Article 99 Protection of the interests of creditors of the merging companies
1. The laws of the Member States shall provide for an adequate system of protection of the interests of creditors of the merging companies whose claims antedate the publication of the draft terms of merger and have not fallen due at the time of such publication. 2. For the purposes of paragraph 1, the laws of the Member States shall at least provide that such creditors shall be entitled to obtain adequate safeguards where the financial situation of the merging companies makes such protection necessary and where those creditors do not already have such safeguards. Member States shall lay down the conditions for the protection provided for in paragraph 1 and in the first subparagraph of this paragraph. In any event, Member States shall ensure that the creditors are authorised to apply to the appropriate administrative or judicial authority for adequate safeguards provided that they can credibly demonstrate that due to the merger the satisfaction of their claims is at stake and that no adequate safeguards have been obtained from the company. 3. Such protection may be different for the creditors of the acquiring company and for those of the company being acquired.
Article 100 Protection of the interests of debenture holders of the merging companies
Without prejudice to the rules governing the collective exercise of their rights, Article 99 shall apply to the debenture holders of the merging companies, except where the merger has been approved by a meeting of the debenture holders, if such a meeting is provided for under national laws, or by the debenture holders individually.
Article 101 Protection of holders of securities, other than shares, to which special rights are attached
Holders of securities, other than shares, to which special rights are attached shall be given rights in the acquiring company at least equivalent to those they possessed in the company being acquired, unless the alteration of those rights has been approved by a meeting of the holders of such securities, if such a meeting is provided for under national laws, or by the holders of those securities individually, or unless the holders are entitled to have their securities repurchased by the acquiring company.
Article 102 Drawing up and certification of documents in due legal form
1. Where the laws of a Member State do not provide for judicial or administrative preventive supervision of the legality of mergers, or where such supervision does not extend to all the legal acts required for a merger, the minutes of the general meetings which decide on the merger and, where appropriate, the merger contract subsequent to such general meetings shall be drawn up and certified in due legal form. In cases where the merger need not be approved by the general meetings of all the merging companies, the draft terms of merger shall be drawn up and certified in due legal form. 2. The notary or the authority competent to draw up and certify the document in due legal form shall check and certify the existence and validity of the legal acts and formalities required of the company for which that notary or authority is acting and of the draft terms of merger.
Article 103 Date on which a merger takes effect
The laws of the Member States shall determine the date on which a merger takes effect.
Article 104 Publication formalities
1. A merger shall be publicised in the manner prescribed by the laws of each Member State, in accordance with Article 16, in respect of each of the merging companies. 2. The acquiring company may itself carry out the publication formalities relating to the company or companies being acquired.
Article 105 Consequences of a merger
1. A merger shall have the following consequences ipso jure and simultaneously: (a) the transfer, both as between the company being acquired and the acquiring company and, as regards third parties, to the acquiring company of all the assets and liabilities of the company being acquired; (b) the shareholders of the company being acquired become shareholders of the acquiring company; and (c) the company being acquired ceases to exist. 2. No shares in the acquiring company shall be exchanged for shares in the company being acquired held either: (a) by the acquiring company itself or through a person acting in his own name but on its behalf; or (b) by the company being acquired itself or through a person acting in his own name but on its behalf. 3. The foregoing shall not affect the laws of Member States which require the completion of special formalities for the transfer of certain assets, rights and obligations by the acquired company to be effective as against third parties. The acquiring company may carry out such formalities itself; however, the laws of the Member States may permit the company being acquired to continue to carry out such formalities for a limited period which may not, save in exceptional cases, be fixed at more than six months from the date on which the merger takes effect.
Article 106 Civil liability of members of the administrative or management bodies of the company being acquired
The laws of the Member States shall at least lay down rules governing the civil liability, towards the shareholders of the company being acquired, of the members of the administrative or management bodies of that company in respect of misconduct on the part of members of those bodies in preparing and implementing the merger.
Article 107 Civil liability of the experts responsible for drawing up the expert report on behalf of the company being acquired
The laws of the Member States shall at least lay down rules governing the civil liability, towards the shareholders of the company being acquired, of the experts responsible for drawing up on behalf of that company the report referred to in Article 96(1), in respect of misconduct on the part of those experts in the performance of their duties.
Article 108 Conditions for nullity of a merger
1. The laws of the Member States may lay down nullity rules for mergers in accordance with the following conditions only: (a) nullity is to be ordered in a court judgment; (b) mergers which have taken effect pursuant to Article 103 may be declared void only if there has been no judicial or administrative preventive supervision of their legality, or if they have not been drawn up and certified in due legal form, or if it is shown that the decision of the general meeting is void or voidable under national law; (c) nullification proceedings may not be initiated more than six months after the date on which the merger becomes effective as against the person alleging nullity or where the situation has been rectified; (d) where it is possible to remedy a defect liable to render a merger void, the competent court is to grant the companies involved a period of time within which to rectify the situation; (e) a judgment declaring a merger void is to be published in the manner prescribed by the laws of each Member State in accordance with Article 16; (f) where the laws of a Member State permit a third party to challenge such a judgment, that party may only do so within six months of publication of the judgment in the manner prescribed by Section 1 of Chapter III of Title I; (g) a judgment declaring a merger void does not of itself affect the validity of obligations owed by or in relation to the acquiring company which arose before the judgment was published and after the date on which the merger takes effect; and (h) companies which have been parties to a merger are jointly and severally liable in respect of the obligations of the acquiring company referred to in point (g). 2. By way of derogation from point (a) of paragraph 1, the laws of a Member State may also provide for the nullity of a merger to be ordered by an administrative authority if an appeal against such a decision lies to a court. Point (b) and points (d) to (h) of paragraph 1shall apply by analogy to the administrative authority. Such nullification proceedings may not be initiated more than six months after the date on which the merger takes effect. 3. The laws of the Member States on the nullity of a merger pronounced following any supervision other than judicial or administrative preventive supervision of legality shall not be affected.
Article 109 Merger by formation of a new company
1. Articles 91, 92, 93 and 95 to 108 shall apply, without prejudice to Articles 11 and 12, to merger by formation of a new company. For this purpose, ‘merging companies’ and ‘company being acquired’ shall mean the companies which will cease to exist, and ‘acquiring company’ shall mean the new company. Article 91(2)(a) shall also apply to the new company. 2. The draft terms of merger and, if they are contained in a separate document, the memorandum or draft memorandum of association and the articles or draft articles of association of the new company shall be approved at a general meeting of each of the companies that will cease to exist.
Article 110 Transfer of all assets and liabilities by one or more companies to another company which is the holder of all their shares
Member States shall make provision, in respect of companies governed by their laws, for the operation whereby one or more companies are wound up without going into liquidation and transfer all their assets and liabilities to another company which is the holder of all their shares and other securities conferring the right to vote at general meetings. Such operations shall be regulated by the provisions of Section 2 of this Chapter. However, Member States shall not impose the requirements set out in points (b), (c) and (d) of Article 91(2), Articles 95 and 96, points (d) and (e) of Article 97(1), point (b) of Article 105(1) and Articles 106 and 107.
Article 111 Exemption from the requirement of approval by the general meeting
Member States shall not apply Article 93 to the operations referred to in Article 110 if the following conditions are fulfilled: (a) the publication provided for in Article 92 is effected, as regards each company involved in the operation, at least one month before the operation takes effect; (b) at least one month before the operation takes effect, all shareholders of the acquiring company are entitled to inspect the documents referred to in points (a), (b) and (c) of Article 97(1) at the company's registered office; (c) point (c) of the first paragraph of Article 94 applies. For the purposes of point (b) of the first paragraph of this Article, Article 97(2), (3) and (4) shall apply.
Article 112 Shares held by or on behalf of the acquiring company
The Member States may apply Articles 110 and 111 to operations whereby one or more companies are wound up without going into liquidation and transfer all their assets and liabilities to another company, if all the shares and other securities specified in Article 110 of the company or companies being acquired are held by the acquiring company and/or by persons holding those shares and securities in their own names but on behalf of that company.
Article 113 Merger by acquisition by a company which holds 90 % or more of the shares of a company being acquired
Where a merger by acquisition is carried out by a company which holds 90 % or more, but not all, of the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired, Member States shall not require approval of the merger by the general meeting of the acquiring company if the following conditions are fulfilled: (a) the publication provided for in Article 92 is effected, as regards the acquiring company, at least one month before the date fixed for the general meeting of the company or companies being acquired which is to decide on the draft terms of merger; (b) at least one month before the date specified in point (a), all shareholders of the acquiring company are entitled to inspect the documents specified in points (a) and (b) and, where applicable, points (c), (d) and (e) of Article 97(1) at the company's registered office; (c) point (c) of the first paragraph of Article 94 applies. For the purposes of point (b) of the first paragraph of this Article, Article 97(2), (3) and (4) shall apply.
Article 114 Exemption from requirements applicable to mergers by acquisition
Member States shall not impose the requirements set out in Articles 95, 96 and 97 in the case of a merger within the meaning of Article 113 if the following conditions are fulfilled: (a) the minority shareholders of the company being acquired are entitled to have their shares acquired by the acquiring company; (b) if they exercise that right, they are entitled to receive consideration corresponding to the value of their shares; (c) in the event of disagreement regarding such consideration, it is possible for the value of the consideration to be determined by a court or by an administrative authority designated by the Member State for that purpose. A Member State need not apply the first paragraph if the laws of that Member State entitle the acquiring company, without a previous public takeover offer, to require all the holders of the remaining securities of the company or companies to be acquired, to sell those securities to it prior to the merger at a fair price.
Article 115 Transfer of all assets and liabilities by one or more companies to another company which is the holder of 90 % or more of their shares
The Member States may apply Articles 113 and 114 to operations whereby one or more companies are wound up without going into liquidation and transfer all their assets and liabilities to another company, if 90 % or more, but not all, of the shares and other securities referred to in Article 113 of the company or companies being acquired are held by that acquiring company and/or by persons holding those shares and securities in their own names but on behalf of that company.
Article 116 Mergers with cash payment exceeding 10 %
Where in the case of one of the operations referred to in Article 88 the laws of a Member State permit a cash payment to exceed 10 %, Sections 2 and 3 of this Chapter and Articles 113, 114 and 115 shall apply.
Article 117 Mergers without all of the transferring companies ceasing to exist
Where the laws of a Member State permit one of the operations referred to in Articles 88, 110 and 116, without all of the transferring companies thereby ceasing to exist, Section 2, except for point (c) of Article 105(1), and Section 3 or 4 of this Chapter shall apply as appropriate.
Article 118 General provisions
This Chapter shall apply to mergers of limited liability companies formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Union, provided at least two of them are governed by the laws of different Member States (hereinafter referred to as ‘cross-border mergers’).
Article 119 Definitions
For the purposes of this Chapter: (1) ‘limited liability company’, hereinafter referred to as ‘company’, means: (a) a company of a type listed in Annex II; or (b) a company with share capital and having legal personality, possessing separate assets which alone serve to cover its debts and that is subject, under the national law governing it, to conditions concerning guarantees such as are provided for by Section 2 of Chapter II of Title I and Section 1 of Chapter III of Title I for the protection of the interests of members and others; (2) ‘merger’ means an operation whereby: (a) one or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company, the acquiring company, in exchange for the issue to their members of securities or shares representing the capital of that other company and, if applicable, a cash payment not exceeding 10 % of the nominal value, or, in the absence of a nominal value, of the accounting par value of those securities or shares; or (b) two or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to a company that they form, the new company, in exchange for the issue to their members of securities or shares representing the capital of that new company and, if applicable, a cash payment not exceeding 10 % of the nominal value, or in the absence of a nominal value, of the accounting par value of those securities or shares; or (c) a company, on being dissolved without going into liquidation, transfers all its assets and liabilities to the company holding all the securities or shares representing its capital.
Article 120 Further provisions concerning scope
1. Notwithstanding Article 119(2), this Chapter shall also apply to cross-border mergers where the law of at least one of the Member States concerned allows the cash payment referred to in Article 119(2)(a) and (b) to exceed 10 % of the nominal value, or, in the absence of a nominal value, of the accounting par value of the securities or shares representing the capital of the company resulting from the cross-border merger. 2. Member States may decide not to apply this Chapter to cross-border mergers involving a cooperative society even in the cases where the latter would fall within the definition of a limited liability company as laid down in Article 119(1). 3. This Chapter shall not apply to cross-border mergers 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. 4. Member States shall ensure that this Chapter does not apply to the company or companies that are the subject of the use of resolution tools, powers and mechanisms provided for in Title IV of Directive 2014/59/EU.
Article 121 Conditions relating to cross-border mergers
1. Save as otherwise provided in this Chapter, (a) cross-border mergers shall only be possible between types of companies which may merge under the national law of the relevant Member States; (b) a company taking part in a cross-border merger shall comply with the provisions and formalities of the national law to which it is subject. The laws of a Member State enabling its national authorities to oppose a given internal merger on grounds of public interest shall also be applicable to a cross-border merger where at least one of the merging companies is subject to the law of that Member State. This provision shall not apply to the extent that Article 21 of Regulation (EC) No 139/2004 is applicable. 2. The provisions and formalities referred to in point (b) of paragraph 1 shall, in particular, include those concerning the decision-making process relating to the merger and, taking into account the cross-border nature of the merger, the protection of creditors of the merging companies, debenture holders and the holders of securities or shares, as well as of employees as regards rights other than those governed by Article 133. A Member State may, in the case of companies participating in a cross-border merger and governed by its law, adopt provisions designed to ensure appropriate protection for minority members who have opposed the cross-border merger.
Article 122 Common draft terms of cross-border mergers
The management or administrative organ of each of the merging companies shall draw up the common draft terms of a cross-border merger. The common draft terms of a cross-border merger shall include at least the following particulars: (a) the form, name and registered office of the merging companies and those proposed for the company resulting from the cross-border merger; (b) the ratio applicable to the exchange of securities or shares representing the company capital and the amount of any cash payment; (c) the terms for the allotment of securities or shares representing the capital of the company resulting from the cross-border merger; (d) the likely repercussions of the cross-border merger on employment; (e) the date from which the holding of such securities or shares representing the company capital will entitle the holders to share in profits and any special conditions affecting that entitlement; (f) the date from which the transactions of the merging companies will be treated for accounting purposes as being those of the company resulting from the cross-border merger; (g) the rights conferred by the company resulting from the cross-border merger on members enjoying special rights or on holders of securities other than shares representing the company capital, or the measures proposed concerning them; (h) any special advantages granted to the experts who examine the draft terms of the cross-border merger or to members of the administrative, management, supervisory or controlling organs of the merging companies; (i) the statutes of the company resulting from the cross-border merger; (j) where appropriate, information on the procedures by which arrangements for the involvement of employees in the definition of their rights to participation in the company resulting from the cross-border merger are determined pursuant to Article 133; (k) information on the evaluation of the assets and liabilities which are transferred to the company resulting from the cross-border merger; (l) dates of the merging companies' accounts used to establish the conditions of the cross-border merger.
Article 123 Publication
1. The common draft terms of the cross-border merger shall be published in the manner prescribed by the laws of each Member State in accordance with Article 16 for each of the merging companies at least one month before the date of the general meeting which is to decide thereon. Any of the merging companies shall be exempt from the publication requirement laid down in Article 16 if, 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, it makes the common draft terms of such merger available on its website free of charge for the public. 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 and may impose such requirements or constraints only to the extent that they are proportionate in order to achieve those objectives. By way of derogation from the second subparagraph, Member States may require that publication be effected via the central electronic platform referred to in Article 16(5). Member States may alternatively require that such publication be made on any other website designated by them for that purpose. Where Member States avail themselves of one of those possibilities, they shall ensure that companies are not charged a specific fee for such publication. Where a website other than the central electronic platform is used, a reference giving access to that website shall be published on the central electronic platform at least one month before the date fixed for the general meeting. That reference shall include the date of publication of the common draft terms of cross-border merger on the website and shall be accessible to the public free of charge. Companies shall not be charged a specific fee for such publication. The prohibition precluding the charging of companies of a specific fee for publication, laid down in the third and fourth subparagraphs, shall not affect the ability of Member States to pass on to companies the costs in respect of the central electronic platform. Member States may require companies to maintain the information for a specific period after the general meeting on their website or, where applicable, on the central electronic platform or the other website designated by the Member State concerned. Member States may determine the consequences of temporary disruption of access to the website or to the central electronic platform, caused by technical or other factors. 2. For each of the merging companies and subject to the additional requirements imposed by the Member State to which the company concerned is subject, the following particulars shall be published in the national gazette of that Member State: (a) the type, name and registered office of every merging company; (b) the register in which the documents referred to in Article 16(3) are filed in respect of each merging company, and the number of the entry in that register; (c) an indication, for each of the merging companies, of the arrangements made for the exercise of the rights of creditors and of any minority members of the merging companies and the address at which complete information on those arrangements may be obtained free of charge.
Article 124 Report of the management or administrative organ
The management or administrative organ of each of the merging companies shall draw up a report intended for the members explaining and justifying the legal and economic aspects of the cross-border merger and explaining the implications of the cross-border merger for members, creditors and employees. The report shall be made available to the members and to the representatives of the employees 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. Where the management or administrative organ of any of the merging companies receives, in good time, an opinion from the representatives of their employees, as provided for under national law, that opinion shall be appended to the report.
Article 125 Independent expert report
1. An independent expert report intended for members and made available not less than one month before the date of the general meeting referred to in Article 126 shall be drawn up for each merging company. Depending on the law of each Member State, such experts may be natural persons or legal persons. 2. As an alternative to experts operating on behalf of each of the merging companies, one or more independent experts, appointed for that purpose at the joint request of the companies by a judicial or administrative authority in the Member State of one of the merging companies or of the company resulting from the cross-border merger or approved by such an authority, may examine the common draft terms of cross-border merger and draw up a single written report to all the members. 3. The expert report shall include at least the particulars provided for in Article 96(2). The experts shall be entitled to secure from each of the merging companies all information they consider necessary for the discharge of their duties. 4. Neither an examination of the common draft terms of cross-border merger by independent experts nor an expert report shall be required if all the members of each of the companies involved in the cross-border merger have so agreed.
Article 126 Approval by the general meeting
1. After taking note of the reports referred to in Articles 124 and 125, the general meeting of each of the merging companies shall decide on the approval of the common draft terms of cross-border merger. 2. The general meeting of each of the merging companies may reserve the right to make implementation of the cross-border merger conditional on express ratification by it of the arrangements decided on with respect to the participation of employees in the company resulting from the cross-border merger. 3. The laws of a Member State need not require approval of the merger by the general meeting of the acquiring company if the conditions laid down in Article 94 are fulfilled.
Article 127 Pre-merger certificate
1. Each Member State shall designate the court, notary or other authority competent to scrutinise the legality of the cross-border merger as regards that part of the procedure which concerns each merging company subject to its national law. 2. In each Member State concerned the authority referred to in paragraph 1 shall issue, without delay to each merging company subject to that State's national law, a certificate conclusively attesting to the proper completion of the pre-merger acts and formalities. 3. If the law of a Member State to which a merging company is subject provides for a procedure to scrutinise and amend the ratio applicable to the exchange of securities or shares, or a procedure to compensate minority members, without preventing the registration of the cross-border merger, such procedure shall only apply if the other merging companies situated in Member States which do not provide for such procedure explicitly accept, when approving the draft terms of the cross-border merger in accordance with Article 126(1), the possibility for the members of that merging company to have recourse to such procedure, to be initiated before the court having jurisdiction over that merging company. In such cases, the authority referred to in paragraph 1 may issue the certificate referred to in paragraph 2 even if such procedure has commenced. The certificate shall, however, indicate that the procedure is pending. The decision in the procedure shall be binding on the company resulting from the cross-border merger and all its members.
Article 128 Scrutiny of the legality of the cross-border merger
1. Each Member State shall designate the court, notary or other authority competent to scrutinise the legality of the cross-border merger as regards that part of the procedure which concerns the completion of the cross-border merger and, where appropriate, the formation of a new company resulting from the cross-border merger where the company created by the cross-border merger is subject to its national law. The said authority shall in particular ensure that the merging companies have approved the common draft terms of cross-border merger in the same terms and, where appropriate, that arrangements for employee participation have been determined in accordance with Article 133. 2. For the purpose of paragraph 1, each merging company shall submit to the authority referred to in paragraph 1 the certificate referred to in Article 127(2) within six months of its issue together with the common draft terms of cross-border merger approved by the general meeting referred to in Article 126.
Article 129 Date on which the cross-border merger takes effect
The law of the Member State to whose jurisdiction the company resulting from the cross-border merger is subject shall determine the date on which the cross-border merger takes effect. That date shall be after the scrutiny referred to in Article 128 has been carried out.
Article 130 Registration
The law of each of the Member States to whose jurisdiction the merging companies were subject shall determine, with respect to the territory of that State, the arrangements, in accordance with Article 16, for publicising the completion of the cross-border merger in the public register in which each of the companies is required to file documents. The registry for the registration of the company resulting from the cross-border merger shall notify, through the system of interconnection of registers established in accordance with Article 22(2) and without delay, the registry in which each of the companies was required to file documents that the cross-border merger has taken effect. Deletion of the old registration, if applicable, shall be effected on receipt of that notification, and not before.
Article 131 Consequences of a cross-border merger
1. A cross-border merger carried out as laid down in subpoints (a) and (c) of point (2) of Article 119 shall, from the date referred to in Article 129, have the following consequences: (a) all the assets and liabilities of the company being acquired shall be transferred to the acquiring company; (b) the members of the company being acquired shall become members of the acquiring company; (c) the company being acquired shall cease to exist. 2. A cross-border merger carried out as laid down in subpoint (b) of point 2 Article 119 shall, from the date referred to in Article 129, have the following consequences: (a) all the assets and liabilities of the merging companies shall be transferred to the new company; (b) the members of the merging companies shall become members of the new company; (c) the merging companies shall cease to exist. 3. Where, in the case of a cross-border merger of companies covered by this Chapter, the laws of the Member States require the completion of special formalities before the transfer of certain assets, rights and obligations by the merging companies becomes effective against third parties, those formalities shall be carried out by the company resulting from the cross-border merger. 4. The rights and obligations of the merging companies arising from contracts of employment or from employment relationships and existing at the date on which the cross-border merger takes effect shall, by reason of that cross-border merger taking effect, be transferred to the company resulting from the cross-border merger on the date on which the cross-border merger takes effect. 5. No shares in the acquiring company shall be exchanged for shares in the company being acquired held either: (a) by the acquiring company itself or through a person acting in his or her own name but on its behalf; (b) by the company being acquired itself or through a person acting in his or her own name but on its behalf.
Article 132 Simplified formalities
1. Where a cross-border merger by acquisition is carried out by a company which holds all the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired: — Article 122(b), (c) and (e), Article 125 and Article 131(1)(b) shall not apply, — Article 126(1) shall not apply to the company or companies being acquired. 2. Where a cross-border merger by acquisition is carried out by a company which holds 90 % or more, but not all, of the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired, reports by an independent expert or experts and the documents necessary for scrutiny shall be required only to the extent that the national law governing either the acquiring company or the company or companies being acquired so requires, in accordance with Chapter I of Title II.
Article 133 Employee participation
1. Without prejudice to paragraph 2, the company resulting from the cross-border merger shall be subject to the rules in force concerning employee participation, if any, in the Member State where it has its registered office. 2. However, the rules in force concerning employee participation, if any, in the Member State where the company resulting from the cross-border merger has its registered office shall not apply, where at least one of the merging companies has, in the six months prior to the publication of the draft terms of the cross-border merger as referred to in Article 123, an average number of employees that exceeds 500 and is operating under an employee participation system within the meaning of point (k) of Article 2 of Directive 2001/86/EC, or where the national law applicable to the company resulting from the cross-border merger does not: (a) provide for at least the same level of employee participation as operated in the relevant merging companies, 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 cross-border merger 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 company resulting from the cross-border merger has its registered office. 3. In the cases referred to in paragraph 2, the participation of employees in the company resulting from the cross-border merger 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, 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) and (3), the first indent of the first subparagraph of Article 3(4), the second subparagraph of Article 3(4) and Article 3(5) and (7); (b) Article 4(1), Article 4(2)(a), (g) and (h) and Article 4(3); (c) Article 5; (d) Article 6; (e) Article 7(1), point (b) of the first subparagraph of Article 7(2), the second subparagraph of Article 7(2) and Article 7(3). However, for the purposes of this Chapter, the percentages required by point (b) of the first subparagraph of Article 7(2) of Directive 2001/86/EC for the application of the standard rules contained in Part 3 of the Annex to that Directive shall be raised from 25 to 33 1/3 %; (f) Articles 8, 10 and 12; (g) Article 13(4); (h) point (b) 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 relevant organs of the merging companies the right to choose without any prior negotiation to be directly subject to the standard rules for participation referred to in point (h) of paragraph 3, as laid down by the legislation of the Member State in which the company resulting from the cross-border merger is to have its registered office, and to abide by those rules from the date of registration; (b) 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, including the votes of members representing employees in at least two different Member States, not to open negotiations or to terminate negotiations already opened and to rely on the rules on participation in force in the Member State where the registered office of the company resulting from the cross-border merger will be situated; (c) 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 company resulting from the cross-border merger. However, if in one of the merging companies 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. 5. The extension of participation rights to employees of the company resulting from the cross-border merger 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. 6. Where at least one of the merging companies is operating under an employee participation system and the company resulting from the cross-border merger is to be governed by such a system in accordance with the rules referred to in paragraph 2, that company shall be obliged to take a legal form allowing for the exercise of participation rights. 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 subsequent domestic mergers for a period of three years after the cross-border merger has taken effect, by applying mutatis mutandis the rules laid down in this Article.
Article 134 Validity
A cross-border merger which has taken effect as provided for in Article 129 may not be declared null and void.
Article 135 General provisions on division operations
1. Where Member States permit the types of companies listed in Annex I coming under their laws to carry out division operations by acquisition as defined in Article 136, they shall make those operations subject to Section 2 of this Chapter. 2. Where Member States permit the types of companies referred to in paragraph 1 to carry out division operations by the formation of new companies as defined in Article 155, they shall make those operations subject to Section 3 of this Chapter. 3. Where Member States permit the types of companies referred to in paragraph 1 to carry out operations, whereby a division by acquisition as defined in Article 136(1) is combined with a division by the formation of one or more new companies as defined in Article 155(1), they shall make those operations subject to Section 2 of this Chapter and Article 156. 4. Article 87(2), (3) and (4) shall apply.
Article 136 Definition of a ‘division by acquisition’
1. For the purposes of this Chapter, ‘division by acquisition’ shall mean the operation whereby, after being wound up without going into liquidation, a company transfers to more than one company all its assets and liabilities in exchange for the allocation to the shareholders of the company being divided of shares in the companies receiving contributions as a result of the division (hereinafter referred to as ‘recipient companies’) and possibly a cash payment not exceeding 10 % of the nominal value of the shares allocated or, where they have no nominal value, of their accounting par value. 2. Article 89(2) shall apply. 3. In so far as this Chapter refers to provisions of Chapter I of Title II, the term ‘merging companies’ shall mean ‘the companies involved in a division’, the term ‘company being acquired’ shall mean ‘the company being divided’, the term ‘acquiring company’ shall mean ‘each of the recipient companies’ and the term ‘draft terms of merger’ shall mean ‘draft terms of division’.
Article 137 Draft terms of division
1. The administrative or management bodies of the companies involved in a division shall draw up draft terms of division in writing. 2. Draft terms of division shall specify at least: (a) the type, name and registered office of each of the companies involved in the division; (b) the share exchange ratio and the amount of any cash payment; (c) the terms relating to the allotment of shares in the recipient companies; (d) the date from which the holding of such shares entitles the holders to participate in profits and any special conditions affecting that entitlement; (e) the date from which the transactions of the company being divided shall be treated for accounting purposes as being those of one or other of the recipient companies; (f) the rights conferred by the recipient companies on the holders of shares to which special rights are attached and the holders of securities other than shares, or the measures proposed concerning them; (g) any special advantage granted to the experts referred to in Article 142(1) and members of the administrative, management, supervisory or controlling bodies of the companies involved in the division; (h) the precise description and allocation of the assets and liabilities to be transferred to each of the recipient companies; (i) the allocation to the shareholders of the company being divided of shares in the recipient companies and the criterion upon which such allocation is based. 3. Where an asset is not allocated by the draft terms of division and where the interpretation of those terms does not make a decision on its allocation possible, the asset or the consideration therefor shall be allocated to all the recipient companies in proportion to the share of the net assets allocated to each of those companies under the draft terms of division. Where a liability is not allocated by the draft terms of division and where the interpretation of those terms does not make a decision on its allocation possible, each of the recipient companies shall be jointly and severally liable for it. Member States may provide that such joint and several liability be limited to the net assets allocated to each company.
Article 138 Publication of the draft terms of division
Draft terms of division shall be published in the manner prescribed by the laws of each Member State in accordance with Article 16 for each of the companies involved in a division, at least one month before the date of the general meeting which is to decide thereon. Any of the companies involved in the division shall be exempt from the publication requirement laid down in Article 16 if, 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 draft terms of division available on its website free of charge for the public. 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 and may impose such requirements or constraints only to the extent that they are proportionate in order to achieve those objectives. By way of derogation from the second paragraph, Member States may require that publication be effected via the central electronic platform referred to in Article 16(5). Member States may alternatively require that such publication be made on any other website designated by them for that purpose. Where Member States avail themselves of one of those possibilities, they shall ensure that companies are not charged a specific fee for such publication. Where a website other than the central electronic platform is used, a reference giving access to that website shall be published on that central electronic platform at least one month before the date fixed for the general meeting. That reference shall include the date of publication of the draft terms of division on the website and shall be accessible to the public free of charge. Companies shall not be charged a specific fee for such publication. The prohibition precluding the charging to companies of a specific fee for publication, laid down in the third and fourth paragraphs, shall not affect the ability of Member States to pass on to companies the costs in respect of the central electronic platform. Member States may require companies to maintain the information for a specific period after the general meeting on their website or, where applicable, on the central electronic platform or the other website designated by the Member State concerned. Member States may determine the consequences of temporary disruption of access to the website or to the central electronic platform, caused by technical or other factors.
Article 139 Approval by the general meeting of each company involved in a division
1. A division shall require at least the approval of a general meeting of each company involved in the division. Article 93 shall apply with regard to the majority required for such decisions, their scope and the need for separate votes. 2. Where shares in the recipient companies are allocated to the shareholders of the company being divided otherwise than in proportion to their rights in the capital of that company, Member States may provide that the minority shareholders of that company may exercise the right to have their shares purchased. In such case, they shall be entitled to receive consideration corresponding to the value of their shares. In the event of a dispute concerning such consideration, it shall be possible for the consideration to be determined by a court.
Article 140 Derogation from the requirement of approval by the general meeting of a recipient company
The laws of a Member State need not require approval of a division by a general meeting of a recipient company if the following conditions are fulfilled: (a) the publication provided for in Article 138 is effected, for each recipient company, at least one month before the date fixed for the general meeting of the company being divided which is to decide on the draft terms of division; (b) at least one month before the date specified in point (a), all shareholders of each recipient company are entitled to inspect the documents specified in Article 143(1) at the registered office of that company; (c) one or more shareholders of any recipient company holding a minimum percentage of the subscribed capital is entitled to require that a general meeting of such recipient company be called to decide whether to approve the division. Such minimum percentage may not be fixed at more than 5 %. Member States may, however, provide for the exclusion of non-voting shares from this calculation. For the purposes of point (b) of the first paragraph, Article 143(2), (3) and (4) shall apply.
Article 141 Detailed written report and information on a division
1. The administration or management bodies of each of the companies involved in the division shall draw up a detailed written report explaining the draft terms of division and setting out the legal and economic grounds for them, in particular the share exchange ratio and the criterion determining the allocation of shares. 2. The report shall also describe any special valuation difficulties which have arisen. Where applicable, it shall disclose the preparation of the report on the consideration other than in cash referred to in Article 70(2) for recipient companies and the register where that report must be lodged. 3. The administrative or management bodies of a company being divided shall inform the general meeting of that company and the administrative or management bodies of the recipient companies so that they can inform their respective general meetings of any material change in the assets and liabilities between the date of preparation of the draft terms of division and the date of the general meeting of the company being divided which is to decide on the draft terms of division.
Article 142 Examination of the draft terms of division by experts
1. One or more experts acting on behalf of each of the companies involved in the division but independent of them, appointed or approved by a judicial or administrative authority, shall examine the draft terms of division and draw up a written report to the shareholders. However, the laws of a Member State may provide for the appointment of one or more independent experts for all of the companies involved in a division if such appointment is made by a judicial or administrative authority at the joint request of those companies. Such experts may, depending on the laws of each Member State, be natural or legal persons or companies or firms. 2. Article 96(2) and (3) shall apply.
Article 143 Availability of documents for inspection by shareholders
1. All shareholders shall be entitled to inspect at least the following documents at the registered office at least one month before the date of the general meeting which is to decide on the draft terms of division: (a) the draft terms of division; (b) the annual accounts and annual reports of the companies involved in the division for the preceding three financial years; (c) where applicable, an accounting statement drawn up as at a date which shall not be earlier than the first day of the third month preceding the date of the draft terms of division, if the latest annual accounts relate to a financial year which ended more than six months before that date; (d) where applicable, the reports of the administrative or management bodies of the companies involved in the division provided for in Article 141(1); (e) where applicable, the reports provided for in Article 142. For the purposes of point (c) of the first subparagraph, an accounting statement shall not be required if the company publishes a half-yearly financial report in accordance with Article 5 of Directive 2004/109/EC and makes it available to shareholders in accordance with this paragraph. 2. The accounting statement provided for in point (c) of paragraph 1 shall be drawn up using the same methods and the same layout as the last annual balance sheet. However, the laws of a Member State may provide that: (a) it shall not be necessary to take a fresh physical inventory; (b) the valuations shown in the last balance sheet shall be altered only to reflect entries in the books of account; the following shall nevertheless be taken into account: (i) interim depreciation and provisions, (ii) material changes in actual value not shown in the books. 3. Every shareholder shall be entitled to obtain, on request and free of charge, full or, if so desired, partial copies of the documents referred to in paragraph 1. Where a shareholder has consented to the use by the company of electronic means for conveying information, such copies may be provided by electronic mail. 4. A company shall be exempt from the requirement to make the documents referred to in paragraph 1 available at its registered office if, 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 them available on its website. Member States shall not subject that exemption to requirements or constraints other than those which are necessary in order to ensure the security of the website and the authenticity of the documents, and may impose such requirements or constraints only to the extent that they are proportionate in order to achieve those objectives. Paragraph 3 shall not apply if the website gives shareholders the possibility, throughout the period referred to in the first subparagraph of this paragraph, of downloading and printing the documents referred to in paragraph 1. However, in that case Member States may provide that the company is to make those documents available at its registered office for consultation by the shareholders. Member States may require companies to maintain the information on their website for a specific period after the general meeting. Member States may determine the consequences of temporary disruption of access to the website caused by technical or other factors.
Article 144 Simplified formalities
1. Neither an examination of the draft terms of division nor an expert report as provided for in Article 142(1) shall be required if all the shareholders and the holders of other securities conferring the right to vote of each of the companies involved in the division have so agreed. 2. Member States may permit the non-application of Article 141 and points (c) and (d) of Article 143(1) if all the shareholders and the holders of other securities conferring the right to vote of each of the companies involved in the division have so agreed.
Article 145 Protection of employees' rights
Protection of the rights of the employees of each of the companies involved in a division shall be regulated in accordance with Directive 2001/23/EC.
Article 146 Protection of the interests of creditors of companies involved in a division; joint and several liability of the recipient companies
1. The laws of Member States shall provide for an adequate system of protection for the interests of the creditors of the companies involved in a division whose claims antedate publication of the draft terms of division and have not yet fallen due at the time of such publication. 2. For the purpose of paragraph 1, the laws of the Member States shall at least provide that such creditors shall be entitled to obtain adequate safeguards where the financial situation of the company being divided, and that of the company to which the obligation is to be transferred in accordance with the draft terms of division, make such protection necessary, and where those creditors do not already have such safeguards. Member States shall lay down the conditions for the protection provided for in paragraph 1 and in the first subparagraph of this paragraph. In any event, Member States shall ensure that the creditors are authorised to apply to the appropriate administrative or judicial authority for adequate safeguards provided that they can credibly demonstrate that due to the division the satisfaction of their claims is at stake and that no adequate safeguards have been obtained from the company. 3. In so far as a creditor of the company to which the obligation has been transferred in accordance with the draft terms of division has not obtained satisfaction, the recipient companies shall be jointly and severally liable for that obligation. Member States may limit that liability to the net assets allocated to each of those companies other than the one to which the obligation has been transferred. However, they need not apply this paragraph where the division operation is subject to the supervision of a judicial authority in accordance with Article 157 and a majority in number representing three-quarters in value of the creditors or any class of creditors of the company being divided have agreed to forego such joint and several liability at a meeting held pursuant to point (c) of Article 157(l). 4. Article 99(3) shall apply. 5. Without prejudice to the rules governing the collective exercise of their rights, paragraphs 1 to 4 shall apply to the debenture holders of the companies involved in the division except where the division has been approved by a meeting of the debenture holders, if such a meeting is provided for under national laws, or by the debenture holders individually. 6. Member States may provide that the recipient companies shall be jointly and severally liable for the obligations of the company being divided. In such case they need not apply paragraphs 1 to 5. 7. Where a Member State combines the system of creditor protection set out in paragraphs 1 to 5 with the joint and several liability of the recipient companies as referred to in paragraph 6, it may limit such joint and several liability to the net assets allocated to each of those companies.
Article 147 Protection of holders of securities, other than shares, to which special rights are attached
Holders of securities, other than shares, to which special rights are attached, shall be given rights in the recipient companies against which such securities may be invoked in accordance with the draft terms of division, at least equivalent to the rights they possessed in the company being divided, unless the alteration of those rights has been approved by a meeting of the holders of such securities, if such a meeting is provided for under national laws, or by the holders of those securities individually, or unless the holders are entitled to have their securities repurchased.
Article 148 Drawing up and certification of documents in due legal form
Where the laws of a Member State do not provide for judicial or administrative preventive supervision of the legality of divisions or where such supervision does not extend to all the legal acts required for a division, Article 102 shall apply.
Article 149 Date on which a division takes effect
The laws of Member States shall determine the date on which a division takes effect.
Article 150 Publication formalities
1. A division shall be published in the manner prescribed by the laws of each Member State in accordance with Article 16 in respect of each of the companies involved in a division. 2. Any recipient company may itself carry out the publication formalities relating to the company being divided.
Article 151 Consequences of a division
1. A division shall have the following consequences ipso jure and simultaneously: (a) the transfer, both as between the company being divided and the recipient companies and as regards third parties, to each of the recipient companies of all the assets and liabilities of the company being divided; such transfer shall take effect with the assets and liabilities being divided in accordance with the allocation laid down in the draft terms of division or in Article 137(3); (b) the shareholders of the company being divided become shareholders of one or more of the recipient companies in accordance with the allocation laid down in the draft terms of division; (c) the company being divided ceases to exist. 2. No shares in a recipient company shall be exchanged for shares held in the company being divided either: (a) by that recipient company itself or by a person acting in his own name but on its behalf; or (b) by the company being divided itself or by a person acting in his own name but on its behalf. 3. The foregoing shall not affect the laws of Member States which require the completion of special formalities for the transfer of certain assets, rights and obligations by a company being divided to be effective as against third parties. The recipient company or companies to which such assets, rights or obligations are transferred in accordance with the draft terms of division or with Article 137(3) may carry out those formalities themselves; however, the laws of Member States may permit a company being divided to continue to carry out those formalities for a limited period which may not, save in exceptional circumstances, be fixed at more than six months from the date on which the division takes effect.
Article 152 Civil liability of members of the administrative or management bodies of a company being divided
The laws of Member States shall at least lay down rules governing the civil liability of members of the administrative or management bodies of a company being divided towards the shareholders of that company in respect of misconduct on the part of members of those bodies in preparing and implementing the division and the civil liability of the experts responsible for drawing up for that company the report provided for in Article 142 in respect of misconduct on the part of those experts in the performance of their duties.
Article 153 Conditions for nullity of a division
1. The laws of Member States may lay down nullity rules for divisions in accordance with the following conditions only: (a) nullity must be ordered in a court judgment; (b) divisions which have taken effect pursuant to Article 149 are declared void only if there has been no judicial or administrative preventive supervision of their legality, or if they have not been drawn up and certified in due legal form, or if it is shown that the decision of the general meeting is void or voidable under national law; (c) nullification proceedings are not initiated more than six months after the date on which the division becomes effective as against the person alleging nullity or if the situation has been rectified; (d) where it is possible to remedy a defect liable to render a division void, the competent court grants the companies involved a period of time within which to rectify the situation; (e) a judgment declaring a division void is published in the manner prescribed by the laws of each Member State in accordance with Article 16; (f) where the laws of a Member State permit a third party to challenge such a judgment, he does so only within six months of publication of the judgment in the manner prescribed by Chapter III of Title I; (g) a judgment declaring a division void does not of itself affect the validity of obligations owed by or in relation to the recipient companies which arose before the judgment was published and after the date referred to in Article 149; (h) each of the recipient companies is liable for its obligations arising after the date on which the division took effect and before the date on which the decision pronouncing the nullity of the division was published. The company being divided shall also be liable for such obligations; Member States may provide that this liability be limited to the share of net assets transferred to the recipient company on whose account such obligations arose. 2. By way of derogation from point (a) of paragraph 1 of this Article, the laws of a Member State may also provide for the nullity of a division to be ordered by an administrative authority if an appeal against such a decision lies to a court. Point (b) and points (d) to (h) of paragraph 1 of this Article shall apply by analogy to the administrative authority. Such nullification proceedings may not be initiated more than six months after the date referred to in Article 149. 3. The foregoing shall not affect the laws of the Member States on the nullity of a division pronounced following any supervision of legality.
Article 154 Exemption from the requirement of approval by the general meeting of the company being divided
Without prejudice to Article 140, Member States shall not require approval of the division by the general meeting of the company being divided if the recipient companies together hold all the shares of the company being divided and all other securities conferring the right to vote at general meetings of the company being divided, and the following conditions are fulfilled: (a) each of the companies involved in the operation carries out the publication provided for in Article 138 at least one month before the operation takes effect; (b) at least one month before the operation takes effect, all shareholders of companies involved in the operation are entitled to inspect the documents specified in Article 143(1), at their company's registered office; (c) where a general meeting of the company being divided, required for the approval of the division, is not summoned, the information provided for in Article 141(3) covers any material change in the asset and liabilities after the date of preparation of the draft terms of division. For the purposes of point (b) of the first paragraph, Article 143(2), (3) and (4) and Article 144 shall apply.
Article 155 Definition of a ‘division by the formation of new companies’
1. For the purposes of this Chapter, ‘division by the formation of new companies’ means the operation whereby, after being wound up without going into liquidation, a company transfers to more than one newly-formed company all its assets and liabilities in exchange for the allocation to the shareholders of the company being divided of shares in the recipient companies, and possibly a cash payment not exceeding 10 % of the nominal value of the shares allocated or, where they have no nominal value, of their accounting par value. 2. Article 90(2) shall apply.
Article 156 Application of rules on divisions by acquisition
1. Articles 137, 138, 139, and 141, Article 142(1) and (2) and Articles 143 to 153 shall apply, without prejudice to Articles 11 and 12, to division by the formation of new companies. For this purpose, the term ‘companies involved in a division’ shall refer to the company being divided and the term ‘recipient companies’ shall refer to each of the new companies. 2. In addition to the information specified in Article 137(2), the draft terms of division shall indicate the form, name and registered office of each of the new companies. 3. The draft terms of division and, if they are contained in a separate document, the memorandum or draft memorandum of association and the articles or draft articles of association of each of the new companies shall be approved at a general meeting of the company being divided. 4. Member States shall not impose the requirements set out in Articles 141 and 142 and in points (c), (d) and (e) of Article 143(1) where the shares in each of the new companies are allocated to the shareholders of the company being divided in proportion to their rights in the capital of that company.
Article 157 Divisions under the supervision of a judicial authority
1. Member States may apply paragraph 2 where division operations are subject to the supervision of a judicial authority having the power: (a) to call a general meeting of the shareholders of the company being divided in order to decide upon the division; (b) to ensure that the shareholders of each of the companies involved in a division have received or can obtain at least the documents referred to in Article 143 in time to examine them before the date of the general meeting of their company called to decide upon the division. Where a Member State makes use of the option provided for in Article 140, the period shall be long enough for the shareholders of the recipient companies to be able to exercise the rights conferred on them by that Article; (c) to call any meeting of creditors of each of the companies involved in a division in order to decide upon the division; (d) to ensure that the creditors of each of the companies involved in a division have received or can obtain at least the draft terms of division in time to examine them before the date referred to in point (b); (e) to approve the draft terms of division. 2. Where the judicial authority establishes that the conditions referred to in points (b) and (d) of paragraph 1 have been fulfilled and that no prejudice would be caused to shareholders or creditors, it may relieve the companies involved in the division from applying: (a) Article 138, on condition that the adequate system of protection of the interest of the creditors referred to in Article 146(1) covers all claims regardless of their date; (b) the conditions referred to in points (a) and (b) of Article 140 where a Member State makes use of the option provided for in Article 140; (c) Article 143, as regards the period and the manner prescribed for the inspection of the documents referred to therein.
Article 158 Divisions with cash payment exceeding 10 %
Where, in the case of one of the operations specified in Article 135, the laws of a Member State permit the cash payment to exceed 10 %, Sections 2, 3 and 4 of this Chapter shall apply.
Article 159 Divisions without the company being divided ceasing to exist
Where the laws of a Member State permit one of the operations specified in Article 135 without the company being divided ceasing to exist, Sections 2, 3 and 4 of this Chapter shall apply, except for point (c) of Article 151(1).
Article 160 Transitional provisions
Member States need not apply Articles 146 and 147 as regards the holders of convertible debentures and other securities convertible into shares if, at the time when the provisions referred to in Article 26(1) or (2) of Directive 82/891/EEC came into force, the position of those holders in the event of a division had previously been determined by the conditions of issue.
Article 161 Data protection
The processing of personal data carried out in the context of this Directive shall be subject to Directive 95/46/EC ( 36 ) .
Amendment rationale: 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, to gether with the proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 1 as regards the use of digital tools and processes in company law - a comprehensive set of measures for fair, enabling and modern compa ny 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 Strategy 2 . 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 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 resour ces 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 E uropean 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 losin g their legal personality. 4 In particular in its recent judgement Polbud 5 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 applic able 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 nati onal 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 wit h 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 which imposes the winding-up prerequisite of cross-border transfe r 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 proporti onate safeguards for employees, creditors and shareholders to create a dynamic and fair Single Market. The European Parliament 9 has already made calls for it. In particular, it is important that w orkers or their representatives are involved in the procedur e , in line with the 8 th 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. 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. 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 Directive 10 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 o f 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 20 13 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 evaluation 11 of the functioning of the Cross-Border Merger Directive identified certain problems which impede the full effectiveness and efficiency of the existing rules. The 2015 Single Market Strategy 12 mentioned uncertainties over company law as one of the obstacle s 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". 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 procedures 13 . However, the Europe an Parliament also noted the necessity to revise it in order to improve its functioning 14 . 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. 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 chan ge 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 division 15 . However, th e 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. The 2015 Single Market Strategy 16 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 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).
Revised version (Article 161 Data protection):
The processing of any personal data carried out in the context of this Directive shall be subject to Regulation (EU) 2016/679.
Article 162 Report, regular dialogue on the system of interconnection of registers and review
1. The Commission shall, not later than 8 June 2022, publish a report concerning the functioning of the system of interconnection of registers, in particular examining its technical operation and its financial aspects. 2. That report shall be accompanied, if appropriate, by proposals for amending provisions of this Directive relating to the system of interconnection of registers. 3. The Commission and the representatives of the Member States shall regularly convene to discuss matters covered by this Directive relating to the system of interconnection of registers in any appropriate forum. 4. By 30 June 2016, the Commission shall review the functioning of those provisions which concern the reporting and documentation requirements in the case of mergers and divisions and which have been amended or added by Directive 2009/109/EC of the European Parliament and of the Council ( 37 ) , and in particular their effects on the reduction of administrative burdens on companies, in the light of experience acquired in their application, and shall present a report to the European Parliament and the Council, accompanied if necessary by proposals to amend those provisions.
Article 163 Exercise of the delegation
1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Article 25(3) shall be conferred on the Commission for an indeterminate period of time. 3. The delegation of power referred to in Article 25(3) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 5. A delegated act adopted pursuant to Article 25(3) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.
Amendment rationale: 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, to gether with the proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 1 as regards the use of digital tools and processes in company law - a comprehensive set of measures for fair, enabling and modern compa ny 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 Strategy 2 . 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 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 resour ces 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 E uropean 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 losin g their legal personality. 4 In particular in its recent judgement Polbud 5 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 applic able 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 nati onal 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 wit h 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 which imposes the winding-up prerequisite of cross-border transfe r 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 proporti onate safeguards for employees, creditors and shareholders to create a dynamic and fair Single Market. The European Parliament 9 has already made calls for it. In particular, it is important that w orkers or their representatives are involved in the procedur e , in line with the 8 th 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. 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. 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 Directive 10 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 o f 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 20 13 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 evaluation 11 of the functioning of the Cross-Border Merger Directive identified certain problems which impede the full effectiveness and efficiency of the existing rules. The 2015 Single Market Strategy 12 mentioned uncertainties over company law as one of the obstacle s 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". 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 procedures 13 . However, the Europe an Parliament also noted the necessity to revise it in order to improve its functioning 14 . 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. 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 chan ge 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 division 15 . However, th e 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. The 2015 Single Market Strategy 16 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 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).
Revised version (Article 163 Exercise of the delegation):
1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Article 25(3) and Article 162a shall be conferred on the Commission for an indeterminate period of time from 31 July 2019. 3. The delegation of power referred to in Article 25(3) and Article 162a may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 6. A delegated act adopted pursuant to Article 25(3) or Article 162a shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of three months of notification of that act to the European Parliament and to the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.
Article 164 Committee procedure
1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.
Article 165 Communication
Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the fields covered by this Directive.
Article 166 Repeal
Directives 82/891/EEC, 89/666/EEC, 2005/56/EC, 2009/101/EC, 2011/35/EU and 2012/30/EU, as amended by the Directives listed in Part A of Annex III, are repealed, without prejudice to the obligations of the Member States relating to the time limits for the transposition into national law and the dates of application of the Directives set out in Part B of Annex III. References to the repealed Directives shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex IV.
Article 167 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 168 Addressees
This Directive is addressed to the Member States.