Dividing up public limited companies from the same EU country
SUMMARY OF:
Directive 82/891/EEC — division of public limited liability companies in the same EU country
SUMMARY
WHAT DOES THIS DIRECTIVE DO?
This directive (the sixth company law directive) deals with the division of public limited liability companies* in a single EU country. It covers protection for shareholders, creditors and employees.
KEY POINTS
The directive addresses the different ways companies can be divided up.
Regarding division by acquisition and division by the formation of a new company, the draft terms of division drawn up by the administrative or management board shall contain specific information including:
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the type, name and registered office of the companies;
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the share exchange ratio (the number of new shares that existing shareholders receive of a company that has been bought or merged with another when they surrender their original shares);
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terms relating to the allocation of shares;
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the rights conferred by the acquiring company;
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the date from which shareholders can participate in profits.
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A division requires at least the approval of a general meeting of each company involved in the division.
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, including the legal and economic grounds for the division.
Independent experts are required to examine the draft terms of division and draw up a written report to the shareholders. Shareholders are entitled to inspect relevant documents, including the draft terms of division and the annual accounts of the companies involved, and to obtain copies of the documents upon request.
EU countries are required to protect creditors of the companies involved. For example, EU countries may provide that recipient companies are jointly and severally liable for the obligations of the company being divided.
The division of companies may also be supervised by a judicial authority (e.g. a court). Provided that no prejudice is caused to shareholders or creditors, that judicial authority may exempt the companies involved from applying certain rules normally applicable to divisions by acquisition or by the formation of new companies.
FROM WHEN DOES THIS DIRECTIVE APPLY?
From 31 December 1982. EU countries had to incorporate it into national law by 1 January 1986.
BACKGROUND
European Commission website on company law
KEY TERMS
* A public liability company is one which has offered shares to the general public and whose shareholders have limited liability, usually only in relation to the amount paid for their shares.
ACT
Sixth Council Directive 82/891/EEC of 17 December 1982 based on Article 54(3)(g) of the Treaty, concerning the division of public limited liability companies (OJ L 378, 31.12.1982, pp. 47-54)
The successive amendments to Directive 82/891/EEC have been incorporated into the original text. This consolidated version is of documentary value only.
last update 11.11.2015