THE CHOICE OF LAW PRINCIPLES

Different laws could be applied according to the different systems of laws of the MS where
companies and subsidiaries have been established.

There are some reasons that should be examined to distinguish which state is to be considered
more attractive than anothers.

First: Burder of taxation: a greater weight of taxation influences the the results of the annual
balance sheet and the amount of dividens that the SH can receive.

Second: Availability to grant special taxation

The company must:

- Set up the new business in the country for a minimum time period
- Hire minimum number of nationals
- Build the factory.

According to the hypothetical agreement, the State undertakes:

- To apply a preferential taxation on business income for a minimum timpe period

- To grant a reduced taxation on labour
- To grant tax incentives to build the factory
- To build connecting roads or structure for the factory

The law where the company is set up rules the ‘internal affair’. The ‘internal affair’ generally
concerns relationships among SH , between SH and the corporation, between the corporation and
the directors, the inner workins of corporate bodies.

Third: Jurisdiction: the structure of the state composed of the courts that have the power to judge
the disputes.

Impartiality and the capability of judges, their independence from the political powers, the time
period for the cases, their costs are some factors that companies have to keep into account .

Referring to the EU area, if companies decide to establish their business activities in Italy or in
Belgiun they have to take in considerations that the time period for case is longer than in Germany.

The States tries to attract business activities: that measn to create jobs from one hand, and from
another to ensure revenues.

To protect its own interest, each states tries to ensure its own sovereignty by applying its own laws
and revenues against the sovereignty of another states.

MERGERS OF PUBLIC LIMITED LIABILITY COMPANY

Through the mergers operation, the total assets of one or more company, are transferred to another
already existing company, or to newly established; the company being acquired cease to exist without
going into liquidation and it is cancelled from the Business register.

Consequently, the Merger operation influences several interest.

First of all , the right of shareholders of the companies. Since a share represents a part from a capital of
a companies, a greater quantity of shares owned means a greater weitgh to exercire the right of the
vote, greater influence in company’s decision, and a higher amount of dividends to receive.
Following the merger operation, the quantity of shares can change significantly, and this can change the
right to approve or to reject decision in the SH meetings. IN essence the power will be recalculated
according to the amount of the new shares.

The merger operations also influence the interest of creditors, third parties and empoyees.

The creditors and third parties can tend to the patrimonial assets of the company, but the merger
operation changes the assets.The employees may undergo staff reduction or an aggressively
restructuration through the branch.

The EU legislator gives the power to approve the merger operation to the SH. Since the merger is
changing their relationship with the capital, they are allowed to take such decisions about this
operation. The decision must be analysed and justified by the Management Board.

DOMESTIC MERGER

The structure of the Domestiv Merger proposed bu the EU legislator, aims to protect the interest of SH,
of creditors, of third parties and employees, and thei could claim against those companies that are
engaged in this kind of operation.

The needs of protection is applied in compliance with the structure of the company and the principile of
acting in an informed manner; it is carried out by the instruments of disclosure according to the
provision of the First Council Directive.

The essential condition to apply this kind of Directive is that the merger operation must involve two or
more public limited liability companies boverned by the law of a single EU company.

CROSS BORDER MERGER OF LIMITED LIABILITY COMPANY

The lack of regulation at EU level allowed domestic legislator to prevent or limit the cross-border
mergers.

To carry out a cross border mergers, the adoption of the real seat approach by some MS requires that
the foreign company had at first to cease to exist in order to be set up as a new company established
under its domestic law.

The Directive provides that the cross-bordrr mergers has to be carried out by limited liability companies
formed under the law of an EU country and having their registered office or main place of business in
the EU. Limited Liability company is one where the members of the company cannot be held personally
liable for the company’s debts or liabilities. . More generally, a limited liability company is a company
with share capital having legal personality, possessing separate assets which alone is covering its debts .

The required essential element to consider the merger as ‘cross border merger Is that at least 2 of the
merging companies are to be governed by the law of different EU countries.

The EU legislator identifies as merger an operation whereby:

- One ore more companies , that are going to be dissolved without liquidation , transferring 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 necessary, a cash payment not exceeding 10 % of the nominal value;

- Two or more companies, that are going to be dissolved without liquidation , transferring all
their assets and liabilities to a new company that they form, in exchange for the issue to their
 members of securities or shares representing the capital of that other company and, if
necessary, a cash payment not exceeding 10 % of the nominal value;

- To a company that has been dissolved without liquidation, by transferring all its assets and
liabilities to the company holding all the securities or shares representing its capital

The management or administrative organ of each of the merging companies shall drawn up a report
intended for the members , explaining and justifying the legal and economic aspects of the cross-border
merger . The report shall be made available to the members and to the representatives of the
employees, or to the employees themselves, not less than one month before the date of general
meeting.

The consequence of the cross-border merger include:

- The companies cease to exits

- All the assets and liabilities of the companies are transferred to the newly merged company
- The members of the merging companies become members of the new merged company.