Cross-border mergers of limited liability companies

SUMMARY OF:

Directive 2005/56/EC — cross-border mergers of limited liability companies

SUMMARY

WHAT DOES THIS DIRECTIVE DO?

It facilitates the cross-border mergers of limited liability companies* in the EU.

KEY POINTS

As regards scope, the directive covers all limited liability companies formed under the law of an EU country and having their registered office or main place of business in the EU, provided at least 2 of them are governed by the law of different EU countries. Certain types of companies are excluded such as undertakings for collective investment in transferable securities (UCITS), or mutual funds.

The directive sets out the procedures for cross-border mergers, including:

• the common draft terms of the merger, for example, names and registered offices of the merging companies and those proposed for the resulting merged company, including the publication of draft terms,
• preparation of a report by the management of the merging companies explaining the economic and legal aspects and impact of the proposed merger for the benefit of both members and employees,
• preparation of an independent expert report on the implications of the merger,
• approval by the general meeting of the merging companies of the common draft terms.

Each EU country must designate an authority competent to issue a pre-merger certificate confirming that the pre-merger formalities have been properly completed and to check the legality of the resulting merger.

The law of the EU country governing the resulting merged company shall determine the date of entry into effect of the merger. The registry* of the resulting merged company must notify without delay the registries of the other companies involved that the cross-border merger has taken effect.

The consequences of the cross-border merger include:

• the companies being merged ceasing to exist,
• the transfer to the newly merged company of all the assets and liabilities of the merging companies,
• the members of the merging companies becoming members of the new merged company.

As regards employee participation rights, the general principle is that the national law governing the company resulting from the cross-border merger applies.

As an exception to this general principle, principles and procedures very close to those concerning employee participation set out in the European Company Statute apply provided certain specified conditions are met. These conditions include, for example, at least one of the merging companies having an average number of employees exceeding 500 and operating under an employee participation system.

FROM WHEN DOES THIS DIRECTIVE APPLY?

It entered into force on 15 December 2005. EU countries had to incorporate it into national law by 15 December 2007.

BACKGROUND

EU company law

KEY TERMS

* Limited liability company is one where the members of the company cannot be held personally liable for the company’s debts or liabilities.

* Register refers to the national body, e.g. the register of companies, where each of the merging companies is required to file documents.

ACT

Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (OJ L 310, 25.11.2005, pp. 1–9)

Successive amendments to Directive 2005/56/EC have been incorporated into the basic text. This consolidated version is of documentary value only.

last update 26.01.2016