European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

The Third Directive No 78/855 , which was codified by Directive No 2011/35 , itself replaced by Directive No 2017/1132 , applies to mergers of public limited liability companies  established on the territory of a same Member State, which give rise either to absorption of one or more companies by another, or merger by the formation of a new company (Directive No 2017/1132, Article 88). Irrespective …

National and cross-border mergers

The Third Directive No 78/855 , which was codified by Directive No 2011/35 , itself replaced by Directive No 2017/1132 , applies to mergers of public limited liability companies  established on the territory of a same Member State, which give rise either to absorption of one or more companies by another, or merger by the formation of a new company (Directive No 2017/1132, Article 88). Irrespective of the form, the merger process follows three steps. 

Firstly, the administrative and management bodies of merging companies must draw up draft terms of merger which specify, in particular, the type, name and registered office of the merging companies, as well as the share exchange ratio and the amount of any cash payment. The draft terms of merger are published in the manner prescribed by the laws of each Member State at least one month before the date of the general meeting which is to decide thereon. Since the coming into force of Directive No 2009/109, the publication may be made on the website of the companies concerned, provided that it is available free of charge for a continuous period of one month before the day fixed for the general meeting, or, if Member States prefer, via the central electronic platform referred to in Article 3(4) of the First Directive (Directive No 2017/1132, Article 92). 

Then, the merger must be approved by the general meeting of each company at a majority of not less than two thirds of the votes attaching either to the shares or to the subscribed capital represented . The shareholders are notified of the draft terms of merger by reports drawn up both by the administrative or management bodies and by independent experts (Directive No 2017/1132, Articles 95 and 96). In order to reduce administrative burdens weighing on the competitiveness of undertakings, Directives No 2009/109  and 2007/63 , replaced by Directive No 2017/1132, have however made it facultative to draw up these reports, provided that the shareholders have so agreed. Moreover, all shareholders must be entitled to inspect the documents referred to by the directive at least one month before the merger either at the registered office of the undertaking or on its website . 

Lastly, the merger is carried out after the vote of the shareholders and it entails transfer, both as between the companies and as regards third parties, of all the assets and liabilities of the company being acquired to the acquiring company, or of the merged companies to the new company (Article 19) and the companies being acquired cease to exist . Pursuant to Article 104 of the directive, the merger must be publicized in accordance with Article 89 of the First Directive.

For purposes of protection of the members and third parties, the directive sets up a very restrictive system for nullity of the merger. Nullity, which may be ordered only in a court judgment (Directive No 2017/1132, Article 108(1)(a)), can only take place in the case of a defect in the implementation of the judicial or administrative preventive supervision of their legality, or in the act 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 (Article 108(1)(b)). Furthermore, the action must be brought within six months after the date on which the merger becomes effective as against the person alleging nullity (Article 108(1)(c)). Where the defect may be remedied, the court must grant the company involved a period of time within which to rectify the situation . 

In parallel, the Tenth Directive No 2005/56 , also replaced by Directive No 2017/1132, extends the European rules on mergers to cross-border mergers. The objective sought by the provision is to facilitate mergers between companies of the European Union by reducing the cost of such transactions, by guaranteeing legal certainty and by allowing the greatest number of undertakings, above all those which do not wish to form a European company, to benefit from it. The directive applies 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 (Directive No 2017/1132, Article 118). Companies the object of which is the collective investment of capital (Article 120(3)) and, if Member States so decide, cross-border mergers involving a cooperative society (Article 120(2)) shall be excluded from the scope of application. The procedure and consequences of the merger are governed by the same rules as those applicable to the simple merger-absorption. By contrast, the Tenth Directive is more precise regarding statutory audits which must be established by the Member States. A national authority competent as regards that part of the procedure relating to each merging company subject to its national law must be designated by each Member State. Before the merger, the authority issues a certificate attesting to the proper completion of the premerger acts and formalities (Article 127). 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 must be scrutinized (Article 128). The authority shall ensure that the merging companies have approved the common draft terms of cross-border merger in the same terms. Once the controls are exercised, the merger is effective and its validity can no longer be challenged (Article 134). The company resulting from the cross-border merger is subject to the rules in force concerning employee participation, if any, in the Member State where it has its registered office (Article 133). Employee participation in the undertakings concerned by the merger must not only be maintained in accordance with Article 133(2)(a) of the directive but must also be extended, in application of  Article 133(2)(b), to employees of establishments of the company resulting from the cross-border merger that are situated in other Member States than the one where the company resulting from the cross-border merger has its registered office. Further, Article 133 does not provide for a less onerous employee participation system for small companies under which employees employed in Member States other than the one in which the company resulting from the merger is registered could be deprived on a long-term basis of their participation rights within that company .

Third Council Directive No 78/855/EEC of 9 October 1978 based on Article 54 (3) (g) of the Treaty concerning mergers of public limited liability companies, OJ L 295 of 20.10.1978, 36.

Directive No 2011/35 of 5 April 2011, OJ L 110 of 29 April 2011.

Tenth Directive No 2005/56 of 26 October 2005 on cross-border mergers of limited liability companies, OJ L 310 of 25 Nov. 2005, 1.

Case C-635/11 Commission v Netherlands, Judgment of 20 June 2013, LawLex201300000993JBJ.

Directive No 2017/1132 of 14 June 2017 relating to certain aspects of company law, OJ L 169 of 30 June 2017.

Article 87 empowers the Member States however to exclude public limited companies from the scope of the regulation (para. 2) or companies that are the subject of bankrupcy proceedings (para. 3).

As an exception, the Member States may require only a simple majority where at least half of the subscribed capital is represented.

Case C-343/13 Modelo Continente Hipermercados, Judgment of 5 March 2015, LawLex201500000274JBJ, stipulating that the transfer to the acquiring company includes the obligation to pay a fine imposed by final decision adopted after the merger by acquisition for infringements of employment law committed by the acquired company prior to the merger.

Directive No 2017/1132, Article 108 (1)(d).

European Business Law

203. National and cross-border mergers

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203. National and cross-border mergers

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise