Source: https://www.ey.com/gr/en/services/tax/country-tax-advisory/law-alert-law-companies-transformations
Timestamp: 2019-04-21 08:25:21+00:00

Document:
Law 4601/2019 (Government Gazette A’ 44/09.03.2019, hereinafter “the Law”) constitutes a significant breakthrough to the legislation of companies’ transformations, since for the first time an organized regulatory framework is introduced from a corporate law perspective. The concentration of the applicable provisions in a unified legislative text in order to address fragmentation and multi-regulation as well as the simplification of the formal procedure by reducing the relevant obligations, is expected to operate beneficially for the development of businesses, promoting the operation of the market.
The Law pursues the reformation and systematization of the provisions on companies’ transformations, the modernization of the applicable legal framework in a way compatible to European law, and the resolution of possible conflicts between tax and corporate law. The Law aims at facilitating transformations by providing, inter alia, for universal succession and continuance of legal personality; by establishing common procedures irrespective of the type of transformation or the company types that participate therein; and by balancing the interests of minority shareholders (or partners) and creditors of the companies under transformation.
In the interest of clarity, Art. 4 of the Law clarifies that the provisions of PD 1297/1972, L 2166/1993 and L 4172/2013, as well as tax or incentive laws, remain in force with regard to the tax aspects and the advantages or incentives relating to the transformations within the scope of the Law. Furthermore, the relevant provisions of Art. 66 – 89 of CL 2190/1920 on transformations, which had remained in force, are abolished by Art. 147.
The relevant provisions of the Law will come into effect on 15th of April 2019 (Art. 157 para 1).
In the Law’s explanatory report, companies’ transformations are defined as the legal actions and procedures, governed by corporate law, by which the corporate vehicle for the conduct of a business is changed, without its prior dissolution and liquidation or the transfer of its assets according to the rules of special succession.
The main transformation categories provided by the Law are three (3): mergers (Art. 6 et seq. of the Law), divisions (Art. 54 et seq. of the Law) and conversions (Art. 104 et seq. of the Law).
Merger is the act by which an existing or newly established company acquires, by universal succession, the assets of other companies which are dissolved without liquidation (Art. 6).
Division is the act of transfer, by universal succession, of a company’s assets - which is dissolved without liquidation - to at least two newly formed companies (Art. 55). Conversion is the act of altering the corporate form of a company, without its prior dissolution and without any succession (universal or special) with regard to its assets (Art. 104).
An important novelty of the Law is the drastic extension of the range of permitted transformations, i.e. the permissibility of transformations with the participation of two or more companies, of the same or different type, without any size criteria or a prerequisite for qualification under an incentive law. Thus, the general rule is that everyone can merge with anyone, everyone can absorb anyone, everyone can be divided to anyone, everyone can be converted to anyone.
In particular, Art. 2 of the Law provides as subjects of companies’ transformations Sociétés Anonymes; Limited Liability Companies; Personal Companies; General Partnerships; Limited Partnerships; Companies Limited by Shares; Joint Ventures; European Companies; Cooperatives; and European Cooperative Companies.
An additional novelty of the Law is the possibility of transformation by companies already dissolved, as a way of their revival. In particular, Art. 3 of the Law introduces the general rule that the transformation of a company which is in the stage of dissolution and liquidation (either under bankruptcy or not) is in principle permitted, provided that the distribution of the liquidation proceeds has not yet begun and the provisions about the minimum capital of the relevant company form are respected.
A significant novelty of the Law is the legal definition of the notion of business division and the detailed regulation of the partial division and demerger, concepts already known in tax law. In particular, Art. 54 para 3 of the Law defines the business division as a total of assets and liabilities, which constitute from an organizational aspect, an independent business, i.e. a total capable of operating autonomously. The issue of partial demerger is regulated in Art. 56 of the Law, with essential characteristics the maintenance of the legal independence of the demerged company and the detachment therefrom of one or more business divisions, which are transferred with the advantage of universal succession to the beneficiary company, in exchange of company participations of the latter (and possibly an amount in cash not exceeding 10% of the nominal value of such company participations) towards the shareholders or partners of the demerged company. With regard to the issue of the hive-off of a business division, Art. 57 of the Law provides that the hive-off is realized either by absorption, or by incorporation of one or more new companies, or by absorption and incorporation of one or more new companies, whereas again the legal independence of the divided company is preserved, without the company participations or the amount in cash given by the beneficiary company or companies to pass to its/their partners or shareholders, but to the divided company itself.
e) availability of the transformation documents on the website of each transformed company and provision of copies, following a request of the partners/shareholders via e-mail (art. 11, 63, 107 of the Law).
h) legal effect of the merger, division or conversion (Art. 18, 70 and 113 of the Law).
With regard to the issue of protection of creditors, the Law provides in Αrt. 13, 65 and 114 that within thirty (30) days from the completion of publication formalities of the draft merger or division agreement or the decision for the conversion, the creditors of the company or companies (in case of conversion), whose claims were born before the time of publication have the right to request appropriate guarantees, if they prove that the financial state of the companies due to the transformation makes the provision of guarantees necessary and no such guarantees have already been provided.
V. Liability of administrators and members of the Board of Directors (BoD) Art. 19, 71 and 115 of the Law provide for the liability of BoD members or the administrators of companies participating in the transformation, vis-à-vis its shareholders or partners, for any fault during the preparation and realization of the transformation, with the possibility of raising the relevant claims by a special representative, in order to avoid multiple trials and streamlining the costs for plaintiffs and defendants. The liability is for the restoration of any possible direct loss incurred by the shareholders or partners, due to the transformation, which is without prejudice to the liability of the same persons for damage of third parties (Art. 19 para 3, 71 para 3, 115 para 2 of the Law) according to the general tort provisions (Greek Civil Code Art 914 onwards), Criminal Code Art. 98, nor the (internal) liability towards the legal entity based on special provisions applicable to each company form (indicatively for SAs, art. 102 onwards Law 4548/2018).
According to Art. 20, 72 and 116 of the Law, the transformation is declared invalid by a court decision, if its approval was not granted by one of the companies participating in the transformation, through a decision of the General Shareholders’ Meeting or partners (in case of merger or division); or if one of these decisions is null and void or voidable. However, in order to protect the rights of partners and creditors and for the safety of transactions, the Law provides saving mechanisms for the transformation: if the existing legal flaw disappears or is restored in any way until the court hearing of the petition for declaring the invalidity, the merger, division and conversion are not declared invalid (Art. 20 para 2, 72 para 2, 116 para 2 of the Law). Moreover, in case of invalidity or voidability of a General Shareholders Meeting or partners decision, the court may not declare the invalidity of the merger, division or conversion, if it holds that this is disproportionate compared to the flaw of the decision, with the possibility of the petitioner raising a restoration claim for the loss incurred due to the flaw (Art. 20 para 4, 72 para 4, 116 para 4 of the Law). In case the absorbing company or the beneficiary company is listed, the invalidity cannot be declared due to an invalid or voidable decision, but a restoration claim is provided (Art. 20 para 4, 72 para 4, 116 para 4 of the Law). In any case, the decision declaring the invalidity of the merger, division or conversion is without prejudice to the legal effect of transactions of the absorbing company, the beneficiary company or the company resulting from the conversion, effected after the filing of the transformation and before the publication of the decision for its invalidity in the G.E.MI. portal (Art. 20 para 8, 72 para 10, 116 para 8 of the Law).
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References: Art. 4
 Art. 66
 Art. 147
 Art. 2
 Art. 3
 Art. 54
 Art. 56
 Art. 57

V. 
 Art. 19
 Art 914
 Art. 98
 art. 102
 Art. 20