Mergers between public limited liability companies in a single EU country

SUMMARY OF:

Directive 2011/35/EU — Mergers between public limited liability companies in a single EU country

SUMMARY

WHAT DOES THE DIRECTIVE DO?

This directive sets out the rules governing mergers between public limited liability companies* within a single EU country i.e. domestic mergers. It covers protection for shareholders, creditors and employees. It replaces Directive 78/855/EEC (former 3rd Company Law Directive).

KEY POINTS

The directive addresses different types of domestic mergers.

Regarding merger by acquisition* and merger by the formation of a new company*, the draft terms of merger drawn up by the administrative or management board must contain specific information including:

• the type, name and registered office of the companies;
• the share exchange ratio (that is, the relative number of new shares that will be given to existing shareholders of a company that has been acquired or merged with another);
• terms relating to the allotment of shares in the acquiring company;
• the rights granted by the acquiring company.

Such information must be made public at least one month before the date fixed for the general meeting that makes a decision on the merger.

All mergers require the approval of the general meeting of each of the merging companies. However, this requirement is waived if:

• publication of the merger takes place at least 1 month before the date fixed for the general meeting;
• all shareholders of the acquiring company are entitled to inspect certain documents, for example, draft terms of merger, annual accounts, at least 1 month before the date fixed for the general meeting;
• 1 or more shareholders of the acquiring company holding a minimum percentage of the subscribed capital (no more than 5 %) are entitled to require that a general meeting be called to decide whether to approve the merger.

At least 1 month before the date fixed for the general meeting, shareholders are entitled to inspect documents (unless they have already been published on the website) such as the draft terms of the merger, the annual accounts and the reports of the administrative bodies.

The merging companies must protect employees’ rights in accordance with the Directive on safeguarding employees’ rights in the event of transfers of undertakings. They must also provide creditors with safeguards with regards to their financial situation.

Following a merger, a number of results may occur including:

• transfer of all assets and liabilities;
• the shareholders of the company being acquired become shareholders of the acquiring company; and
• the company being acquired ceases to exist.

SINCE WHEN DOES THE DIRECTIVE APPLY?

It entered into force on 1 July 2011. It is a codification of previously existing legislation (Directive 78/855/EEC) which EU countries had to incorporate into national law by 13 October 1981.

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.

* Merger by acquisition by one or more companies occurs where the company/companies that are the object of acquisition transfer their assets and responsibilities to the acquiring company and the shareholders gain shares of the acquiring company.

* Merger by the formation of a new company occurs where the assets and liabilities are exchanged to shares of the new company and cash payment that is a maximum of 10 % of the nominal value of the shares.

ACT

Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 concerning mergers of public limited liability companies (OJ L 110, 29.4.2011, pp. 1-11)

Successive amendments to Directive 2011/35/EU have been incorporated into the basic text. This consolidated version is for reference only.

last update 16.02.2016