Cross-border mergers to be made simpler

The Commission has tabled a proposal for a directive on cross-border mergers to overcome obstacles presented by differences in national legislation.

On 18 November, the Commission tabled a new proposal for a directive on cross-border mergers, aiming at overcoming existing hurdles. At the moment, differences in national legislation still present challenges for companies – and particularly SMEs – when they attempt to merge with partners in other EU Member States.

The proposed directive would make such mergers simpler for all companies with share capital (and especially SMEs) who want to operate across EU-borders but not throughout the EU and thus are not likely to seek incorporation under the European Company Statute.

The Commission proposes that cross-border mergers be carried out under the law of the country in which the merged entity is registered.

Protection for creditors, debenture holders, holders of securities other than shares, minority shareholders and employees would be maintained as it is under the applicable national law. Regarding the issue of employees’ rights, and specifically workers’ participation, a special negotiation procedure would apply to maintain existing rights.

This directive is the first to be presented under the Commission’s Action Plan on company law and corporate governance of May 2003.

 

The first attempt to facilitate cross-border mergers in Europe was made by the Commission in 1984, but it failed over disagreement on the issue of worker participation in companies' decision-making bodies. In 2001, an agreement was reached on the European Company Statute which resolved the issue of worker participation, prompting the Commission to set out for a second attempt at a cross-border merger directive.

 

The proposed directive will be submitted to the Parliament and the Council to be adopted under the co-decision procedure. The Commission has called for a swift adoption of the directive, as the upcoming enlargement will make it even more important for companies to merge with partners in other EU countries.

 

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