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CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

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Published by LEX 47
CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES
CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES

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Published by: LEX 47 on Sep 05, 2009
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05/11/2014

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CROSS-BORDER MERGERS OF LIMITED LIABILITY COMPANIES
This Directive aims to facilitate cross-border mergers between limited liability companiesin the European Union. The measures envisaged by the EU are designed to reduce thecost of such operations, to guarantee their legal certainty and to offer this option to themaximum number of companies, particularly those not wishing to set up a EuropeanCompany, (SE).
ACTDirective2005/56/ECof the European Parliament and of the Council of 26 October2005 on cross-border mergers of limited liability companies [Official Journal L 310of 25.11.2005, p. 1].SUMMARY
The Directive sets out to facilitate cross-border mergers of limited liability companies by proposing a simplified legislative framework.It is an important stage in the EU efforts to implement the Lisbon Strategy and isdesigned to identify the legislation applicable in the event of a merger to each of themerging companies. Once the new entity emanating from the merger has been set up, asingle body of national legislation applies: that of the Member State in which the entityhas established its registered office.
Scope
 The Directive applies to mergers of limited liability companies:
formed in accordance with the law of a Member State;
with their registered office, central administration or principal place of business withinthe Community;
if at least two of them are governed by the law of different Member States.Member States may decide not to apply the Directive to cross-border mergers involving acooperative society even in the cases where the latter would fall within the definition of "limited liability company". Lastly, companies the object of which is the collective
 
investment of capital provided by the public (UCITS) are excluded from the scope of theDirective.
Procedures governing cross-border mergers
 The management or administrative organ of each of the merging companies is required todraw up the
common draft terms of cross-border merger
. The Directive contains a listof the twelve compulsory particulars that constitute the minimum content of the commondraft terms, which must be published in the manner prescribed by the law of eachMember State in accordance with the Directive ondisclosure by limited liability companiesat least one month before the date of the general meeting which is to decide onthem.The management or administrative organ of the merging companies must prepare a reporton the
proposed cross-border merger
for the members and employees that explains thelegal and economic aspects of the cross-border merger and its implications.An
independent expert report
on the merger must be drawn up. It will not be required if all the members of each of the companies involved in the merger have so agreed. Theexpert report and the proposed cross-border merger report must be made available at leastone month before the date of the general meeting.On the basis of the documents referred to above, the general meeting of each of themerging companies must decide on the approval of the common draft terms of cross- border merger.
Scrutiny of legality
 Each Member State must designate the authority competent for scrutinising the legality of the cross-border merger as regards that part of the procedure that concerns each mergingcompany subject to its national law. That authority must issue a
pre-merger certificate
attesting to the proper completion of the pre-merger acts and formalities.Each Member State must designate the authority competent for scrutinising the legality of the cross-border merger as regards that part of the procedure that concerns the completionof the cross-border merger and, where appropriate, the formation of a new companyresulting from the cross-border merger where the company created by the cross-border 
 
merger is subject to its national law. That authority must ensure that the mergingcompanies have approved the common draft terms of cross-border merger in the sameterms.
Legal effects
 Following scrutiny of legality, the law of the Member State to whose jurisdiction thecompany resulting from the cross-border merger is subject must determine the date onwhich the cross-border merger takes effect and the arrangements for publicisingcompletion of the merger in the public register. The old registration must not be deleteduntil that notification has been received.Cross-border mergers have the following effects:
the companies being acquired or the merging companies cease to exist;
all the assets and liabilities of the companies concerned by the merger are transferred tothe new entity (either the acquiring company or the new company);
the members of the companies being acquired become members of the new entity.Where the laws of the Member States require the completion of special formalities beforethe transfer of certain assets, rights and obligations by the merging companies becomeseffective against third parties, the company resulting from the cross-border merger isresponsible for carrying out those formalities.
Worker participation
 The general principle as regards the employees' rights of participation is that nationallaws governing the company resulting from the cross-border merger apply.By way of exception, the principles and arrangements relating to worker participationlaid down by the relevant regulation and theDirective on the European Company(SE)apply as follows:
where at least one of the merging companies has, in the six months before publication of the draft terms of the cross-border merger, an average number of employees that exceeds500 and is operating under an employment participation system;
where the national legislation applicable to the company resulting from the cross-border merger does not provide for at least the same level of employee participation as operated

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