  for  the  cross-border  division. 
Members,  creditors  and  employees  of  the  company  carrying  out  the  cross-border 
division should be notified that they can submit comments with regard to the division.  

(43) 

(44) 

(45) 

In  order  to  provide  information  to  its  members,  the  company  being  divided  should 
prepare  a  report.  The  report  should  explain  and  substantiate  the  legal  and  economic 
aspects of the proposed cross-border division, in particular explaining the implications 
of  the  cross-border  division  for  members  with  regard  to  the  future  business  of  the 
company  and  the  management  organs’  strategic  plan.  It  should  also  include 
explanations about the exchange ratio, where applicable, the criteria to determine the 
allocation  of  shares  and  potential  remedies  available  to  members,  where  they  do  not 
agree with the decision to carry out a cross-border division. 

In  order  to  provide  information  its  employees,  the  company  being  divided  should 
prepare a report explaining the implications of the proposed cross-border division for 
employees.  The  report  should  explain  in  particular  the  implications  of  the  proposed 
cross-border division on the safeguarding of the jobs of the employees, whether there 
would be any material change in the conditions of employment and the locations of the 
companies’  places  of  business,  and  how  each  of  these  factors  would  relate  to  any 
subsidiaries of the company. The provision of the report should be without prejudice 
to the applicable information and consultation proceedings instituted at national level 
following the implementation of Directives 2001/23/EC, 2002/14/EC or 2009/38/EC.  

In  order  to  ensure  the  accuracy  of  the  information  contained  in  the  draft  terms  of 
division  and  in  the  reports  addressed  to  the  members  and  employees  and  to  provide 
factual  elements  necessary  to  assess  whether  the  proposed  division  constitutes  an 
artificial arrangement which could not be authorised, an independent expert report to 
assess  the  division  plan  should  be  required  to  be  prepared.  In  order  to  secure  the 
independence of the expert, the expert should be appointed by the competent authority, 
following  an  application  by  the  company.  In  this  context,  the  expert  report  should 
present all relevant information to enable the competent authority of the Member State 
of  the  company  being  divided  to  take  an  informed  decision  as  to  whether  or  not  to 
issue the pre-division certificate To this end, the expert should be able to obtain all the 
relevant  company 
information  and  documents  and  carry  out  all  necessary 
investigations  in  order  to  gather  all  the  evidence  required.  The  expert  should  use 
information, in particular net turnover and profit or loss, number of employees and the 
composition of balance sheet collected by the company in view of the preparation of 
financial  statements  in  accordance  with  Union  law  and  the  law  of  Member  States. 
However, in order to protect any confidential information, including business secrets 
of  the  company,  such  information  should  not  form  part  of  the  expert’s  final  report 
which itself would be publically available.  

(46)  With  a  view  to  avoiding  disproportionate  costs  and  burdens  for  smaller  companies 
carrying  out  cross-border  division,  micro  and  small  enterprises  as  defined  in  the 

EN 

41 

  EN 

 
Commission Recommendation 2003/361/EC of 6 May 2003 should be exempted from 
the requirement to have produce an independent expert. 

(47)  On the basis of the draft terms of the cross-border division and the reports, the general 
meeting of the members of the company being divided, should decide on whether or 
not to approve those draft terms. It is important that, the majority requirement for such 
a  vote  should  be  sufficiently  high  in  order  to  ensure  that  the  decision  to  divide  is  a 
collective one.  

(48) 

It is appropriate that members who held voting rights and who did not vote to approve 
the draft terms of the cross-border division and those members without voting rights, 
who could not present their position, should be afforded the right to exit the company. 
Those members should be able to leave the company and receive cash compensation 
for their shares equivalent to the value of their shares. Furthermore, they should have a 
right to challenge the calculation and adequacy of that cash compensation offered and 
also  the  share  exchange  ratio  where  they  wish  to  remain  members  of  any  of  the 
recipient companies before a court. As part of those proceedings, the court should be 
able  to  order  any  company  involved  in  the  cross-border  division  either  to  pay 
additional cash compensation or to issue additional shares. 

(49)  The  company  being  divided  should  propose  in  the  draft  terms  adequate  means  to 
protect  creditors  in  view  of  the  cross-border  division.  In  addition,  in  order  to 
strengthen the protection of creditors in case of insolvency following the cross-border 
division,  Member  States  should  be  allowed  to  require  the  company  to  make  a 
declaration  stating  that  it  is  not  aware  of  any  reason  why  the  converted  company 
should  not  be  able  to  meet  its  liabilities.  Member  States  should  be  able  to  make 
management  organ  personally  liable  for  the  accuracy  of  the  statement.  Since  legal 
traditions  vary  among  Member  States  with  regard  to  solvency  declarations  and  their 
possible  consequences,  it  should  be  up  to  Member  States  to  draw  appropriate 
consequences of false or misleading declarations, including sanctions and liabilities in 
compliance with Union law.  

(50) 

In order to guarantee the appropriate protection of creditors in cases where they are not 
satisfied  with  the  protection  offered  by  the  company  in  the  draft  terms  of  the  cross-
border division, creditors who are prejudiced by the cross-border division may apply 
to  the  competent  judicial  or  administrative  authority  of  the  Member  State  of  the 
company being divided for the safeguards they consider adequate. In order to facilitate 
the  assessment  of  prejudice,  certain  presumptions  should  be  laid  down  whereby 
creditors would be deemed not to be prejudiced by a cross-border division where the 
risk of loss to a creditor is remote. A presumption should arise where an independent 
expert report concludes that there is no reasonable likelihood that the creditors would 
be prejudiced or  where creditors are offered a  right  to  payment against the company 
resulting from the division or against a third party guarantee of equivalent value to the 
creditor's original claim and which can be brought in the same jurisdiction jurisdiction 
as the original claim. The creditor protection provided for in this Directive should be 
without prejudice to national laws of the Member State of the company being divided 
concerning  payment 
taxation  or  social  security 
contributions.  

to  public  bodies, 

including 

(51)  To  ensure  the  proper  allocation  of  tasks  among  Member  States  and  an  efficient  and 
effective  ex-ante  control  of  cross-border  divisions,  the  competent  authority  of  the 
Member  State  of  the  company  being  divided  should  have  the  power  to  issue  a  pre-

EN 

42 

  EN 

 
division certificate without which the authorities of the Member States of the recipient 
companies should not be able to complete the cross-border-division procedure. 

(52)  The  issue  of  the  pre-division  certificate  by  the  Member  State  of  the  company  being 
divided should  be scrutinised  to  ensure the legality of the cross-border division.  The 
competent  authority  should  decide  whether  to  issue  a  pre-division  certificate  within 
one month of the application by the company has been submitted, unless it has serious 
concerns as to the existence of an artificial arrangement aimed at obtaining undue tax 
advantages  or  at  unduly  prejudicing  the  legal  or  contractual  rights  of  employees, 
creditors or members. In such a case, the competent authority should carry out an in-
depth  assessment.  However,  this  in-depth  assessment  should  not  be  carried  out 
systematically  but  it  should  be  conducted  on  a  case-by-case  basis  where  there  are 
serious concerns as to the existence of an artificial arrangement. For their assessment, 
competent authorities should take into account at least a number of factors laid down 
in this Directive which however should be only considered as indicative factors in the 
overall  assessment  and  not  be  considered  in  isolation.  In  order  not  to  burden 
companies  with  an  overly  lengthy  procedure,  this  in-depth  assessment  should  in  any 
event  be  concluded  within  two  months  informing  the  company  that  the  in-depth 
assessment will be carried out.  

(53)  After  having  received  a  pre-division  certificate,  and  after  verifying  that  the 
incorporation  requirements  of  the  Member  State  of  the  recipient  company  or 
companies  are  fulfilled,  the  authorities  of  the  Member  States  of  the  recipient 
companies  should  register  the  companies  in  the  business  registers  of  that  Member 
State. Only after this registration should the competent authority of the Member State 
of the company being divided strike the company off its own register. The accuracy of 
the  information  provided  by  the  pre-division  certificate  cannot  be  challenged  by  the 
competent authorities of the Member States of the recipient companies. 

(54)  As  a  consequence  of  the  cross-border  division,  the  assets  and  liabilities  of  the 
company being divided shall be transferred to the recipient companies in accordance 
with  the  allocation  specified  in  the  draft  terms  of  division  and  the  members  of  the 
company being  divided shall  become  members  of the recipient companies or  remain 
members of the company being divided or shall become members of both. 

(55) 

In order to ensure that employee participation is not unduly prejudiced as a result of 
the cross-border division where the company carrying out the cross-border division is 
operating  under  an  employee  participation  system,  the  companies  resulting  from  the 
division  should  be  obliged  to  take  a  legal  form  allowing  for  the  exercise  of 
participation, including through the presence of representatives of the employees in the 
appropriate management or supervisory organs of the companies. Moreover, in such a 
case,  a  bona  fide  negotiation  between  the  company  and  its  employees  should  take 
place,  along the lines  of the procedure provided for in  Directive 2001/86/EC, with  a 
view to finding an amicable solution reconciling the right of the company to carry out 
a cross-border division with the employees'' rights of participation. As a result of those 
negotiations, either a bespoke and agreed solution or, in the absence of an agreement, 
the  application  of  standard  rules  as  set  out  in  the  Annex  to  Directive  2001/86/EC 
should  apply  mutatis  mutandis.  In  order  to  protect  either  the  agreed  solution  or  the 
application  of  those  standard  rules,  the  company  should  not  be  able  to  remove  the 
participation  rights  through  carrying  out  subsequent  domestic  or  cross-border 
conversions, mergers or divisions within 3 years.  

EN 

43 

  EN 

 
(56) 

In order to prevent the circumvention of the employee participation rights by means of 
a cross-border division, the company carrying out a division which is registered in the 
Member State which provides for the employee participation rights, should not be able 
to  perform  a  cross-border  division  without  first  entering  into  negotiations  with  its 
employees or their representatives when the average number of employees employed 
by  that  company  is  equivalent  to  four  fifths  of  the  national  threshold  for  triggering 
such employee participation. 

(57)  To  guarantee  the  employees'  rights  other  than  rights  of  participation,  Directive 
2009/38/EC,  Council  Directive  98/59/EC10,  Directive  2001/23/EC,  and  Directive 
2002/14/EC,  are  not  affected  by  this  Directive.  National  laws  should  also  apply  to 
matters outside the scope of this Directive such as tax or social security. 

(58)  The  provisions  of  this  Directive  do  not  affect  the  legal  or  administrative  provisions, 
including  the  enforcement  of  tax  rules  in  cross-border  conversions,  mergers  and 
divisions, of national law relating to the taxes of Member States, or its territorial and 
administrative subdivisions.  

(59)  This  Directive  does  not  affect  the  provisions  of  Directive  (EU)  2015/849  of  the 
European  Parliament  and  the  Council11  addressing  risks  of  money  laundering  and 
terrorist financing, in particular the obligations related to carrying out the appropriate 
customer  due  diligence  measures  on  a  risk-sensitive  basis  and  to  identifying  and 
registering the beneficial owner of any newly created entity in the Member State of its 
incorporation.  

(60)  Since  the  objectives  of  this  Directive,  to  facilitate  and  regulate  cross-border 
conversions,  mergers  and  divisions  cannot  be  sufficiently  achieved  by  the  Member 
States,  but  can  be  better  achieved  at  Union  level,  the  Union  may  adopt  measures,  in 
accordance  with  the  principle  of  subsidiarity  as  set  out  in  Article  5  of  the  Treaty  on 
European Union. In accordance with the principle of proportionality, as set out in that 
Article,  this  Directive  does  not  go  beyond  what  is  necessary  to  achieve  those 
objectives. 

(61)  This Directive respects the fundamental rights and observes the principles recognised 

in particular by the Charter of Fundamental Rights of the European Union. 

(62) 

In  accordance  with  the Joint  Political  Declaration  of  28  September  2011  of  Member 
States  and  the  Commission  on  explanatory  documents12,  Member  States  have 
undertaken  to  accompany,  in  justified  cases,  the  notification  of  their  transposition 
measures  with  one  or  more  documents  explaining  the  relationship  between  the 
components  of  a  directive  and  the  corresponding  parts  of  national  transposition 

10 

11 

12 

Council  Directive  98/59/EC  of  20  July  1998  on  the  approximation  of  the  laws  of  the  Member  States 
relating to collective redundancies (OJ L 225, 12.8.1998, p. 1). 
Directive  (EU)  2015/849  of  the  European  Parliament  and  of  the  Council  of  20  May  2015  on  the 
prevention  of  the  use  of  the  financial  system  for  the  purposes  of  money  laundering  or  terrorist 
financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and 
repealing  Directive  2005/60/EC  of  the  European  Parliament  and  of  the  Council  and  Commission 
Directive 2006/70/EC (Text with EEA relevance) OJ L 141, 5.6.2015, p. 73. 
OJ C 369, 17.12.2011, p. 14. 

EN 

44 

  EN 

 
                                                 
 
instruments. With regard to this Directive, the legislator considers the transmission of 
such documents to be justified. 

(63)  The  Commission  should  carry  out  an  evaluation  of  this  Directive.  Pursuant  to 
paragraph 22 of the Interinstitutional Agreement between the European Parliament, the 
Council of the European Union and the European Commission on Better Law-Making 
of  13  April  201613  that  evaluation  should  be  based  on  the  five  criteria  of  efficiency, 
effectiveness, relevance, coherence and value added and should provide the basis for 
impact assessments of possible further measures. 

(64) 

Information  should  be  collected in  order  to  assess  the  performance  of  the  legislation 
against the objectives its pursues and in order to inform an evaluation of the legislation 
in  accordance  with  paragraph  22  of  the  Interinstitutional  Agreement  between  the 
European  Parliament,  the  Council  of  the  European  Union  and  the  European 
Commission on Better Law-Making of 13 April 2016.  

(65)  Directive (EU) 2017/1132 should therefore be amended accordingly, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 
Amendments to Directive (EU) 2017/1132 

Directive (EU) 2017/1132 is amended as follows: 

(1) 

in Article 24, point (e) is replaced by the following: 

"(e)  the  detailed  list  of  data  to  be  transmitted  for  the  purpose  of  exchange  information 
between registers, as  referred to in Articles 20, 34, 86h, 86o, 86p, 86q, 123, 127, 128, 130, 
160j, 160q, 160r and 160s"; 

(2) 

the title of Title II is replaced by the following: 

"CONVERSIONS,  MERGERS  AND  DIVISIONS  OF  LIMITED  LIABILITY 
COMPANIES"; 

(3) 

in Title II, the following Chapter -I is inserted: 

 "CHAPTER -I  

Cross-border conversions 

Article 86a  
Scope 

1. 

This Chapter shall apply to the conversion of a limited liability company formed in 
accordance with the law of a Member State and having its registered office, central 

13 

OJ L123, 12.5. 2016, p. 1. 

EN 

45 

  EN 

 
 
                                                 
 
2. 

3. 

4. 

administration  or  principal  place  of  business  within  the  Union  into  a  company 
governed by the law of another Member State. 

Member States shall take the necessary measures to establish a procedure for cross-
border conversion referred to in paragraph 1. 

Member  States  may  decide  not  to  apply  this  Chapter  to  cross-border  conversions 
involving a cooperative society even in the case where the latter would fall within the 
definition of a ‘limited liability company’ as laid down in Article 86a(1). 

This  Chapter  shall  not  apply  to  cross-border  conversions  involving  a  company  the 
object of which is the collective investment of capital provided by the public, which 
operates on the principle of risk-spreading and the units of which are, at the holders' 
request,  repurchased  or  redeemed,  directly  or  indirectly,  out  of  the  assets  of  that 
company. Action taken by such a company to ensure that the stock exchange value of 
its  units  does  not  vary  significantly  from  its  net  asset  value  shall  be  regarded  as 
equivalent to such repurchase or redemption. 

For the purposes of this Chapter: 

Article 86b 
Definitions 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

'limited  liability  company'  hereinafter  referred  to  as  "company",  means  a 
company of a type listed in Annex II;  

'cross-border  conversion'  means  an  operation  whereby  a  company,  without 
being  dissolved,  wound  up  or  going  into  liquidation,  converts  the  legal  form 
under which it is registered in a departure Member State into a legal form of a 
company  of  a  destination  Member  State  and  transfers  at  least  its  registered 
office into the destination Member State whilst retaining its legal personality; 

'departure  Member  State'  means  a  Member  State  in  which  a  company  is 
registered in its legal form prior to the cross-border conversion; 

'destination Member State' means a Member State in which a company shall be 
registered as a result of the cross-border conversion; 

'register'  means  the  central,  commercial  or  companies  register  referred  to  in 
Article 16(1); 

'converted  company'  means  the  newly  formed  company  in  the  destination 
Member  State  from  the  date  upon  which  the  cross-border  conversion  takes 
effect. 

Article 86c 
Conditions relating to cross-border conversions 

1. 

2. 

Member States shall ensure that where a company intends to carry out a cross-border 
conversion, the departure and destination Member States verify that the cross-border 
conversion complies with the conditions laid down in paragraph 2.  

A company shall not be entitled to carry out a cross border conversion in any of the 
following circumstances: 

(a)  proceedings have been instituted for the winding-up, liquidation, or insolvency 

of that company; 

EN 

46 

  EN 

 
3. 

4. 

1. 

(b) 

(c) 

(d) 

the  company  is  subject  to  preventive  restructuring  proceedings  initiated 
because of the likelihood of insolvency;  

the suspension of payments is on-going; 

the  company  is  subject  to  resolution  tools,  powers  and  mechanisms  provided 
for in Title IV of Directive 2014/59/EU of the European Parliament and of the 
Council(*);  

(e)  preventive  measures  have  been  taken  by  the  national  authorities  to  avoid  the 

initiation of proceedings referred to in points (a), (b) or (d). 

Member  States  shall  ensure  that  the  competent  authority  of  the  departure  Member 
State  shall  not  authorise  the  cross-border  conversion  where  it  determines,  after  an 
examination  of  the  specific  case  and  having  regard  to  all  relevant  facts  and 
circumstances, that it constitutes an artificial arrangement aimed at obtaining undue 
tax advantages or at unduly prejudicing the legal or contractual rights of employees, 
creditors or minority members.  

The  national  law  of  the  departure  Member  State  shall  govern  that  part  of  the 
procedures and formalities to be complied with in connection with the cross-border 
conversion in order to obtain the pre-conversion certificate, and the national law of 
the destination Member State shall govern that part of the procedures and formalities 
to  be  complied  with  following  receipt  of  the  pre-conversion  certificate,  in 
compliance with Union law.  

Article 86d 
Draft terms of cross-border conversion 

The management or administrative organ of the company which intends to carry out 
a cross-border conversion shall draw up the draft terms of a cross-border conversion. 
The draft terms of a cross-border conversion shall include at least the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

the  legal  form,  name  and  registered  office  of  the  company  in  the  departure 
Member State; 

the  legal  form,  name  and  location  of  its  registered  office  proposed  for  the 
company resulting from the cross-border conversion in the destination Member 
State; 

the  instrument  or  instruments  of  the  constitution  of  a  company  in  the 
destination Member State; 

the proposed timetable for the cross-border conversion; 

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

details of the safeguards offered to the creditors; 

the date from which the transactions of the company formed and registered in 
the  departure  Member  State  will  be  treated  for  accounting  purposes  as  being 
those of the converted company;  

(h) 

any special advantages granted to members of the administrative, management, 
supervisory or controlling organ of the converted company; 

EN 

47 

  EN 

 
(i) 

details of the offer of cash compensation for the members opposing the cross-
border conversion in accordance with Article 86j; 

(j) 

the likely repercussions of the cross-border conversion on employment 

(k)  where  appropriate,  information  on  the  procedures  by  which  arrangements  for 
the involvement of employees in the definition of their rights to participation in 
the  converted  company  are  determined  pursuant  to  Article  86l  and  on  the 
possible options for such arrangements. 

In addition to the official languages of the departure and destination Member States, 
Member States shall allow the company carrying out the cross-border conversion to 
use a language customary in the sphere of international business and finance in order 
to  draw  up  the  draft  terms  of  a  cross-border  conversion  and  all  other  related 
documents. Member States  shall specify which language will  prevail in the case of 
discrepancies identified between the different linguistic versions of those documents.  

Article 86e 
Report of the management or administrative organ to the members 

The  management  or  administrative  organ  of  the  company  carrying  out  the  cross-
border  conversion  shall  draw  up  a  report  explaining  and  justifying  the  legal  and 
economic aspects of the cross-border conversion. 

2. 

1. 

2. 

The report referred to in paragraph 1, shall in particular explain the following : 

(a) 

(b) 

(c) 

the  implications  of  the  cross-border  conversion  on  the  future  business  of  the 
company and on the management's strategic plan; 

the implications of the cross-border conversion for members; 

the  rights  and  remedies  available  to  members  opposing  the  conversion  in 
accordance with Article 86j. 

The report referred to in paragraph 1 of this Article, shall be made available, at least 
electronically, to the members not less than two months before the date of the general 
meeting referred to in Article 86i. That report shall also be made similarly available 
to the representatives of the employees of the company carrying out the cross-border 
conversion or, where there are no such representatives, to the employees themselves. 

However,  that  report  shall  not  be  required  where  all  the  members  of  the  company 
carrying out the cross-border conversion have agreed to waive this requirement. 

Article 86f 
Report of the management or administrative organ to the employees 

The  management  or  administrative  organ  of  the  company  carrying  out  the  cross-
border  conversion  shall  draw  up  a  report  explaining  the  implications  of  the  cross-
border conversion for employees. 

3. 

4. 

1. 

2. 

The report referred to in paragraph 1, shall in particular explain the following: 

(a) 

(b) 

the  implications  of  the  cross-border  conversion  on  the  future  business  of  the 
company and on the management's strategic plan;  

the  implications  of  the  cross-border  conversion  on  the  safeguarding  of 
employment relationships;  

EN 

48 

  EN 

 
3. 

4. 

5. 

6. 

1. 

2. 

(c) 

any  material  changes  in  the  conditions  of  employment  and  in  the  location  of 
the company’s places of business; 

(d)  whether  the  factors  set  out  in  points  (a),  (b)  and  (c)  also  relate  to  any 

subsidiaries of the company. 

The report referred to in paragraph 1 of this Article, shall be made available, at least 
electronically,  to  the  representatives  of  the  employees  of  the  company  carrying  out 
the  cross-border  conversion  or,  where  there  are  no  such  representatives,  to  the 
employees  themselves  not  less  than  two  months  before  the  date  of  the  general 
meeting referred to in Article 86i. That report shall also be made similarly available 
to the members of the company carrying out the cross-border conversion. 

Where  the  management  or  administrative  organ  of  the  company  carrying  out  the 
cross-border conversion receives, in good time, an opinion from the representatives 
of their employees or, where there are no such representatives, from the employees 
themselves,  as  provided  for  under  national  law,  the  members  shall  be  informed 
thereof and that opinion shall be appended to that report. 

However,  where  a  company  carrying  out  the  cross-border  conversion  and  its 
subsidiaries,  if  any,  have  no  employees  other  than  those  who  form  part  of  the 
management or administrative organ, the report referred to in paragraph 1 shall not 
be required. 

Paragraphs  1  to  6  are  without  prejudice  to  the  applicable  information  and 
consultation  rights  and  proceedings  instituted  at  national  level  following  the 
transposition of Directives 2002/14/EC or 2009/38/EC.  

Article 86g 
Examination by an independent expert  

Member  States  shall  ensure  that  the  company  carrying  out  the  cross-border 
conversion applies not less than two months before the date of the general meeting 
referred  to  in  Article  86i  to  the  competent  authority  designated  in  accordance  with 
Article  86m(1),  to  appoint  an  expert  to  examine  and  assess  the  draft  terms  of  the 
cross-border conversion and the reports referred to in Articles 86e and 86f, subject to 
the proviso set out in paragraph 6 of this Article.  

The  application  for  the  appointment  of  an  expert  shall  be  accompanied  by  the 
following: 

(a) 

(b) 

the draft terms of the cross-border conversion referred to in Article 86d; 

the reports referred to in Articles 86e and 86f. 

The  competent  authority  shall  appoint  an  independent  expert  within  five  working 
days from the application referred to in paragraph 1 and the receipt of the draft terms 
and  reports.  The  expert  shall  be  independent  from  the  company  carrying  out  the 
cross-border conversion and may be a natural or a legal person depending upon the 
law  of  the  departure  Member  State.  Member  States  shall  take  into  account,  in 
assessing  the  independence  of  the  expert,  the  framework  established  in  Articles  22 
and 22b of Directive 2006/43/EC.  

3. 

The expert shall draw up a written report providing at least: 

(a) 

a detailed assessment of the accuracy of the reports and information submitted 
by the company carrying out the cross-border conversion; 

EN 

49 

  EN 

 
(b) 

a  description  of  all  factual  elements  necessary  for  the  competent  authority, 
designated  in  accordance  with  Article  86m(1),  to  carry  out  an  in-depth 
assessment  to  determine  whether  the  intended  cross-border  conversion 
constitutes an artificial arrangement in accordance with Article 86n, including 
at  a  minimum  the  following:  the  characteristics  of  the  establishment  in  the 
destination Member State, including the intent, the sector, the investment, the 
net  turnover  and  profit  or  loss,  number  of  employees,  the  composition  of  the 
balance sheet, the tax residence, the assets and their location, the habitual place 
of work of the employees and of specific groups of employees, the place where 
social  contributions  are  due  and  the  commercial  risks  assumed  by  the 
converted company in the destination Member State and the departure Member 
State.   

Member  States  shall  ensure  that  the  independent  expert  shall  be  entitled  to  obtain, 
from the company carrying out the cross-border conversion, all relevant information 
and documents and to carry out all necessary investigations to verify all elements of 
the  draft  terms  or  management  reports.  The  expert  shall  also  be  entitled  to  receive 
comments and opinions from the representatives of the employees of the company, 
or, where there are no such representatives, from the employees themselves and also 
from the creditors and members of the company. 

Member States shall ensure that information submitted to the independent expert can 
only  be  used  for  the  purpose  of  drafting  their  report  and  that  confidential 
information,  including  business  secrets,  shall  not  be  disclosed.  Where  appropriate, 
the  expert  may  submit  a  separate  document  containing  any  such  confidential 
information  to  the  competent  authority,  designated  in  accordance  with  Article 
86m(1)  and  that  separate  document  shall  only  be  made  available  to  the  company 
carrying out the cross-border conversion and not be disclosed to any other party. 

Member States shall exempt 'micro' and 'small enterprises' as defined in Commission 
Recommendation 2003/361/EC (**) from the provisions of this Article. 

Article 86h 
Disclosure  

Member  States  shall  ensure  that  a  departure  Member  State  discloses  and  makes 
publically available in the register, at least one month before the date of the general 
meeting which is to decide thereon, the following documents: 

(a) 

(b) 

(c) 

the draft terms of the cross-border conversion; 

the independent expert report referred to in Article 86g, where applicable; 

a  notice  informing  the  members,  creditors  and  employees  of  the  company 
carrying out the cross-border conversion that they may submit, before the date 
of  the  general  meeting,  comments  concerning  the  documents  referred  to  in 
points  (a)  and  (b)  of  the  first  subparagraph  to  the  company  and  to  the 
competent authority designated in accordance with Article 86m(1).  

4. 

5. 

6. 

1. 

The documents referred to in the first subparagraph shall also be accessible by means 
of the system referred to in Article 22. 

2. 

Member  States  may  exempt  the  company  carrying  out  a  cross-border  conversion 
from  the  disclosure  requirement  referred  to  in  paragraph  1  where,  for  a  continuous 
period  beginning  at  least  one  month  before  the  date  fixed  for  the  general  meeting 

EN 

50 

  EN 

 
which is  to  decide  on the draft terms of conversion  and ending not  earlier  than the 
conclusion of that meeting, it makes the documents referred in paragraph 1, available 
on its website free of charge to the public.  

However,  Member  States  shall  not  subject  that  exemption  to  any  requirements  or 
constraints other than those which are necessary in order to ensure the security of the 
website  and  the  authenticity  of  those  documents  unless  and  only  to  the  extent  that 
they are proportionate in order to achieve those objectives.  

3. 

Where the company intending to carry out the cross-border conversion discloses the 
draft  terms  of  the  cross-border  conversion  in  accordance  with  paragraph  2,  it  shall 
submit at least one month before the date of the general meeting which is to decide 
thereon to the register of the departure Member State, the following information:  

(a) 

(b) 

the  legal  form,  name  and  registered  office  of  the  company  in  the  departure 
Member  State  as  well  as  those  proposed  for  the  converted  company  in  the 
destination Member State; 

the register in which the documents referred to in Article 14 are filed in respect 
of the company carrying out the cross-border conversion, and the entry number 
in that register; 

(c) 

an  indication  of  the  arrangements  made  for  the  exercise  of  the  rights  of 
creditors, employees and members; 

(d)  details  of  the  website  where  draft  terms  of  the  cross-border  conversion,  the 
notice and the expert report referred in paragraph 1 and complete information 
on the arrangements referred to in point (c) of this paragraph may be obtained 
online and free of charge. 

Member States shall ensure that the requirements referred to in paragraphs 1 and 3 
can  be  completed  online  in  their  entirety  without  the  necessity  to  appear  in  person 
before any competent authority in the departure Member State.  

However,  Member  States  may,  in  cases  of  genuine  suspicion  of  fraud  based  on 
reasonable grounds, require a physical presence before a competent authority.  

Member States may require, in addition to the disclosure referred to in paragraphs 1, 
2  and  3,  that  the  draft  terms  of  the  cross-border  conversion,  or  the  information 
referred  to  in  paragraph  3  is  published  in  their  national  gazette.  In  that  instance, 
Member States shall ensure that the register transmits the relevant information to the 
national gazette.  

Member  States  shall  ensure  that  the  documentation  referred  in  paragraph  1  is 
accessible by the public free of charge. Member States shall further ensure that any 
fees  charged  to  the  company  carrying  out  the  cross-border  conversion  by  the 
registers for the disclosure referred to in paragraphs 1 and 3 and, where applicable, 
for the publication referred to in paragraph 5 shall not exceed the administrative costs 
of providing the service. 

Article 86i 
Approval by the general meeting 

After  taking  note  of  the  reports  referred  to  in  Articles  86e,  86f  and  86g,  where 
applicable,  the  general  meeting  of  the  company  carrying  out  the  conversion  shall 
decide,  by  means  of  a  resolution,  whether  to  approve  the  draft  terms  of  the  cross-

4. 

5. 

6. 

1. 

EN 

51 

  EN 

 
2. 

3. 

4. 

5. 

1. 

2. 

3. 

border conversion. The company shall inform the competent authority designated in 
accordance with Article 86m(1) of the decision of the general meeting. 

The  general  meeting  of  the  company  carrying  out  the  conversion  may  reserve  the 
right to make implementation of the cross-border conversion conditional on express 
ratification by it of the arrangements referred to in Article 86l. 

Member States shall ensure that the approval of any amendment to the draft terms of 
the  cross-border  conversion  requires  a  majority  of  not  less  than  two  thirds  but  not 
more than 90 % of the votes attached either to the shares or to the subscribed capital 
represented. In any event the voting threshold shall not be higher than that provided 
for in national law for the approval of cross-border mergers.  

The  general  meeting  shall  also  decide  whether  the  cross-border  conversion  would 
necessitate  amendments  to  the  instruments  of  constitution  of  the  company  carrying 
out the conversion.  

Member States shall ensure that the approval of the cross-border conversion by the 
general  meeting  cannot  be  challenged  solely  on  the  ground  that  the  cash 
compensation referred to in Article 86j has been inadequately set. 

Article 86j 
Protection of members  

Member States shall ensure that the following members of a company carrying cross-
border  conversion  have  the  right  to  dispose  of  their  shareholdings  under  the 
conditions laid down in paragraphs 2 to 6: 

(a) 

the  members  holding  shares  with  voting  rights  and  who  did  not  vote  for  the 
approval of the draft terms of the cross-border conversion; 

(b) 

the members holding shares without voting rights.  

Member States shall ensure that the members referred to in paragraph 1, may dispose 
of their shareholdings, in consideration of adequate cash compensation paid, once the 
cross-border  conversion  has  taken  effect  in  accordance  with  Article  86r,  to  one  or 
more of the following: 

(a) 

(b) 

(c) 

the company carrying out the cross-border conversion; 

the remaining members of that company; 

third parties in agreement with the company carrying out the conversion. 

Member  States  shall  ensure  that  a  company  carrying  out  a  cross-border  conversion 
makes  an  offer  of  adequate  compensation  in  the  draft  terms  of  the  cross-border 
conversion  as  specified  in  the  Article  86d(1)(i)  to  the  members,  referred  to  in 
paragraph  1  of  this  Article,  who  wish  to  exercise  their  right  to  dispose  of  their 
shareholdings. Member States shall also establish the period for the acceptance of the 
offer,  which  shall  not  in  any  event  exceed  one  month  after  the  general  meeting 
referred to in Article 86i. Member States shall further ensure that the company is able 
to  accept  an  offer  communicated  electronically  to  an  address  provided  by  the 
company for that purpose. 

However, the acquisition by the company carrying out a cross-border conversion of 
its own shares shall be without prejudice to national rules governing the acquisition 
by a company of its own shareholdings.  

EN 

52 

  EN 

 
4. 

5. 

6. 

1. 

2. 

3. 

Member States shall ensure that the offer of cash compensation is conditional upon 
the  cross-border  conversion  taking  effect  in  accordance  with  Article  86r.  Member 
States shall further establish the period within which the cash compensation is to be 
paid,  which  shall  not  in  any  event  exceed  one  month  after  the  cross-border 
conversion takes effect.  

Member  States  shall  provide  that  any  member  who  has  accepted  the  offer  of  cash 
compensation referred to in paragraph 3 but who considers that the compensation has 
not  been  adequately  set,  is  entitled  to  demand  the  recalculation  of  the  cash 
compensation offered before a national court within one month of the acceptance of 
the offer.   

Member States shall ensure that the law of the departure Member State governs the 
rights referred to in paragraphs 1 to 5 and that the courts of that Member State shall 
have jurisdiction. Any member who has accepted the offer of cash compensation to 
acquire its shares shall be entitled to institute or to be a party to proceedings referred 
to in paragraph 5.  

Article 86k 
Protection of creditors 

Member  States  may  require  that  the  management  or  administrative  organ  of  the 
company carrying out the cross-border conversion provides a declaration accurately 
reflecting  the  financial  status  of  the  company  as  part  of  the  draft  terms  of  cross-
border conversion referred to in Article 86d. The declaration shall declare that, on the 
basis of the information available to the management or administrative organ of the 
company at the date of the declaration, and after having made reasonable enquiries, 
they are unaware of any reason why the company should, after the conversion takes 
effect, be unable to meet the liabilities when those liabilities fall due. The declaration 
shall  be  made  no  earlier  than  one  month  before  the  draft  terms  of  the  cross-border 
conversion are disclosed in accordance with Article 86h. 

Member States shall ensure that creditors who are dissatisfied with the protection of 
their  interests  provided  for  in  the  draft  terms  of  the  cross-border  conversion,  as 
provided for in Article 86d(f), may apply to the appropriate administrative or judicial 
authority  for  adequate  safeguards  within  one  month  of  the  disclosure  referred  to  in 
Article 86h.  

The  creditors  of  the  company  carrying  out  the  cross-border  conversion  shall  be 
presumed not to be prejudiced by a cross-border conversion in either of the following 
circumstances:  

(a)  where  the  company  discloses  together  with  the  draft  terms  of  conversion  an 
independent  expert  report,  which  concluded  that  there  is  no  reasonable 
likelihood  that  the  rights  of  creditors  would  be  unduly  prejudiced.  The 
independent  expert  should  be  appointed  or  approved  by  the  competent 
authority and shall fulfil the requirements laid down in Article 86g(2);  

(b)  where  creditors  are  offered  a  right  to  payment,  either  against  a  third  party 
guarantor,  or  against  the  company  resulting  from  the  cross-border  conversion 
of at least equivalent value to their original claim, which may be brought in the 
same jurisdiction as their original claim, and which is of a credit quality at least 
commensurate  with  the  creditor's  original  claim  immediately  after  the 
completion of the conversion. 

EN 

53 

  EN 

 
4. 

1. 

2. 

3. 

Paragraphs 1, 2 and 3 are without prejudice to the application of national laws of the 
departure Member State concerning the satisfaction of or securing payments due to 
public bodies. 

Article 86l 
Employee participation 

Without  prejudice  to  paragraph  2,  the  company  resulting  from  the  cross-border 
conversion shall be subject to the rules in force concerning employee participation, if 
any, in the destination Member State.  

However,  the  rules  in  force  concerning  employee  participation,  if  any,  in  the 
destination  Member  State  shall  not  apply,  where  the  company  carrying  out  the 
conversion  has,  in  the  six  months  prior  to  the  publication  of  the  draft  terms  of  the 
cross-border  conversion  as  referred  to  in  Article  86d  of  this  Directive,  an  average 
number of employees equivalent to four fifths of the applicable threshold, laid down 
in  the  law  of  the  departure  Member  State,  which  triggers  the  participation  of 
employees within the meaning of point (k) of Article 2 of Directive 2001/86/EC, or 
where the national law of the destination Member State does not:  

(a)  provide for at least the same level of employee participation as operated in the 
company  prior  to  the  conversion,  measured  by  reference  to  the  proportion  of 
employee  representatives  amongst  the  members  of  the  administrative  or 
supervisory  organ  or  their  committees  or  of  the  management  group  which 
covers the profit units of the company, subject to employee representation; or 

(b)  provide  for  employees  of  establishments  of  the  company  resulting  from  the 
conversion  that  are  situated  in  other  Member  States  the  same  entitlement  to 
exercise participation rights as is enjoyed by those employees employed in the 
destination Member State. 

In the cases referred to in paragraph 2 of this Article, the participation of employees 
in the converted company and their involvement in the definition of such rights shall 
be regulated by the Member States, mutatis mutandis and subject to paragraphs 4 to 7 
of this Article, 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)  Article 3(1), (2)(a)(i), 2(b) and (3), the first indent of the first subparagraph of 
Article  3(4),  the  second  subparagraph  of  Article  3(4),  Article  3(5),  the  third 
subparagraph of Article 3(6) and Article 3(7); 

(b)  Article 4(1), Article 4(2)(a), (g) and (h), Article 4(3) and Article 4(4); 

(c)  Article 5; 

(d)  Article 6; 

(e) 

(f) 

 the first subparagraph of Article 7(1); 

 Articles 8, 9, 10 and 12; 

(g) 

 point (a) of Part 3 of the Annex. 

4. 

When  regulating  the  principles  and  procedures  referred  to  in  paragraph  3,  Member 
States: 

EN 

54 

  EN 

 
(a) 

shall confer on the special negotiating body the right to decide, by a majority of 
two thirds of its members representing at least two thirds of the employees, not 
to open negotiations or to terminate negotiations already opened and to rely on 
the rules on participation in force in the destination Member State;  

(b)  may,  in  the  case  where,  following  prior  negotiations,  standard  rules  for 
participation  apply  and  notwithstanding  such  rules,  decide  to  limit  the 
proportion  of  employee  representatives  in  the  administrative  organ  of  the 
converted  company.  However,  if  in  the  company  carrying  out  the  conversion 
employee representatives constituted at least one third of the administrative or 
supervisory  board,  the  limitation  may  never  result  in  a  lower  proportion  of 
employee representatives in the administrative organ than one third; 

(c) 

shall  ensure  that  the  rules  on  employee  participation  that  applied  prior  to  the 
cross-border conversion continue to apply until the date of application of any 
subsequently agreed rules or in the absence of agreed rules until the application 
of default rules in accordance with point (a) of Part 3 of the Annex.  

The  extension  of  participation  rights  to  employees  of  the  converted  company 
employed in other Member States, referred to in point (b) of paragraph 2, shall not 
entail  any  obligation  for  Member  States  which  choose  to  do  so  to  take  those 
employees into account when calculating the size of workforce thresholds giving rise 
to participation rights under national law. 

Where  the  company  carrying  out  the  conversion  is  operating  under  an  employee 
participation system, that company shall be obliged to take a legal form allowing for 
the exercise of participation rights. 

Where the converted company is operating under an employee participation system, 
that  company  shall  be  obliged  to  take  measures  to  ensure  that  employees' 
participation  rights  are  protected  in  the  event  of  any  subsequent  cross-border  or 
domestic merger, division or  conversion  for a period  of three  years  after the cross-
border conversion has taken effect, by applying mutatis mutandis the rules laid down 
in paragraphs 1 to 6. 

A  company  shall  communicate  to  its  employees  the  outcome  of  the  negotiations 
concerning employee participation without undue delay. 

Article 86m 
Pre-conversion certificate  

Member  States  shall  designate  the  authority  competent  to  scrutinise  the  legality  of 
the cross-border conversion as regards that part of the procedure which is governed 
by  the  law  of  the  departure  Member  State  and  to  issue  a  pre-conversion  certificate 
attesting compliance with all the relevant conditions and the proper completion of all 
procedures and formalities in the departure Member State.  

Member States shall ensure that the application to obtain a pre-conversion certificate 
by  the  company  carrying  out  the  cross-border  conversion  is  accompanied  by  the 
following: 

(a) 

(b) 

the draft terms of conversion referred to in Article 86d; 

the reports referred to in Articles 86e, 86f and 86g, as appropriate; 

5. 

6. 

7. 

8. 

1. 

2. 

EN 

55 

  EN 

 
3. 

4. 

5. 

6. 

7. 

(c) 

information on the resolution of the general meeting to approve the conversion 
referred to in Article 86i. 

The  draft  terms  and  reports  submitted  under  Article  86g  do  not  have  to  be  re-
submitted to the competent authority. 

Member States shall ensure that the application referred to in paragraph 2, including 
submission  of  any  information  and  documents  may  be  completed  online  in  its 
entirety  without  the  necessity  to  appear  in  person  before  the  competent  authority 
referred to in paragraph 1.  

However,  in  cases  of  genuine  suspicion  of  fraud  based  on  reasonable  grounds 
Member States may require a physical presence before a competent authority where 
relevant information and documents are required to be submitted. 

In  respect  of  compliance  with  the  rules  concerning  employee  participation  as  laid 
down in Article 86l, the departure Member State shall verify that the draft terms of 
cross-border  conversion,  referred  to  in  paragraph  2  of  this  Article,  include 
information  on  the  procedures  by  which  the  relevant  arrangements  are  determined 
and on the possible options for such arrangements.  

As  part  of  the  assessment  of  legality  referred  to  in  paragraph  1,  the  competent 
authority, shall examine the following: 

(a) 

(b) 

(c) 

the documents and information referred to in paragraph 2; 

all comments and opinions submitted by interested parties in accordance with 
Article 86h(1); 

an  indication  by  the  company  that  the  procedure  referred  to  in  Article  86l(3) 
and (4) has started, where relevant. 

Member States shall ensure that competent authorities designated in accordance with 
paragraph 1 may consult other relevant authorities with competence in the different 
fields concerned by the cross-border conversion. 

Member States shall ensure that the assessment by the competent authority is carried 
out  within  one  month  of  the  date  of  receipt  of  the  information  concerning  the 
approval of the conversion by the general meeting of the company. It shall have one 
of the following outcomes:  

(a)  where  the  competent  authority  determines  that  the  cross-border  conversion 
falls within the scope of the national provisions transposing this Directive, that 
it  complies  with  all  the  relevant  conditions  and  that  all  necessary  procedures 
and  formalities  have  been  completed,  the  competent  authority  shall  issue  the 
pre-conversion certificate;  

(b)  where  the  competent  authority  determines  that  the  cross-border  conversion 
does  not  fall  within  the  scope  of  the  national  provisions  transposing  this 
Directive, the competent authority shall not issue the pre-conversion certificate 
and  shall  inform  the  company  of  the  reasons  for  its  decision.  The  same  shall 
apply  to  the  situations  in  which  the  competent  authority  determines  that  the 
cross-border conversion does not meet all the relevant conditions or that not all 
necessary  procedures  and  formalities  have  been  completed  and  the  company, 
after being invited to take the necessary steps, has failed to do so;  

(c)  where  the  competent  authority  has  serious  concerns  that  the  cross-border 
conversion constitutes an artificial arrangement referred to in Article 86c(3), it 

EN 

56 

  EN 

 
may decide to carry out an in-depth assessment in accordance with Article 86n 
and shall inform the company about its decision to conduct such an assessment 
and of the subsequent outcome. 

Article 86n 
In-depth assessment 

Member  States  shall  ensure  in  order  to  assess  whether  the  cross-border  conversion 
constitutes  an  artificial  arrangement  within  the  meaning  of  Article  86c(3),  that  the 
competent  authority  of  the  departure  Member  State  carries  out  an  in-depth 
assessment  of  all  relevant  facts  and  circumstances  and  shall  take  into  account  at  a 
minimum  the  following:  the  characteristics  of  the  establishment  in  the  destination 
Member State, including the intent, the sector, the investment, the net turnover and 
profit  or  loss,  number  of  employees,  the  composition  of  the  balance  sheet,  the  tax 
residence, the assets and their location, the habitual place of work of the employees 
and of specific groups of employees, the place where social contributions are due and 
the commercial risks assumed by the converted company in the destination Member 
State and the departure Member State. 

Those  elements  may  be  only  considered  as  indicative  factors  in  the  overall 
assessment and therefore shall not be considered in isolation. 

Member  States  shall  ensure  that  where  the  competent  authority  referred  to  in 
paragraph  1  decides  to  carry  out  an  in-depth  assessment,  it  is  able  to  hear  the 
company and all parties that have submitted observations pursuant Article 86h(1)(c) 
in accordance with national law. The competent authorities referred to in paragraph 1 
may also hear any other interested third parties in accordance with national law. The 
competent  authority  shall  take  its  final  decision  regarding  the  issue  of  the  pre-
conversion certificate within two months from the start of the in-depth assessment. 

Article 86o 
Review and transmission of the pre-conversion certificate 

Member  States  shall  ensure  that,  where  the  competent  authority  of  the  departure 
Member  State  is  not  a  court,  the  decision  of  the  competent  authority  to  issue  or  to 
refuse to issue a pre-conversion certificate, is subject to judicial review in accordance 
with  national  law.  In  addition,  Member  States  shall  ensure  that  a  pre-conversion 
certificate shall not be effective before the expiry of a certain period to allow parties 
to  bring  an  action  before  the  competent  court  and  to  obtain,  where  appropriate, 
interim measures. 

Member States shall ensure that the decision to issue the pre-conversion certificate is 
sent to the authorities referred to in Article 86m(1) and that the decisions to issue or 
refuse  to  issue  a  pre-conversion  certificate  are  available  through  the  system  of 
interconnection of registers set up in accordance with Article 22.  

Article 86p 
Scrutiny of the legality of the cross-border conversion by the destination Member State 

Member States shall designate an authority competent to scrutinise the legality of the 
cross-border conversion as regards that part of the procedure which is governed by 
the law of the destination Member State and to approve the cross-border conversion 

1. 

2. 

1. 

2. 

1. 

EN 

57 

  EN 

 
2. 

3. 

4. 

5. 

1. 

2. 

where  the  conversion  complies  with  all  the  relevant  conditions  and  the  proper 
completion of all procedures and formalities in the destination Member State. 

The  competent  authority  of  the  destination  Member  State  shall  in  particular  ensure 
that  the  proposed  converted  company  complies  with  provisions  of  national  law  on 
the  incorporation  of  companies  and,  where  appropriate,  that  arrangements  for 
employee participation have been determined in accordance with Article 86l. 

For  the  purpose  of  paragraph  1,  the  company  carrying  out  the  cross-border 
conversion shall submit to the authority, referred to in paragraph 1, the draft terms of 
the  cross-border  conversion  approved  by  the  general  meeting  referred  to  in  Article 
86i. 

Each Member State shall ensure that the application referred to in paragraph 1, by the 
company carrying out the cross-border conversion, which includes the submission of 
any information and documents, may be completed online in its entirety without the 
necessity to appear in person before the competent authority referred to in paragraph 
1.  

However,  in  cases  of  genuine  suspicion  of  fraud  based  on  reasonable  grounds, 
Member  States  may  require  a  physical  presence  before  a  competent  authority  of  a 
Member  State  where  relevant  information  and  documents  are  required  to  be 
submitted.  

The  competent  authority  referred  to  in  paragraph  1  shall,  without  delay,  confirm 
receipt  of  the  pre-conversion  certificate  referred  to  in  Article  86m  and  the  other 
information and documents required by the law of the destination Member State. It 
shall  issue  a  decision  to  approve  the  cross-border  conversion  as  soon  as  it  has 
completed its assessment of the relevant conditions. 

The  pre-conversion  certificate  referred  to  in  paragraph  4  shall  be  accepted  by  the 
competent authority, referred to in paragraph 1, as conclusive evidence of the proper 
completion of the procedures and formalities under the national law of the departure 
Member State without which the cross-border conversion cannot be approved. 

Article 86q 
Registration 

The law of the departure and destination Member States shall determine, with respect 
to  the  territory  of  those  States,  the  arrangements  to  disclose  the  completion  of  the 
cross-border conversion in the register.  

Member States shall ensure that at least the following information shall be entered in 
their  registers,  which  are  made  publically  available  and accessible  by means  of  the 
system referred to in Article 22: 

(a) 

(b) 

(c) 

the  entry  number  in  the  register  of  the  converted  company  as  a  result  of  a 
cross-border conversion; 

the  date  of  registration  of  the  converted  company  in  the  destination  Member 
State; 

the date of striking off or removal of the company carrying out the cross-border 
conversion from the register in the departure Member State; 

EN 

58 

  EN 

 
(d) 

the  registration  numbers  in  the  departure  Member  State  of  the  company 
carrying  out  the  conversion  and  of  the  converted  company  in  the  destination 
Member State.  

3. 

Member States shall ensure that the registry in the destination Member State notifies 
the  registry  in  the  departure  Member  State  by  means  of  the  system  referred  to  in 
Article 22, that the converted company has been registered. Member States shall also 
ensure that the registration of the company carrying out the conversion be removed 
immediately upon receipt of that notification but not before.  

Article 86r 
Date on which the cross-border conversion takes effect 

The  cross-border  conversion  shall  take  effect  from  the  date  of  registration  of  the  converted 
company  in  the  destination  Member  State,  following  the  scrutiny  of  legality  and  approval 
referred to in Article 86p.  

Article 86s 
Consequences of the cross-border conversion 

1. 

A  cross-border  conversion,  carried  out  in  compliance  with  the  national  provisions 
transposing this Directive, shall have the following consequences:  

(a) 

(b) 

(c) 

(d) 

all  the  assets  and  liabilities  of  the  company  carrying  out  the  cross-border 
conversion  including  all  contracts,  credits,  rights  and  obligations  shall  be 
transferred to and shall continue with the converted company 

the  members  of  the  company  which  carried  out  the  conversion  shall  become 
members of the converted company, unless they exercise the exit right referred 
to in Article 86j(2); 

the  rights  and  obligations  of  the  company  carrying  out  the  cross-border 
conversion  arising  from  contracts  of  employment  or  from  employment 
relationships  and  existing  at  the  date  on  which  the  cross-border  conversion 
takes  effect  shall,  by  reason  of  that  cross-border  conversion  taking  effect,  be 
transferred  to  the  company  resulting  from  the  cross-border  conversion  on  the 
date on which the cross-border conversion takes effect.  

the  place  of  the  registered  office  of  the  converted  company  in  the  departure 
Member State may be relied upon until such time as the company carrying out 
the conversion has been struck off from the register in the departure Member 
State, unless it may be proven that a third party knew, or ought to have known, 
of the registered office in the destination Member State. 

Any activity of the converted company carried out after the date of registration in the 
destination  Member  State  and  before  the  company  carrying  out  the  conversion  has 
been struck off from the register in the departure Member State shall be treated as the 
activity of the converted company. 

The converted company shall be liable for any losses arising from any differences in 
national legal systems of the Member States of departure and destination, where any 
contracting party or counterparty of the company carrying out the conversion had not 
been  informed  of  the  cross-border  conversion  by  that  company  prior  to  concluding 
that contract. 

2. 

3. 

EN 

59 

  EN 

 
Article 86t 
Liability of the independent experts 

Member  States  shall  lay  down  rules  governing  at  least  the  civil  liability  of  the  independent 
experts  responsible  for  drawing  up  the  reports  referred  to  in  Articles  86g  and  86k(2)(a), 
including in respect of any misconduct on their part in the performance of their duties. 

Article 86u 
Validity 

A  cross-border  conversion  which  has  taken  effect  in  compliance  with  the  procedures 
transposing this Directive may not be declared null and void. 

________ 

(*) 

Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May 
2014 establishing a framework for the recovery and resolution of credit institutions 
and  investment  firms  and  amending  Council  Directive  82/891/EEC,  and  Directives 
2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC,  2007/36/EC,  2011/35/EU, 
2012/30/EU  and  2013/36/EU,  and  Regulations  (EU)  No  1093/2010  and  (EU)  No 
648/2012,  of the European Parliament  and of the Council (OJ L 173, 12.6.2014, p. 
190). 

(**) 

Commission  Recommendation  2003/361/EC  of  6  May  2003  concerning  the 
definition  of  micro,  small  and  medium-sized  enterprises  (OJ  L  124,  20.5.2003,  p. 
36)."; 

(4) 

in Article 119, point (2) is amended as follows: 

(a) 

(b) 

at the end of point (c) the following is added "; or"; 

the following point (d) is added: 

"(d) 
one  or  more  companies,  on  being  dissolved  without  going  into 
liquidation, transfer all their assets and liabilities to another existing company, 
the  acquiring  company,  without  the  issue  of  any  new  shares  by  the  acquiring 
company, provided that one person holds directly or indirectly all the shares in 
the  merging  companies  or  the  members  of  the  merging  companies  hold  their 
shares in the same proportion in all merging companies."; 

(5) 

Article 120, paragraph 4 is replaced by the following : 

"4.  Member  States  shall  ensure  that  this  Chapter  does  not  apply  to  the  company  or 
companies where: 

(a)  proceedings have been instituted for the winding-up, liquidation, or insolvency 

of that company or companies; 

(b) 

(c) 

(d) 

(e) 

 the  company  is  subject  to  preventive  restructuring  proceedings  initiated 
because of the likelihood of insolvency;  

 the suspension of payments is on-going; 

 the  company  is  subject  to  resolution  tools,  powers  and  mechanisms  provided 
for in Title IV of Directive 2014/59/EU; 

 preventive  measures  have  been  taken  by  the  national  authorities  to  avoid  the 
initiation of proceedings referred to in points (a), (b) or (d)."; 

(6) 

Article 121 is amended as follows: 

EN 

60 

  EN 

 
(a) 

in paragraph 1, point (a) is deleted;  

(b)  paragraph 2 is replaced by the following: 

"2.  The  provisions  and  formalities  referred  to  in  the  point  (b)  of  paragraph  1 
shall,  in  particular,  include  those  concerning  the  decision-making  process 
relating to the merger and the protection of employees as regards rights other 
than those governed by Article 133."; 

(7) 

Article 122 is amended as follows: 

(a)  point (i) is replaced by the following:  

"(i) the instrument or instruments of constitution of the company resulting from 
the cross-border merger";  

(b) 

following points (m) and (n) are added: 

"(m)  details  of  the  offer  of  cash  compensation  for  members  opposing  the 
cross-border merger in accordance with Article 126a; 

(n) 

details of the safeguards offered to creditors."; 

(c) 

the following second subparagraph is added:  

"In  addition  to  the  official  language  of  each  Member  State  of  the  merging 
companies,  Member  States  shall  allow  the  merging  companies  to  use  a 
language customary in the sphere of international business and finance to draw 
up  the  common  draft  terms  of  a  cross-border  merger  and  all  other  related 
documents.  Member  States  shall  specify  which  language  will  prevail  in  the 
case  of  discrepancies  identified  between  the  different  linguistic  versions  of 
those documents."; 

(8) 

the following Article 122a is inserted: 

"Article 122a 
Accounting date  

1. 

Where the company resulting from the cross-border merger prepares financial annual 
statements in accordance with the international accounting standards provided for in 
Regulation  (EC)  No  1606/2002  of  the  European  Parliament  and  of  the  Council(*), 
the  date  from  which  the  transactions  of  the  merging  companies  shall  be  treated  as 
those of the company resulting from the cross-border merger shall be determined in 
accordance with those accounting standards. 

Notwithstanding the first subparagraph, the accounting date provided in the common 
draft  terms  of  the  cross-border  merger,  shall  be  the  date  on  which  the  cross-border 
merger  takes  effect,  as  referred  to  in  Article  129,  unless  the  merging  companies 
determine  another  date  in  order  to  facilitate  the  merger  process.  In  that  case  the 
accounting date shall comply with the following requirements: 

(a) 

(b) 

it  may  not  be  earlier  than  the  date  of  the  balance  sheet  of  the  last  annual 
financial statements drawn up and published by any of the merging companies; 

it shall enable the company resulting from the cross-border merger to draw up 
its  annual  financial  statements,  including  the  effects  of  the  merger,  in 
accordance  with  Union  law  and  the  law  of  Member  States  as  at  the  balance 
sheet date immediately after the date upon which the cross-border merger takes 
effect. 

EN 

61 

  EN 

 
2. 

3. 

Member  States  shall  ensure  that  the  date  referred  to  in  paragraph  1,  is  treated  for 
accounting  purposes  as  being  the  date  from  which  the  transactions  of  the  merging 
companies  will  be  treated  as  being  those  of  the  company  resulting  from  the  cross-
border merger by the national laws of all merging companies. 

Member  States  shall  ensure  that  for  the  recognition  and  valuation  of  assets  and 
liabilities  in  the  financial  statements  to  be  transferred  pursuant  to  the  cross-border 
merger by acquisition, the accounting regime of the acquiring company shall be used 
as  a  common  basis  by  all  of  the  merging  companies  from  the  date  specified  in 
paragraph 1. 

_______ 

(*)  

Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 
July  2002  on  the  application  of  international  accounting  standards  (OJ  L  243, 
11.9.2002, p. 1)."; 

(9) 

Articles 123 and 124 are replaced by the following: 

1. 

2. 

3. 

"Article 123 
Disclosure 

Member States shall ensure that the common draft terms of the cross-border merger 
are  disclosed  and  made  publically  available  in  their  respective  national  registers, 
referred  to  in  Article  16,  at least  one  month  before  the  date  of  the  general  meeting 
which  is  to  decide  thereon.  Those  common  draft  terms  shall  also  be  accessible  by 
means of the system referred to in Article 22.  

Member States may exempt merging companies from the requirement referred to in 
paragraph 1 where, for a continuous period beginning at least one month before the 
date fixed for the general meeting which is to decide on the common draft terms of 
the cross-border merger and ending not earlier than the conclusion of that meeting, 
those companies make the common draft terms of cross-border merger available on 
their websites free of charge.  

However,  Member  States  shall  not  subject  that  exemption  to  any  requirements  or 
constraints other than those which are necessary in order to ensure the security of the 
website and the authenticity of the documents unless and only to the extent that they 
are proportionate in order to achieve those objectives.  

Where  merging  companies  disclose  the  common  draft  terms  of  the  cross-border 
merger  in  accordance  with  paragraph  2  of  this  Article,  the  following  information 
shall be disclosed at least one month before the date of the general meeting which is 
to decide thereon in the respective national registers referred to in Article 16: 

(a) 

(b) 

(c) 

the  legal  form,  name  and  registered  office  of  each  of  the  merging  companies 
and the legal form, name and registered office proposed for any newly created 
company; 

the register in which the documents referred to in Article 14 are filed in respect 
of each of the merging companies and the entry number in that register; 

an indication, for each of the merging companies, of the arrangements made for 
the exercise of the rights of creditors, employees and members;  

EN 

62 

  EN 

 
(d)  details of the website where the common draft terms of the cross-border merger 
and complete information on the arrangements referred to in point (c) may be 
obtained free of charge. 

Member States shall ensure that the requirements referred to in paragraphs 1 and 3 
can  be  completed  online  in  their  entirety  without  the  necessity  to  appear  in  person 
before any competent authority in any of the Member States concerned.  

However,  Member  States  may,  in  cases  of  genuine  suspicion  of  fraud  based  on 
reasonable grounds, require a physical presence before a competent authority. 

Where  the  approval  of  the  merger  is  not  required  by  the  general  meeting  of  the 
acquiring  company  in  accordance  with  Article  126(3),  the  disclosure  referred  to  in 
paragraphs 1, 2 and 3 of this Article shall be made at least one month before the date 
of the general meeting of the other merging company or companies. 

Member States may require, in addition to the disclosure referred to in paragraphs 1, 
2 and 3 that the common draft terms of the cross-border merger, or the information 
referred  to  in  paragraph  3,  is  published  in  their  national  gazette.  In  that  instance, 
Member  States  shall  ensure  that  the  registers  referred  to  in  Article  16  transmit  the 
relevant information to the national gazette.  

Member  States  shall  ensure  that  the  disclosed  common  draft  terms  of  the  cross-
border  merger  and  the  information  referred  to  in  paragraph  3  is  accessible  to  the 
public free of charge. Member States shall further ensure that any fees charged to the 
merging companies by the registers for the disclosure referred to in paragraph 1 and 
3  and,  where  applicable,  for  the  publication  referred  to  in  paragraph  6  shall  not 
exceed the administrative costs of providing the service. 

Article 124 
Report of the management or administrative organ to the members 

The  management  or  administrative  organ  of  each  of  the  merging  companies  shall 
draw  up  a  report  explaining  and  justifying  the  legal  and  economic  aspects  of  the 
cross-border merger . 

4. 

5. 

6. 

7. 

1. 

2. 

The report referred to in paragraph 1, shall in particular explain the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

the  implications  of  the  cross-border  merger  on  the  future  business  of  the 
company resulting from the merger and on the management's strategic plan; 

an explanation and justification of the share exchange ratio; 

a description of any special valuation difficulties which have arisen; 

 the implications of the cross-border merger for members; 

 the  rights  and  remedies  available  to  members  opposing  the  merger  in 
accordance with Article 126a. 

3. 

The report shall be made available, at least electronically, to the members of each of 
the  merging  companies  not  less  than  one  month  before  the  date  of  the  general 
meeting referred to in Article 126. The report shall also be made similarly available 
to the representatives of the employees of each of the merging companies, or where 
there are no such representatives, to the employees themselves. However, where the 
approval of the merger is not required by general meeting of the acquiring company 
in  accordance  with  Article  126(3),  the  report  shall  be  made  available,  at  least  one 

EN 

63 

  EN 

 
month  before  the  date  of  the  general  meeting  of  the  other  merging  company  or 
companies. 

4. 

However,  the  report  referred  to  in  paragraph  1,  shall  not  be  required  where  all  the 
members of the merging companies have agreed to waive this requirement."; 

(10) 

the following Article 124a is inserted: 

"Article 124a 
Report of the management or administrative organ to the employees 

1. 

The  management  or  administrative  organ  of  each  of  the  merging  companies  shall 
draw  up  a  report  explaining  the  implications  of  the  cross-border  merger  for 
employees. 

2. 

The report referred to in paragraph 1, shall in particular explain the following: 

(a) 

(b) 

(c) 

the  implications  of  the  cross-border  merger  on  the  future  business  of  the 
company and on the management's strategic plan; 

 the  implications  of  the  cross-border  merger  on  the  safeguarding  of  the 
employment relationships; 

 any material changes in the conditions of employment and in the locations of 
the companies’ places of business; 

(d)  whether  the  factors  set  out  in  points  (a),  (b)  and  (c)  also  relate  to  any 

subsidiaries of the merging companies. 

The report referred to in paragraph 1 of this Article, shall be made available, at least 
electronically,  to  the  representatives  of  the  employees  of  each  of  the  merging 
companies or, where there are no such representatives, to the employees themselves, 
not less than one month before the date of the general meeting referred to in Article 
126. The report shall also be made similarly available to the members of each of the 
merging companies.  

However, where the approval of the merger is not required by general meeting of the 
acquiring company, in accordance with Article 126(3), the report shall be available at 
least one month before the date of the general meeting of the other merging company 
or companies. 

Where  the  management  or  administrative  organ  of  one  or  more  of  the  merging 
companies  receives,  in  good  time,  an  opinion  from  the  representatives  of  their 
employees,  or,  where  there  are  no  such  representatives,  from  the  employees 
themselves,  as  provided  for  under  national  law,  the  members  shall  be  informed 
thereof and that opinion shall be appended to the report. 

However,  where  the  merging  companies  and  their  subsidiaries,  if  any,  have  no 
employees,  other  than  those  who  form  part  of  the  management  or  administrative 
organ, the report referred in paragraph 1 shall not be required to be drawn up. 

The submission of the report is without prejudice to the applicable information and 
consultation  rights  and  proceedings  instituted  at  national  level  following  the 
implementation of Directives 2001/23/EC, 2002/14/EC or 2009/38/EC.";  

3. 

4. 

5. 

6. 

(11) 

in Article 125(1), the following second subparagraph is added: 

"Member States shall take into account, in assessing the independence of the expert, 
the framework established in Articles 22 and 22b of Directive 2006/43/EC."; 

EN 

64 

  EN 

 
(12) 

Article 126 is amended as follows: 

(a)  paragraph 1 is replaced by the following: 

"1.  After  taking  note  of  the  reports  referred  to  in  Articles 124,  124a  and  125,  as 
appropriate, the general meeting of each of the merging companies shall decide, by 
means of a resolution, on the approval of the common draft terms of the cross-border 
merger."; 

(b) 

the following paragraph 4 is added: 

"4. Member States shall ensure that the resolution to approve a cross-border merger 
referred  to  in  paragraph  1,  cannot  be  challenged  before  the  competent  authority 
solely on the following grounds:  

(a) 

(b) 

(c) 

the  share  exchange  ratio  referred  to  in  Article  122(b)  has  been 
inadequately set;  

the  cash  compensation  referred 
inadequately set; 

to 

in  Article  122(m)  has  been 

the  total  value  of  the  shareholdings  allocated  to  a  member  is  not 
equivalent to the value of the shares held by that member in the company 
being merged."; 

(13) 

the following Articles 126a and 126b are inserted: 

"Article 126a 
Protection of members 

1. 

2. 

3. 

Member  States  shall  ensure  that  the  following  members  of  the  merging  companies 
have  the  right  to  dispose  of  their  shareholding  under  the  conditions  laid  down  in 
paragraphs 2 to 6;  

(a) 

the  members  holding  shares  with  voting  rights  and  who  did  not  vote  for  the 
approval of the common draft terms of the cross-border merger; 

(b) 

the members holding shares without voting rights. 

Member  States  shall  ensure  that  the  members  referred  to  in  paragraph  1  of  this 
Article,  may  dispose  of  their  shareholdings  in  consideration  of  adequate  cash 
compensation,  paid,  once  the  cross-border  merger  has  taken  effect  in  accordance 
with Article 129, to one or more of the following: 

(a) 

(b) 

(c) 

the merging companies concerned; 

the remaining members of the merging companies concerned; 

third parties in agreement with the merging companies concerned.   

Member  States  shall  ensure  that  each  of  the  merging  companies  makes  an  offer  of 
adequate cash compensation in the common draft terms of the cross-border merger, 
as specified in Article 122(1)(m), to those members referred to in paragraph 1 of this 
Article  who  wish  to  exercise  their  right  to  dispose  of  their  shareholdings.  Member 
States shall also establish the period for the acceptance of the offer, which shall not 
in any event exceed one month after the general meeting referred to in Article 126 or, 
in  cases  where  the  approval  of  the  general  meeting  is  not  required,  within  two 
months  after  the  disclosure  of  the  common  draft  terms  of  merger  referred  to  in 
Article 123. Member States shall further ensure that the merging companies are able 

EN 

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4. 

5. 

6. 

7. 

8. 

9. 

to  accept  an  offer  communicated  electronically  to  an  address  provided  by  those 
companies for that purpose.  

However,  the  acquisition  by  the  merging  companies  of  its  own  shares  shall  be 
without prejudice to national rules governing the acquisition by a company of its own 
shareholdings.  

Member States shall ensure that the offer of cash compensation is conditional upon 
the cross-border merger taking effect in accordance with Article 129. Member States 
shall further establish the period within which the cash compensation is to be paid, 
which shall not  in  any event  exceed one month  after the cross-border merger takes 
effect. 

The independent expert appointed pursuant to Article 125 shall review the adequacy 
of the cash compensation. The expert shall have regard to any market price of those 
shares in the merging companies prior to the announcement of the merger proposal 
and  to  the  value  of  the  company  excluding  the  effect  of  the  proposed  merger  as 
determined according to generally accepted valuation methods. 

Member  States  shall  ensure  that  any  member  who  has  accepted  the  offer  of  cash 
compensation  referred  to  in  paragraph  3,  but  who  considers  that  the  cash 
compensation has not been adequately set, is entitled to demand the recalculation of 
the  cash  compensation  offered  before  a  national  court  within  one  month  of  the 
acceptance of the offer.  

Member  States  shall  ensure  that  the  national  law  of  the  Member  State  to  which  a 
merging company is subject, governs the rights referred to in paragraphs 1 to 6 and 
that the courts of that Member State shall have jurisdiction. Any member, who has 
accepted  the  offer  of  cash  compensation  to  acquire  its  shares,  shall  be  entitled  to 
institute or to be a party to proceedings referred to in paragraph 6.  

Member States shall also ensure that members of the merging companies who did not 
oppose  the  cross-border  merger,  but  who  consider  that  the  share-exchange  ratio  is 
inadequate  may  challenge  that  share-exchange  ratio,  set  out  in  the  common  draft 
terms  of  the  cross-border  merger  referred  to  Article  122,  before  a  national  court 
within one month after the cross-border merger takes effect. 

Member States shall ensure that where a national court finds that a share-exchange 
ratio  has  not  been  adequately  set,  the  court  has  the  power  to  order  the  company 
resulting from the cross-border merger to pay compensation to those members who 
succesfully  challenged  the  ratio.  This  compensation  shall  consist  of  an  additional 
cash payment calculated on the basis of an adequate ratio applicable to the exchange 
of  securities  or  shares  as  determined  by  the  court.  Upon  request  by  any  of  these 
members  or  by  the  merging  companies,  the  national  court  shall  be  empowered  to 
order  the  company  resulting  from  the  cross-border  merger  to  provide  additional 
shares instead of the cash payment.  

10. 

Member States shall ensure that the law applicable to the company resulting from the 
cross-border merger governs the obligation to pay additional cash compensation or to 
provide additional shares. 

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1. 

2. 

3. 

Article 126b 
Protection of creditors 

Member  States  may  require  that  the  management  or  administrative  organ  of  the 
merging company provides a declaration accurately reflecting the financial status of 
the company as part of the common draft terms of cross-border merger referred to in 
Article  122.  The  declaration  shall  declare  that,  on  the  basis  of  the  information 
available to the management or  administrative organ of the company  at the date of 
that  declaration,  and  having  made  reasonable  enquiries,  they  are  unaware  of  any 
reason  why  the  company  resulting  from  the  merger  would  be  unable  to  meet  the 
liabilities  when  those  liabilities  fall  due.  The  declaration  shall  be  made  no  earlier 
than  one  month  before  the  common  draft  terms  of  the  cross-border  merger  are 
disclosed in accordance with Article 123. 

Member  States  shall  ensure  that  creditors  of  the  merging  companies  who  are 
dissatisfied with the protection of their interests as provided for in the common draft 
terms of the cross-border merger, as provided for in Article 122(1)(n), may apply to 
the  appropriate  administrative  or  judicial  authority  for  adequate  safeguards  within 
one month of the disclosure referred to in Article 123.  

The creditors of the merging companies shall be presumed not to be prejudiced by a 
cross-border merger in either of the following circumstances: 

(a)  where the merging companies disclose together with the draft terms of cross-
border merger, an independent expert report, which concluded that there is no 
reasonable  likelihood  that  the rights  of  creditors  would  be  unduly  prejudiced. 
The  independent  expert  should  be  appointed  or  approved  by  the  competent 
authority and shall fulfil the requirements laid down in Article 125(1).  

(b)  where  creditors  are  offered  a  right  to  payment,  either  against  a  third  party 
guarantor,  or  against  the  company  resulting  from  the  merger  of  at  least 
equivalent  value  to  their  original  claim,  which  may  be  brought  in  the  same 
jurisdiction as was their original claim, and which is of a credit quality at least 
commensurate  with  the  creditor’s  original  claim  immediately  after  the 
completion of the merger.  

4. 

Paragraphs 1, 2 and 3 are without prejudice to the application of national laws of the 
Member  State  of  the  merging  companies  concerning  the  satisfaction  of  or  securing 
payments due to public bodies."; 

(14) 

Article 127 is amended as follows: 

(a) 

in paragraph, 1, the following subparagraphs are added: 

"Member  States  shall  ensure  that  the  application  for  obtaining  a  pre-merger 
certificate  by  the  merging  companies  including  submission  of  any  information  and 
documents may be completed online in its entirety without the necessity to appear in 
person before the competent authority referred to in paragraph 1. 

However,  in  cases  of  genuine  suspicion  of  fraud  based  on  reasonable  grounds 
Member States may require a physical presence before a competent authority where 
relevant information and documents are required to be submitted."; 

(b) 

in paragraph 2, the following subparagraph is added: 

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"Member States shall ensure that the certificate is sent to the authorities referred in 
Article 128(1) by means of the system of interconnection of registers in accordance 
with Article 22."; 

(c)  paragraph 3 is deleted; 

(15) 

Article 128 is amended as follows: 

(a)  paragraph 2 is replaced by the following: 

“2. 
 For  the  purpose  of  paragraph  1  of  this  Article,  each  merging  company  shall 
submit to the authority referred to in that paragraph the common draft terms of cross-
border merger, approved by the general meeting referred to in Article 126."; 

(b) 

the following paragraphs 3 and 4 are added: 

“3.  Each Member State shall ensure that the application for the completion of the 
procedure,  referred  to  in  paragraph  1,  by  any  of  the  merging  companies,  which 
includes the submission of any information and documents may be completed online 
in  its  entirety  without  the  necessity  to  appear  in  person  before  any  competent 
authority. 

However, Member States may take measures in cases of genuine suspicion of fraud 
based  on  reasonable  grounds  which  could  require  a  physical  presence  before  a 
competent  authority  of  a  Member  State  in  which  the  relevant  information  and 
documents are required to be submitted. 

The pre-merger certificate or certificates referred to in Article 127(2) shall be 
4. 
accepted by a competent authority of a Member State of a company resulting from 
the cross-border merger as conclusive evidence of the proper completion of the pre-
merger  acts  and  formalities in  the  respective  Member  State or  Member  States.  The 
certificate  shall  be  shared  by  the  competent  authority  or  authorities  of  the  merging 
companies  with  the  competent  authority  of  the  Member  State  of  the  company 
resulting  from  the  merger  through  the  system  of  interconnection  of  registers  in 
accordance with Article 22."; 

(16) 

Article 131 is amended as follows: 

(a) 

in paragraph 1, point (a) is replaced by the following:  

all  the  assets  and  liabilities  of  the  company  being  acquired  herein 
"(a) 
including all contracts, credits, rights and obligations shall be transferred to and 
shall continue with the acquiring company;"; 

(b) 

in paragraph 2, point (a) is replaced by the following:  

“(a) 
all the assets and liabilities of the merging companies herein including 
all  contracts,  credits,  rights  and  obligations  shall  be  transferred  to  and  shall 
continue with the new company;"; 

(17) 

Article 132 is amended as follows: 

(a)  paragraph 1 is replaced by the following: 

"1.  Where  a  cross-border  merger  by  acquisition  is  carried  out  by  either  a  company 
which holds all the shares and other securities conferring the right to vote at general 
meetings  of  the  company  or  companies  being  acquired  or  by  a  person  who  holds 
directly  or  indirectly  all  the  shares  in  the  acquiring  company  and  in  the  companies 
being  acquired  and  the  acquiring  company  does  not  allot  any  shares  under  the 
merger: 

EN 

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– 

– 

points (b), (c), (e) and (m) of Article 122 , Article 125, and point (b) of 
Article 131(1) shall not apply; 

Article  124  and  Article  126(1)  shall  not  apply  to  the  company  or 
companies being acquired."; 

(b) 

the following paragraph 3 is added: 

"3. Where the laws of Member States of all of the merging companies provide for the 
exemption from the approval by general meeting in accordance with Article 126(3) 
and  paragraph  1  of  this  Article,  the  common  draft  terms  of  cross-border  merger  or 
the information referred to in paragraphs 1 to 3  of Article 123 respectively and the 
reports  referred  to  in  Articles  124  and  124a,  shall  be  made  available  at  least  one 
month before the decision on the merger is taken by the company in accordance with 
the national law."; 

(18) 

Article 133 is amended as follows: 

(a)  paragraph 7 is replaced by the following: 

"7. Where the company resulting from the cross-border merger is operating under an 
employee  participation  system,  that  company  shall  be  obliged  to  take  measures  to 
ensure  that  employees'  participation  rights  are  protected  in  the  event  of  any 
subsequent cross-border or  domestic  mergers, divisions or conversions for a period 
of  three  years  after  the  cross-border  merger  has  taken  effect,  by  applying  mutatis 
mutandis the rules laid down in paragraphs 1 to 6."; 

(b) 

the following paragraph 8 is added: 

"8.  A  company  shall  communicate  to  its  employees  whether  it  chooses  to  apply 
standard rules for participation referred to in point (h) of paragraph 3 or whether it 
enters  into  negotiations  within  the  special  negotiating  body.  In  the  latter  case  the 
company  shall  communicate  to  its  employees  the  outcome  of  the  negotiations 
without undue delay."; 

(19) 

the following Article 133a is inserted: 

“Article 133a 
Liability of independent experts 

Member  States  shall  lay  down  rules  governing  the  civil  liability  of  the  independent  experts 
responsible for drawing up the report referred to in Articles 125 and 126b(2)(a), including in 
respect of misconduct on their part in the performance of their duties.”; 

(20) 

In Title II, the following Chapter IV is added:  

"CHAPTER IV 

Cross-border divisions of limited liability companies 

Article 160a 
Scope 

1. 

This Chapter shall apply to the cross-border division of a limited liability company, 
formed  in  accordance  with  the  law  of  a  Member  State  and  having  its  registered 
office,  central  administration  or  principal  place  of  business  within  the  Union 

EN 

69 

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provided that at least two of the companies involved in the division are governed by 
the laws of different Member States (‘cross-border division’). 

2. 

Member States shall take the necessary measures to establish a procedure for cross-
border division referred to in paragraph 1.  

For the purposes of this Chapter: 

Article 160b 
Definitions 

(1) 

(2) 

‘limited  liability  company’,  hereinafter  referred  to  as  ‘company’,  means  a 
company as defined in Annex II ; 

'company  being  divided'  means  a  company  which  in  a  process  of  the  cross-
border division whereby it transfers all its assets and liabilities to one or more 
companies,  or  in  case  of  a  partial  division  it  transfers  part  of  its  assets  and 
liabilities to one or more companies; 

(3) 

‘division’ means an operation whereby either: 

(a) 

(b) 

 a company being divided, which has been wound up without going into 
liquidation,  transfers  all  its  assets  and  liabilities  to  two  or  more  newly 
formed companies (‘the recipient companies’), in exchange for the issue 
to  the members  of the company  being  divided of securities or  shares  in 
the recipient companies and, if any, a cash payment not exceeding 10 % 
of the nominal value of those securities or shares or, where they have no 
nominal value, a cash payment not exceeding 10% of the accounting par 
value of their securities or shares ('full division');  

a company being divided transfers part of its assets and liabilities to one 
or  more  newly  formed  companies  (‘the  recipient  companies’),  in 
exchange for the issue to the members of the company being divided of 
securities or shares in the recipient companies or, in the company being 
divided,  or  in  both  the  recipient  companies  and  in  the  company  being 
divided,  and  if  any  a  cash  payment  not  exceeding  10  %  of  the  nominal 
value of those securities or shares, or, in the absence of a nominal value, 
a cash payment not exceeding 10 % of the accounting par value of their 
securities or shares (‘partial division’). 

Article 160c 
Further provisions concerning the scope 

1. 

2. 

3. 

Notwithstanding  Article  160b(3),  this  Chapter  shall  also  apply  to  cross-border 
divisions  where  the  national  law  of  at  least  one  of  the  Member  States  concerned 
allows the cash payment referred to in points (a) and (b) of Article 160b(3) to exceed 
10  %  of  the  nominal  value  or,  in  the  absence  of  a  nominal  value,  10%  of  the 
accounting  par  value  of  the  securities  or  shares  representing  the  capital  of  the 
recipient companies. 

Member  States  may  decide  not  to  apply  this  Chapter  to  cross-border  divisions 
involving a cooperative society even in the cases where the latter would fall within 
the definition of ‘limited liability company’ as laid down in Article 160b(1). 

This  Chapter  shall  not  apply  to  cross-border  divisions  involving  a  company  the 
object of which is the collective investment of capital provided by the public, which 

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operates on the principle of risk-spreading and the units of which are, at the holders’ 
request,  repurchased  or  redeemed,  directly  or  indirectly,  out  of  the  assets  of  that 
company. Action taken by such a company to ensure that the stock exchange value of 
its  units  does  not  vary  significantly  from  its  net  asset  value  shall  be  regarded  as 
equivalent to such repurchase or redemption. 

Article 160d  
Conditions relating to cross-border divisions 

Member States shall ensure that where a company intends to carry out a cross-border 
division,  the  Member  State  of  the  company  being  divided  and  of  the  recipient 
company  or  companies  verify  that  the  cross-border  division  complies  with  the 
conditions laid down in paragraph 2. 

A  company  shall  not  be  entitled  to  carry  out  a  cross-border  division  in  any  of  the 
following circumstances: 

(a)  proceedings have been instituted for the winding-up, liquidation, or insolvency 

of that company; 

(b) 

(c) 

(d) 

(e) 

the  company  is  subject  to  preventive  restructuring  proceedings  initiated 
because of the likelihood of insolvency;  

 the suspension of payments is on-going; 

the  company  is  subject  to  resolution  tools,  powers  and  mechanisms  provided 
for in Title IV of Directive 2014/59/EU; 

the  preventive  measures  have  been  taken  by  the  national  authorities  to  avoid 
the initiation of proceedings referred to in points (a), (b) or (d). 

The  Member  State  of  the  company  being  divided  shall  ensure  that  the  competent 
authority shall not authorise the division when it determines, after an examination of 
the  specific  case  and  having  regard  to  all  relevant  facts  and  circumstances,  that  it 
constitutes  an  artificial  arrangement  aimed  at  obtaining  undue  tax  advantages  or  at 
unduly  prejudicing  the  legal  or  contractual  rights  of  employees,  creditors  or 
members. 

The national law of the Member State of the company being divided shall govern the 
part  of  the  procedures  and  formalities  to  be  complied  with  in  connection  with  the 
cross-border division in order to obtain the pre-division certificate, and the national 
laws  of  the  Member  States  of  the  recipient  companies  shall  govern  the  part  of  the 
procedure  and  the  formalities  to  be  complied  with  following  receipt  of  the  pre-
division certificate in compliance with Union law.  

Article 160e 
Draft terms of cross-border divisions 

The  management  or  administrative  organ  of  the  company  being  divided  shall  draw 
up the draft terms of cross-border division. The draft terms of cross-border division 
shall include at least the following: 

(a) 

(b) 

the  legal  form,  name  and  registered  office  proposed  for  the  new  company  or 
companies resulting from the cross-border division; 

the  ratio  applicable  to  the  exchange  of  securities  or  shares  representing  the 
companies’ capital and the amount of any cash payment, where appropriate; 

1. 

2. 

3. 

4. 

1. 

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(c) 

(d) 

(e) 

(f) 

(g) 

the terms for the allotment of securities or shares representing the capital of the 
recipient companies or, of the company being divided; 

the proposed timetable for the cross-border division; 

the likely repercussions of the cross-border division on employment;  

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

 the  date  or  dates  from  which  the  transactions  of  the  company  being  divided 
will  be  treated  for  accounting  purposes  as  being  those  of  the  recipient 
companies; 

(h)  details  of  any  special  advantages  granted  to  members  of  the  administrative, 

management, supervisory or controlling organ of the company being divided;  

(i) 

(j) 

(k) 

(l) 

(m) 

(n) 

(o) 

(p) 

 the  rights  conferred  by  the  recipient  companies  on  members  of  the  company 
being  divided  enjoying  special  rights  or  on  holders  of  securities  other  than 
shares  representing  the  divided  company  capital,  or  the  measures  proposed 
concerning them; 

 any special advantages granted to the experts who examine the draft terms of 
cross-border division; 

 the instruments of constitution of the recipient companies and any changes to 
the instrument of constitution of the company being divided in case of a partial 
division; 

 where  appropriate,  information  on  the  procedures  by  which  arrangements  for 
the involvement of employees in the definition of their rights to participation in 
the  recipient  companies  are  determined  pursuant  to  Article160n  and  on  the 
possible options for such arrangements; 

 the  precise  description  of  the  assets  and  liabilities  of  the  company  being 
divided and a  statement of how these assets and liabilities are  to  be allocated 
between the recipient companies, or retained by the company being divided in 
the case of a partial division, including provision for the treatment of assets or 
liabilities  not  explicitly  allocated  in  the  draft  terms  of  cross-border  division, 
such as assets or liabilities which are unknown on the date on which the draft 
terms of cross-border division are drawn up;  

 information on the evaluation of the assets and liabilities which are allocated to 
each company involved in a cross-border division; 

the  date  of  the  accounts  of  the  company  being  divided,  which  is  used  to 
establish the conditions of the cross-border division; 

 where appropriate the allocation to the members of the company being divided 
of  shares  and  securities  in  the  recipient  companies  or  in  the  company  being 
divided  or  in  the  combination  of  the  recipient  company  and  company  being 
divided and the criterion upon which such allocation is based;  

(q) 

 details of the offer of cash compensation for the members opposing the cross-
border division in accordance with Article 160l; 

(r) 

details of the safeguards offered to creditors.  

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2. 

3. 

4. 

1. 

Member States shall ensure that where an asset of the company being divided is not 
explicitly  allocated  under  the  draft  terms  of  cross-border  division  and  where  the 
interpretation of these terms does not make a decision on its allocation possible, the 
asset or the consideration therefor is allocated to all the recipient companies or, in the 
case  of  a  partial  division,  to  all  the  recipient  companies  and  the  company  being 
divided  in  proportion  to  the  share  of  the  net  assets  allocated  to  each  of  those 
companies under the draft terms of cross-border division.  

Member States shall also ensure that where a liability of the company being divided 
is not explicitly allocated under the draft terms of cross-border division the liability is 
allocated to the recipient companies and the company being divided, in proportion to 
the share of the net assets allocated to each of those companies under the draft terms 
of cross-border division. Similarly, any joint and several liability shall be limited to 
the value of the net assets allocated to each company at the date of the division. 

In addition to the official languages of the Member States of the recipient companies 
and the one being divided, Member States shall allow the company to use a language 
customary in the sphere of international business and finance in order to draw up the 
draft terms of cross-border division and all other related documents. Member States 
shall  specify  which  language  will  prevail  in  case  of  discrepancies  among  different 
linguistic versions of those documents. 

Article 160f 
Accounting date   

The  management  or  administrative  organ  of  the  company  being  divided  shall  be 
entitled  to  determine  the  accounting  date  or  dates  in  the  draft  terms  of  the  cross-
border division, in order to facilitate the division process.  

The accounting date provided in the draft terms of the cross-border division shall be 
the date on which the cross-border division takes effect, as referred to in Article 160t 
unless the company determines other dates in order to facilitate the division process.  

In that case each accounting date shall comply with the following requirements: 

(a) 

(b) 

(c) 

it  may  not  be  earlier  than  the  date  of  the  balance  sheet  of  the  last  annual 
financial statements drawn up and published by the company being divided;  

in  respect  of  each  recipient  company,  it  may  not  be  earlier  than  the  date  on 
which the recipient company was formed;  

the dates referred to in points (a) and (b) shall enable the recipient companies, 
and  in  case  of  partial  division  the  company  being  divided,  to  draw  up  their 
respective annual financial  statements  including the effects of the division, in 
accordance with Union law and the law of Member States as at the respective 
balance sheet date of the companies involved in the division immediately after 
the date upon which the cross-border division takes effect.  

For the purposes of points (a) and (b), the determination of the accounting date may 
have regard to the accounting regime in use by a recipient company. 

2. 

Member States  shall ensure that the dates referred to  in  paragraph 1 are treated for 
accounting purposes as being the dates from which the transactions transferred by the 
company being divided will be treated as being those of each recipient company, by 
their national laws of all companies resulting from the cross-border division. 

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3. 

1. 

Member  States  shall  ensure  that  for  the  recognition  and  valuation  of  assets  and 
liabilities  in  the  financial  statements  to  be  transferred  pursuant  to  the  cross-border 
division,  the  accounting  regimes  of  the  recipient  companies  shall  be  used  from  the 
respective dates specified in paragraph 1.  

Article 160g 
Report of the management or administrative organ to the members  

The  management  or  administrative  organ  of  the  company  being  divided  shall  draw 
up  a  report  explaining  and  justifying  the  legal  and  economic  aspects  of  the  cross-
border division. 

2. 

The report referred to in paragraph 1, shall in particular explain the following: 

3. 

4. 

1. 

2. 

(a) 

(b) 

(c) 

(d) 

(e) 

the  implications  of  the  cross-border  division  on  the  future  business  of  the 
recipient companies and, in the case of a partial division, also of the company 
being divided and on the managements' strategic plan; 

an explanation and justification of the share exchange ratio, where applicable; 

 a description of any special valuation difficulties which have arisen; 

the implications of the cross-border division for members; 

the  rights  and  remedies  available  to  members  opposing  the  cross-border 
division in accordance with Article 160l. 

The report referred to in paragraph 1 of this Article shall be made available, at least 
electronically,  to  the  members  of  the  company  being  divided  not  less  than  two 
months before the date of the general meeting referred to in Article 160k. That report 
shall also be made similarly available to the representatives of the employees of the 
company being divided or, where there are no such representatives, to the employees 
themselves. 

However,  the  report  referred  to  in  paragraph  1,  shall  not  be  required  where  all  the 
members of the company being divided have agreed to waive this document.  

Article 160h 
Report of the management or administrative organ to the employees 

The  management  or  administrative  organ  of  the  company  being  divided  shall  draw 
up a report explaining the implications of the cross-border division for employees. 

The report referred to in paragraph 1 shall in particular explain the following: 

(a) 

(b) 

(c) 

the  implications  of  the  cross-border  division  on  the  future  business  of  the 
recipient companies and, in the case of a partial division, also of the company 
being divided and on the management's strategic plan;  

the  implications  of  the  cross-border  division  on  the  safeguarding  of  the 
employment relationships;  

any material change in the conditions of employment and the locations of the 
companies’ places of business;  

(d)  whether  the  factors  set  out  in  points  (a),  (b)  and  (c)  also  relate  to  any 

subsidiaries of the company being divided. 

EN 

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3. 

4. 

5. 

6. 

1. 

2. 

The report referred to in paragraph 1 shall be made available, at least electronically, 
to the representatives of the employees of the company being divided or, where there 
are  no  such  representatives,  to  the  employees  themselves  not  less  than  two  months 
before  the  date  of  the  general  meeting  referred  to  in  Article  160k.  The  report  shall 
also be made similarly available to the members of the company being divided. 

Where  the  management  or  administrative  organ  of  the  company  being  divided 
receives,  in  good  time,  an  opinion  from  the  representatives  of  their  employees,  or, 
where there are no such representatives, from the employees themselves, as provided 
for under national law, the members shall be informed thereof and that opinion shall 
be appended to that report. 

However, where the company being divided and all of their subsidiaries, if any, have 
no employees, other than those who form part of the management or administrative 
organ, the report referred to in paragraph 1, shall not be required. 

Paragraphs  1  to  5  are  without  prejudice  to  the  applicable  information  and 
consultation  rights  and  proceedings  instituted  at  national  level  following  the 
implementation of Directives 2001/23/EC, 2002/14/EC or 2009/38/EC. 

Article 160i  
Examination by an independent expert 

Member States shall ensure that the company being divided applies to the competent 
authority,  designated  in  accordance  with  Article  160o(1),  not  less  than  two  months 
before  the  date  of  the  general  meeting  referred  to  in  Article  160k,  to  appoint  an 
expert to examine and assess the draft terms of cross-border division and the reports 
referred to in Articles 160g and 160h, subject to the proviso set out in paragraph 6 of 
this Article. 

The  application  for  the  appointment  of  an  expert  shall  be  accompanied  by  the 
following  

(a) 

(b) 

the draft terms of division referred to in Article 160e; 

the reports referred to in Articles 160g and 160h. 

The  competent  authority  shall  appoint  an  independent  expert  within  five  working 
days of the application referred to in paragraph 1 and the receipt of the draft terms 
and  reports.  The  expert  shall  be  independent  from  the  company  being  divided  and 
may  be  a  natural  or  a  legal  person  depending  upon  the  law  of  the  Member  State 
concerned. Member States shall take into account, in assessing the independence of 
the  expert,  the  framework  established  in  Articles  22  and  22b  of  Directive 
2006/43/EC. 

3. 

The expert shall draw up a written report providing at least: 

(a) 

(b) 

(c) 

an indication of the method or methods used to determine the share exchange 
ratio proposed; 

 a  statement  as  to  whether  the  method  or  methods  referred  to  in  point  (a)  are 
adequate;  

a calculation of the values arrived at by using the methods referred to in point 
(a) and giving an opinion on the relative importance attributed to such methods 
in arriving at the value proposed; 

(d) 

an assessment of whether the share exchange ratio is fair and reasonable; 

EN 

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(e) 

(f) 

 a detailed assessment of the accuracy of the reports and information submitted 
by the company;  

 a  description  of  all  factual  elements  necessary  for  the  competent  authority 
designated  in  accordance  with  Article  160o(1),  to  carry  out  an  in-depth 
assessment to determine whether the intended cross-border division constitutes 
an  artificial  arrangement  in  accordance  with  Article  160p,  at  a  minimum  the 
following:  the  characteristics  of  the  establishments  in  the  Member  States 
concerned  of  the  recipient  companies,  including  the  intent,  the  sector,  the 
investment,  the  net  turnover  and  profit  or  loss,  number  of  employees,  the 
composition  of  the  balance  sheet,  the  tax  residence,  the  assets  and  their 
location, the habitual place of work of the employees and of specific groups of 
employees,  the  place  where  social  contributions  are  due  and  the  commercial 
risks  assumed  by  the  company  being  divided  in  the  Member  States  of  the 
recipient companies.  

Member  States  shall  ensure  that  the  independent  expert  shall  be  entitled  to  obtain 
from the company being divided all relevant information and documents and to carry 
out  all  necessary  investigations  to  verify  all  elements  of  the  draft  terms  or 
management  reports.  The  independent  expert  shall  also  be  entitled  to  receive 
comments and opinions from the representatives of the employees of the company, 
or, where there are no such representatives, employees themselves and also from the 
creditors and members of the company. 

Member States shall ensure that information submitted to the independent expert can 
only be used for the purpose of drafting the report and that confidential information, 
including business secrets, shall not be disclosed. Where appropriate, the expert may 
submit  a  separate  document  containing  confidential  information  to  the  competent 
authority designated in accordance with Article 160o(1) and that separate document 
shall only be made available to the company being divided and not be disclosed to 
any third party. 

Member States shall exempt micro and small enterprises as defined in Commission 
Recommendation 2003/361/EC (**) from the provisions of this Article. 

Article 160j 
Disclosure  

Member  States  shall  ensure  that  the  Member  States  of  the  company  being  divided 
discloses and makes publicly available in the register, at least one month before the 
date of the general meeting thereon, the following documents: 

(a) 

(b) 

(c) 

the draft terms of the cross-border division;  

the independent expert report referred to in Article 160i, where applicable;  

a  notice  informing  the  members,  creditors  and  employees  of  the  company 
being  divided  that  they  may  submit,  before  the  date  of  the  general  meeting 
comments  concerning  the  documents  referred  to  in  points  (a)  and  (b)  of  the 
first subparagraph to the company and to the competent authority designated in 
accordance with Article 160o(1). 

The documents referred to in the first subparagraph shall be also accessible by means 
of the system referred to in Article 22.  

4. 

5. 

6. 

1. 

EN 

76 

  EN 

 
2. 

3. 

4. 

5. 

6. 

Member  States  may  exempt  the  company  being  divided  from  the  disclosure 
requirement  referred  to  in  paragraph  1  where,  for  a  continuous  period beginning at 
least one month before the date fixed for the general meeting which is to decide on 
the draft terms of division and ending not earlier than the conclusion of that meeting, 
it  makes  the  documents  referred  in  paragraph  1,  available  on  its  website  free  of 
charge to the public.  

However,  Member  States  shall  not  subject  that  exemption  to  any  requirements  or 
constraints other than those which are necessary in order to ensure the security of the 
website  and  the  authenticity  of  those  documents  unless  and  only  to  the  extent  that 
they are proportionate in order to achieve those objectives.  

Where  the  company  being  divided  discloses  the  draft  terms  of  the  cross-border 
division in accordance with paragraph 2 of this Article, it shall submit, at least one 
month  before  the  date  of  the  general  meeting  which  is  to  decide  thereon,  to  the 
register, the following information: 

(a) 

(b) 

(c) 

the  legal  form,  name  and  registered  office  of  the  company  being  divided  and 
the  legal  form,  name  and  registered  office  proposed  for  any  newly  created 
company resulting from the cross-border division; 

the register in which the documents referred to in Article 14 are filed in respect 
of the company being divided and the entry number in that register; 

an  indication  of  the  arrangements  made  for  the  exercise  of  the  rights  of 
creditors, employees and members; 

(d)  details  of  the  website  where  the  draft  terms  of  the  cross-border  division,  the 
notice and the expert report referred in paragraph 1 and complete information 
on the arrangements referred to in point (c) of this paragraph may be obtained 
online and free of charge. 

Member States shall ensure that the requirements referred to in paragraphs 1 and 3 
can  be  completed  online  in  their  entirety  without  the  necessity  to  appear  in  person 
before any competent authority in the Member State concerned.  

However,  Member  States  may  in  cases  of  genuine  suspicion  of  fraud  based  on 
reasonable grounds, require a physical presence before a competent authority. 

Member States may require in addition to the disclosure referred to in paragraphs 1, 
2 and 3, that the draft terms of the cross-border division, or the information referred 
to  in  paragraph  3,  is  published  in  their  national  gazette.  In  that  instance,  Member 
States shall ensure that the register transmits the relevant information to the national 
gazettes. 

Member  States  shall  ensure  that  the  documentation  referred  in  paragraph  1  is 
accessible  by  the  public  free  of  charge.  Member  States  shall  ensure  that  any  fees 
charged to the company being divided by the registers for the disclosure referred to 
in  paragraph  1  and  3  and,  where  applicable,  for  the  publication  referred  to  in 
paragraph 5 shall not exceed the administrative costs of providing the service. 

Article 160k  
Approval by the general meeting 

1. 

After  taking  note  of  the  reports  referred  to  in  Articles  160g,  160h  and  160i,  where 
applicable, the general meeting of the company being divided shall decide by means 

EN 

77 

  EN 

 
2. 

3. 

4. 

5. 

1. 

2. 

3. 

of  a  resolution,  whether  to  approve  the  draft  terms  of  cross-border  division.  The 
company shall inform the competent authority designated in accordance with Article 
160o(1) of the decision of the general meeting. 

The  general  meeting  may  reserve  the  right  to  make  implementation  of  the  cross-
border division conditional on express ratification by it of the arrangements referred 
to in Article 160n. 

Member States shall ensure that the approval of any amendment to the draft terms of 
the cross-border division requires a majority of not less than two thirds but not more 
than  90  %  of  the  votes  attached  either  to  the  shares  or  to  the  subscribed  capital 
represented. In any event the voting threshold shall not be higher than that provided 
for in national law for the approval of cross-border mergers. 

The  general  meeting  shall  also  decide  whether  the  cross-border  division  would 
necessitate  amendments  to  the  instruments  of  constitution  of  the  company  being 
divided.  

Member  States  shall  ensure  that  the  approval  of  the  cross-border  division  by  the 
general meeting cannot be challenged solely on the following grounds:  

(a) 

(b) 

(c) 

the share exchange ratio referred to in Article 160e has been inadequately set; 

the cash compensation referred to in Article 160l has been inadequately set; 

the total value of the shareholdings allocated to a member is not equivalent to 
the value of the shares held by that member in the company being divided. 

Article 160l 
Protection of members 

Member States shall ensure that the following members of a company being divided 
have  the  right  to  dispose  of  their  shareholdings  under  the  conditions  laid  down  in 
paragraphs 2 to 6:  

(a) 

the  members  holding  shares  with  voting  rights  and,  who  did  not  vote  for  the 
approval of the draft terms of the cross-border division;  

(b) 

the members holding shares without voting rights.  

Member States shall ensure that the members referred to in paragraph 1, may dispose 
of their shareholdings, in consideration of adequate cash compensation paid, once the 
cross-border  division  has  taken  effect  in  accordance  with  Article  160t,  by  one  or 
more of the following: 

(a) 

(b) 

(c) 

the company being divided; 

the remaining members of that company; 

third parties, in agreement with the company being divided. 

Member States shall ensure that a company being divided makes an offer of adequate 
cash  compensation  in  the  draft  terms  of  the  cross-border  division  as  specified  in 
Article  160e(1)(q)  to  the  members,  referred  to  in  paragraph  1  of  this  Article,  who 
wish  to  exercise  their  right  to  dispose  of  their  shareholdings.  Member  States  shall 
also establish the period for the acceptance of the offer which shall not in any event 
exceed  one  month  after  the  general  meeting  referred  to  in  Article  160k.  Member 
States  shall  further  ensure  that  a company  is  able  to  accept  an  offer  communicated 
electronically to an address provided by the company for that purpose. 

EN 

78 

  EN 

 
4. 

5. 

6. 

7. 

8. 

9. 

1. 

However, the acquisition by the company of its own shares provided for in paragraph 
1 shall be without prejudice to national rules governing the acquisition by a company 
of its own shareholdings. 

Member  States  shall  ensure,  that  the  offer  of  the  cash  compensation  is  conditional 
upon the cross-border division taking effect in accordance with Article 160t. Member 
States shall further establish the period within which the cash compensation is paid, 
which shall not exceed one month after the cross-border division takes effect.  

Member  States  shall  provide  that  any  member  who  has  accepted  the  offer  of  cash 
compensation  referred  to  in  paragraph  3,  but  who  considers  that  the  compensation 
has  not  been  adequately  set,  is  entitled  to  demand  the  recalculation  of  the  cash 
compensation offered before a national court within one month of the acceptance of 
the offer.  

Member States shall ensure that the national law of the Member State of a company 
being divided governs the rights referred to in paragraphs 1 to 5 and that the courts of 
that Member State shall have jurisdiction. Any member, who has accepted the offer 
to  acquire  its  shares,  shall  be  entitled  to  institute  or  to  be  a  party  to  proceedings 
referred to in paragraph 5. 

Member States shall also ensure that members of the company being divided who did 
not  oppose  the  cross-border  division,  but  consider  that  the  share-exchange  ratio  is 
inadequate may challenge that share-exchange ratio set out in the draft terms of the 
cross-border division before a national court within one month after the cross-border 
division takes effect.  

Member States shall ensure that where a national court finds that a share-exchange 
ratio  has  not  been  adequately  set,  the  court  has  the  power  to  order  the  recipient 
company  to  pay  compensation  to  those  members  who  succesfully  challenged  the 
ratio.  This  compensation  shall  consist  of  an  additional  cash  payment  calculated  on 
the  basis  of  an  adequate  ratio  applicable  to  the  exchange  of  securities  or  shares  as 
determined by the court. Upon request by any of these members, the national court 
shall  be  empowered  to  order  the  recipient  company  to  provide  additional  shares 
instead of the cash payment.  

Member States shall ensure that the law applicable to the company resulting from the 
cross-border division shall govern the obligation to pay additional cash compensation 
or to provide additional shares. 

Article 160m  
Protection of creditors 

Member  States  may  require  that  the  management  or  administrative  organ  of  the 
company  being  divided  provides  a  declaration  accurately  reflecting  the  financial 
status of the company as a part of the draft terms of cross-border division referred to 
in  Article  160e.  The  declaration  shall  declare  that,  on  the  basis  of  the  information 
available to the management or  administrative organ of the company  at the date  of 
the declaration, and after having made reasonable enquiries, they are unaware of any 
reason why any recipient company and, in the case of a partial division, the company 
being divided, should, after the division takes effect, be unable to meet the liabilities 
allocated  to  them  under  the  draft  terms  of  the  cross-border  division  when  those 
liabilities  fall  due.  The  declaration  shall  be  made  no  earlier  than  one  month  before 

EN 

79 

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2. 

3. 

4. 

5. 

1. 

2. 

the draft terms of the cross-border division are disclosed in accordance with Article 
160j. 

Member States shall ensure that creditors, who are dissatisfied with the protection of 
their interests provided for in the draft terms of the cross-border division, as provided 
for in Article 160e, may apply to the appropriate administrative or judicial authority 
for  adequate  safeguards  within  one  month  of  the  disclosure  referred  to  in  Article 
160j.  

The creditors of the company being divided shall be presumed not to be prejudiced 
by a cross-border division in either of the following circumstances: 

(a)  where  the  company  discloses  together  with  the  draft  terms  of  conversion  an 
independent  expert  report  which  concluded  that  there  is  no  reasonable 
likelihood  that  the  rights  of  creditors  would  be  unduly  prejudiced.  The 
independent  expert  should  be  appointed  or  approved  by  the  competent 
authority and shall fulfil the requirements laid down in Article 160i(2); 

(b)  where  creditors  are  offered  a  right  to  payment,  either  against  a  third  party 
guarantor,  or  against  the  recipient  companies,  or  in  case  of  a  partial  division 
against  the  recipient  company  and  a  company  being  divided,  of  at  least 
equivalent  value  to  their  original  claim,  which  may  be  brought  in  the  same 
jurisdiction  as  their  original  claim,  and  which  is  of  a  credit  quality  at  least 
commensurate  with  the  creditor’s  original  claim  immediately  after  the 
completion of the division. 

Where  a  creditor  of  the  company  to  be  divided  whose  claim  is  transferred  to  a 
recipient company does not obtain satisfaction from that recipient company, the other 
recipient companies, and in the case of a partial division the company being divided, 
shall be jointly and severally liable with the recipient companies for that obligation. 
However,  the  maximum  amount  of  joint  and  several  liability  of  any  company 
involved  in  the  division  shall  be  limited  to  the  value,  at  the  date  on  which  the 
division takes effect, of the net assets allocated to that company.  

Paragraphs  1  to  4  are  without  prejudice  to  the  application  of  national  laws  of  the 
Member  State  of  the  dividing  company  concerning  the  satisfaction  of  or  securing 
payments to public bodies. 

Article 160n  
Employee participation 

Without  prejudice  to  paragraph  2,  each  recipient  company  shall  be  subject  to  the 
rules in force concerning employee participation, if any, in the Member State where 
it has its registered office. 

However, the rules in force concerning employee participation, if any, in the Member 
State where the company resulting from the cross-border division has its registered 
office shall not apply, where the company being divided, in the six months prior to 
the publication of the draft terms of the cross-border division as referred to in Article 
160e of this Directive, has an average number of employees equivalent to four fifths 
of the applicable threshold, laid down in the law of the Member State of the company 
being divided, which triggers  the participation of employees within the meaning of 
point (k) of Article 2 of Directive 2001/86/EC, or where the national law applicable 
to each of the recipient companies does not: 

EN 

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3. 

(a)  provide for at least the same level of employee participation as operated in the 
company  being  divided  prior  to  the  division,  measured  by  reference  to  the 
proportion  of  employee  representatives  amongst 
the 
administrative or supervisory organ or their committees or of the management 
group  which  covers  the  profit  units  of  the  company,  subject  to  employee 
representation; or 

the  members  of 

(b)  provide  for  employees  of  establishments  of  the  recipient  companies  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 recipient company has its registered office. 

In  the  cases  referred  to  in  paragraph  2,  the  participation  of  employees  in  the 
companies  resulting  from  the  cross-border  division  and  their  involvement  in  the 
definition of such rights shall be regulated by the Member States,  mutatis mutandis 
and subject to paragraphs 4 to 7 of this Article, 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)  Article 3(1), (2)(a)(i), 2(b) and (3), the first indent of the first subparagraph of 
Article 3(4), the second subparagraph of Article 3(4), Article 3(5), Article 3(6) 
third indent and Article 3(7); 

(b)  Article 4(1), Article 4(2)(a), (g) and (h), Article 4(3) and Article 4(4); 

(c)  Article 5; 

(d)  Article 6; 

(e) 

the first subparagraph of Article 7(1); 

(f)  Articles 8, 9, 10 and 12; 

(g)  point (a) of part 3 of the Annex. 

4. 

When  regulating  the  principles  and  procedures  referred  to  in  paragraph  3,  Member 
States: 

(a) 

shall confer on the special negotiating body the right to decide, by a majority of 
two thirds of its members representing at least two thirds of the employees, not 
to open negotiations or to terminate negotiations already opened and to rely on 
the rules on participation in force in the Member States of each of the recipient 
companies; 

(b)  may,  in  the  case  where,  following  prior  negotiations,  standard  rules  for 
participation  apply  and  notwithstanding  such  rules,  decide  to  limit  the 
proportion  of  employee  representatives  in  the  administrative  organ  of  the 
recipient companies. However, if in the company being divided the employee 
representatives  constituted  at  least  one  third  of  the  administrative  or 
supervisory  board,  the  limitation  may  never  result  in  a  lower  proportion  of 
employee representatives in the administrative organ than one third; 

(c) 

shall ensure that the rules on participation that applied prior to the cross-border 
division  continue  to  apply  until  the  date  of  application  of  any  subsequently 
agreed  rules  or  in  the  absence  of  agreed  rules  until  the  application  of  default 
rules in accordance with point (a) of Part 3 of the Annex.  

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5. 

6. 

7. 

8. 

1. 

2. 

3. 

4. 

The  extension  of  participation  rights  to  employees  of  the  recipient  companies 
employed in other Member States, referred to in point (b) of paragraph 2, shall not 
entail  any  obligation  for  Member  States  which  choose  to  do  so  to  take  those 
employees into account when calculating the size of workforce thresholds giving rise 
to participation rights under national law. 

Where any of the recipient companies is to be governed by an employee participation 
system in accordance with the rules referred to in paragraph 2, those companies shall 
be obliged to take a legal form allowing for the exercise of participation rights, 

Where  the  company  resulting  from  the  cross-border  division  is  operating  under  an 
employee  participation  system,  that  company  shall  be  obliged  to  take  measures  to 
ensure  that  employees'  participation  rights  are  protected  in  the  event  of  any 
subsequent cross-border or  domestic merger, division  or conversion  for a period  of 
three  years  after  the  cross-border  division  has  taken  effect,  by  applying,  mutatis 
mutandis, the rules laid down in paragraphs 1 to 6. 

A  company  shall  communicate  to  its  employees  the  outcome  of  the  negotiations 
concerning employee participation without undue delay. 

Article 160o 
Pre-division certificate 

Member  States  shall  designate  the  national  authority  competent  to  scrutinise  the 
legality  of  the  cross-border  divisions  as  regards  the  part  of  the  procedure  which  is 
governed by the law of the Member State of the company being divided, and to issue 
a  pre-division  certificate  attesting  compliance  with  all  relevant  conditions,  and  the 
proper completion of all procedures and formalities in that Member State.   

Member  States  shall  ensure  that  the  application  for  obtaining  the  pre-division 
certificate by the company being divided is accompanied by the following: 

(a) 

(b) 

(c) 

the draft terms of division referred to in Article 160e; 

the reports referred to in Articles 160g, 160h and 160i, as appropriate; 

information  on  the  resolution  of  the  general  meeting  to  approve  the  division 
referred to in Article 160k. 

The  draft  terms  and  reports  submitted  under  Article  160i  do  not  have  to  be  re-
submitted to the competent authority. 

Member States shall ensure that the application referred to in paragraph 2, including 
submission of any company information and documents, may be completed online in 
its entirety without the necessity to appear in person before the competent authority 
referred to in paragraph 1.  

However,  in  cases  of  genuine  suspicion  of  fraud  based  on  reasonable  grounds, 
Member States may require a physical presence before a competent authority where 
relevant information and documents are required to be submitted. 

In  respect  of  compliance  with  the  rules  concerning  employee  participation  as  laid 
down in Article 160n, the Member State of the company being divided shall verify 
that  the  draft  terms  of  cross-border  division  referred  to  in  Article  160e  include 
information  on  the  procedures  by  which  the  relevant  arrangements  are  determined 
and on the possible options for such arrangements.  

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5. 

As  part  of  the  assessment  of  legality  referred  to  in  paragraph  1  the  competent 
authority shall examine the following information:  

6. 

7. 

1. 

(a) 

(b) 

(c) 

the documents and information referred to in paragraph 2;  

all  comments  submitted  by  interested  parties  in  accordance  with  Article 
160j(1); 

an indication by the company that the procedure referred to in Article 160n(3) 
and (4) has started, where relevant. 

Member States shall ensure that competent authorities designated in accordance with 
paragraph 1 may consult other relevant authorities with competence in the different 
fields concerned by the cross-border division. 

Member States shall ensure that the assessment by the competent authority is carried 
out within one month of the receipt of the information concerning the approval of the 
cross-border division by the general meeting of the company. It shall have one of the 
following outcomes: 

(a) 

 where  the  competent  authority  determines  that  the  cross-border  division  falls 
within  the  scope  of  the  national  provisions  transposing  this  Directive,  that  it 
complies with the all the relevant conditions and all necessary procedures and 
formalities  have  been  completed,  the  competent  authority  shall  issue  the  pre-
division certificate;  

(b)  where  the  competent  authority  determines  that  the  cross-border  division  does 
not fall within the scope of the national provisions transposing this Directive it 
shall not issue the pre-division certificate and shall inform the company of the 
reasons  of  its  decision.  The  same  shall  apply  to  the  situations  in  which  the 
competent authority determines that the cross-border division does not meet all 
the  relevant  conditions  or  that  not  all  necessary  procedures  and  formalities 
have  been  completed  and  the  company,  after  being  invited  to  take  the 
necessary steps, has failed to do so; 

(c)  where  the  competent  authority  has  serious  concerns  that  the  cross-border 
division  constitutes  an  artificial  arrangement  referred  to  in  Article  160d(3),  it 
may  decide  to  carry  out  an  in-depth  assessment  in  accordance  with  Article 
160p  and  shall  inform  the  company  about  its  decision  to  conduct  such  an 
assessment and the subsequent outcome. 

Article 160p 
In-depth assessment  

Member  States  shall  ensure  in  order  to  assess  whether  the  cross-border  division 
constitutes  an  artificial  arrangement  within  the  meaning  of  Article  160d(3)  of  this 
Directive, the  competent authority  of the company being divided shall carry  out  an 
in-depth  assessment  of  all  relevant  facts  and  circumstances  and  shall  take  into 
account  at  a  minimum the following: the characteristics  of the establishment in  the 
Member  States  concerned,  including  the  intent,  the  sector,  the  investment,  the  net 
turnover  and  profit  or  loss,  number  of  employees,  the  composition  of  the  balance 
sheet,  the tax residence, the assets  and their location,  the habitual  place  of work of 
the  employees  and  of  specific  groups  of  employees,  the  place  where  social 
contributions  are  due  and  the  commercial  risks  assumed  by  the  company  being 

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divided  in  the  Member  State  of  that  company  and  Member  States  of  recipient 
companies. 

Those  elements  may  be  only  considered  as  indicative  factors  in  the  overall 
assessment and therefore shall not be considered in isolation. 

Member  States  shall  ensure  that  where  the  competent  authority  referred  to  in 
paragraph 1 of this Article decides to carry out an in-depth assessment, it is able to 
hear  the  company  and  all  parties  that  have  submitted  observations  pursuant  Article 
160j(1)  in  accordance  with  national  law.  The  competent  authorities  referred  to  in 
paragraph  1  may  also  hear  any  other  interested  third  parties  in  accordance  with 
national law. The competent authority shall take its final decision regarding the issue 
of  the  pre-division  certificate  within  two  months  from  the  start  of  the  in-depth 
assessment. 

Article 160q 
Review and transmission of the pre-division certificate 

Member  States  shall  ensure  that,  where  the  competent  authority  is  not  a  court,  the 
decision  of  the  competent  authority  to  issue  or  to  refuse  to  issue  a  pre-division 
certificate is subject to judicial review in accordance with national law. In addition, 
Member States shall ensure that a pre-division certificate shall not be effective before 
the expiry of a certain period to allow parties to bring an action before the competent 
court and to obtain, if appropriate, interim measures. 

Member  States  shall  ensure  that  the  decision  to  issue  the  pre-division  certificate  is 
sent  to  the  authorities  referred  to  in  Article  160r(1)  and  the  decisions  to  issue  or 
refuse  to  issue  the  pre-division  certificate  are  available  through  the  system  of 
interconnection of registers set up in accordance with Article 22.  

Article 160r  
Scrutiny of the legality of the cross-border division 

Member States shall designate an authority competent to scrutinise the legality of the 
cross-border  divisions  as  regards  that  part  of  the  procedure  which  concerns  the 
completion of the cross-border division governed by the law of the Member States of 
the recipient companies and to approve the cross-border division where it complies 
with all the relevant conditions and all the procedures and formalities in that Member 
State have been properly completed. 

The  competent  authority  or  authorities  shall  in  particular  ensure  that  the  proposed 
recipient companies comply with provisions of national law on the incorporation of 
companies  and,  where  appropriate,  that  arrangements  for  employee  participation 
have been determined in accordance with Article 160n.  

For the purpose of paragraph 1, each recipient company shall submit to the authority 
referred to in that paragraph, the draft terms of the cross-border division approved by 
the general meeting referred to in Article 160k.  

Each  Member  State  shall  ensure  that  the  application  referred  to  in  paragraph  1,  by 
any  of  the  recipient  companies  which  includes  submission  of  any  information  and 
documents may be completed online in its entirety without the necessity to appear in 
person before the competent authority referred to in paragraph 1. 

2. 

1. 

2. 

1. 

2. 

3. 

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4. 

5. 

1. 

2. 

3. 

However,  in  cases  of  genuine  suspicion  of  fraud  based  on  reasonable  grounds, 
Member  States  may  require  a  physical  presence  before  a  competent  authority  of  a 
Member State where relevant information and documents are required be submitted. 

The  competent  authority  referred  to  in  paragraph  1  of  this  Article  shall,  without 
delay, confirm receipt of the pre-division certificate referred to in Article 160o and 
the other information and documents, required by the laws of the Member States of 
the recipient companies. It shall issue a decision to approve the cross-border division 
as soon as it has completed its assessment of the relevant conditions. 

The  pre-division  certificate,  referred  to  in  paragraph  4,  shall  be  accepted  by  any 
competent authority, referred to in paragraph 1 of this Article, as conclusive evidence 
of  the  proper  completion  of  the  pre-division  procedures  and  formalities  in  the 
Member State of the company being divided without which the cross-border division 
cannot be approved. 

Article 160s  
Registration 

The law of each of the Member States governing the recipient companies, and in case 
of  a  partial  division  the  recipient  companies  and  the  company  being  divided,  shall 
determine, with respect to the territory of that State, the arrangements to disclose the 
completion of the cross-border division in the register referred to in Article 16.  

Member States shall ensure that at least the following information shall be entered in 
their  registers,  which  are  made  publically  available  and accessible  by means  of  the 
system referred to in Article 22: 

(a) 

(b) 

(c) 

the entry number in the register of the recipient company as a result of a cross-
border division; 

the dates of registration of the recipient companies; 

in  case  of  a  full  division,  the  date  of  striking  off  from  the  register  in  the 
Member State of the company being divided; 

(d)  where  appropriate,  the  registration  numbers  in  the  Member  State  of  the 
company being divided and the Member States of the recipient companies.  

Member States  shall ensure that the registers in the Member States  of the  recipient 
companies notify the registry in the Member State of the company being divided, by 
means of the system referred to in Article 22, that the recipient companies have been 
registered. In the case of a full division, the striking off of the company being divided 
from the register shall take effect immediately upon the receipt of that notification.  

Article 160t  
Date on which the cross-border division takes effect 

The law of the Member State of the company being divided shall determine the date on which 
the  cross-border  division  takes  effect.  The  date  shall  be  after  the  scrutiny  referred  to  in 
Articles 160o, 160p and 160r has been carried out and after having received all notifications 
referred to in Article 160s(3).   

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Article 160u  
Consequences of the cross-border division 

1. 

A  full  cross-border  division  carried  out  in  compliance  with  the  national  provisions 
transposing this Directive, shall, have the following consequences: 

(a) 

(b) 

(c) 

(d) 

(e) 

all  the  assets  and  liabilities  of  the  company  being  divided,  including  all 
contracts,  credits,  rights  and  obligations  shall  be  transferred  to  and  shall 
continue  with  the  recipient  companies  in  accordance  with  the  allocation 
specified in the draft terms of the cross-border division; 

the  members  of  the  company  being  divided  shall  become  members  of  the 
recipient companies in accordance with the allocation of shares specified in the 
draft terms of cross-border division, unless they exercise the exit right referred 
to in Article 160l(2); 

the  rights  and  obligations  of  the  company  being  divided  arising  from  the 
contracts of employment or from employment relationship and existing at the 
date on which cross-border division takes effect shall, by reason of that cross-
border division taking effect, be transferred to the respective recipient company 
or companies on the date on which the cross-border division takes effect; 

the company being divided shall cease to exist; 

the place of the registered office of the company being divided may be relied 
upon by third parties until such time as the company carrying out the division 
has been struck off from the register in the departure Member State, unless it 
may  be  proven  that  a  third  party  knew,  or  ought  to  have  known,  of  the 
registered office in the Member States of the recipient companies. 

2. 

Any activity of the company being divided carried out after the date of registration in 
the Member States of the recipient companies and before the company carrying out 
the  division  has  been  struck  off  from  the  register  in  that  Member  State  shall  be 
treated as the activity of the company being divided.  

The  company  being  divided  shall  be  liable  for  any  losses  arising  from  any 
differences  in  national  legal  systems  of  the  Member  States  of  the  company  being 
divided and of the recipient companies, where any contracting party or counterparty 
of the company carrying out the division had not been informed of the cross-border 
division by that company prior to concluding that contract. 

3. 

A partial cross-border division carried out in compliance with the national provisions 
transposing this Directive, shall have the following consequences: 

(a) 

(b) 

all the assets and liabilities of the company being divided including contracts, 
credits, rights and obligations shall be transferred to and shall continue with the 
recipient  companies  and  shall  be  retained  by  the  company  being  divided  in 
accordance  with  the  allocation  specified  in  the  draft  terms  of  cross-border 
division; 

the  members  of  the  company  being  divided  shall  become  members  of  the 
recipient  companies  and  at  least  some  of  the  members  shall  remain  in  the 
company being  divided or  shall  become  members of both  in accordance with 
the allocation of shares specified in the draft terms of cross-border division; 

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(c) 

the recipient companies and the company being divided shall respect the terms 
of the employment relationships of the company being divided which existed at 
the date of the division. 

Where, in the case of a either a full or a partial cross-border division, the laws of the 
Member  States  require  the  completion  of  special  formalities  before  the  transfer  of 
certain  assets,  rights  and  obligations  by  the  company  being  divided  becomes 
effective  as  against  third  parties,  those  formalities  shall  be  carried  out  by  the 
company being divided or by the recipient companies, as appropriate.  

Member States shall ensure that shares in a recipient company may not be exchanged 
for shares in the company being divided which are either held by the company itself 
or through a person acting in his or her own name but on behalf of the company. 

4. 

5. 

Article 160v 
Liability of the independent experts 

Member  States  shall  lay  down  rules  governing  at  least  the  civil  liability  of  the  independent 
experts  responsible  for  drawing  up  the  report  referred  to  in  Articles  160i  and  160m(2)(a), 
including in respect of any misconduct on their part in the performance of their duties. 

Article 160w  
Validity 

A cross-border division which has taken effect in compliance with the procedures transposing 
this Directive may not be declared null and void." 

Article 2 
Transposition 

1. 

2. 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions necessary to comply with this Directive [OP set the date = the last day of 
the  month  of  24  months  after  entry  into  force]  at  the  latest.  They  shall  forthwith 
communicate to the Commission the text of those provisions. 

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. 

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. 

Article 3 
Reporting and review 

The Commission shall, no later than five years after [OP please insert the date of the 
end  of  the  transposition  period  of  this  Directive],  carry  out  an  evaluation  of  this 
Directive  and  present  a  Report  on  the  findings  to  the  European  Parliament,  the 
Council  and  the  European  Economic  and  Social  Committee  accompanied,  where 
appropriate, by a legislative proposal. Member States shall provide the Commission 
with  the  information  necessary  for  the  preparation  of  that  report,  in  particular  by 
providing  data  on  the  number  of  cross-border  conversions,  mergers  and  divisions, 
their duration and related costs. 

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2. 

3. 

The report shall in particular evaluate the procedures referred to in Chapter -I of Title 
II and Chapter IV of Title II, notably in terms of their duration and costs. 

The report shall include an assessment of the feasibility of providing rules for types 
of cross-border divisions which are not covered by this Directive. 

Article 4  
Entry into force 

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

Article 5  
Addressees 

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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