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Mergers of public limited liability companies

This Directive regulates mergers between public limited liability companies to ensure that the safeguards required of companies are equivalent in all Member States.

ACT

Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 concerning mergers of public limited liability companies (Text with EEA relevance).

SUMMARY

This Directive aims at coordinating the legislation of Member States on mergers of public limited liability companies to protect the interests of members and third parties.

Member States need not apply this Directive:

  • to cooperatives;
  • to companies which are being acquired or will cease to exist and are the subject of bankruptcy proceedings, proceedings relating to the winding-up of insolvent companies, judicial arrangements, compositions and analogous proceedings.

Mergers by acquisition and merger by the formation of a new company

Mergers by acquisition * or mergers by the formation of a new company *may be effected where one or more of the companies which are ceasing to exist is in liquidation, provided that the companies have not yet begun to distribute their assets to their shareholders.

Where the administrative or management bodies of companies decide to carry out a merger, they must draw up draft terms of merger in writing which include, in particular:

  • the type, name and registered office of the companies;
  • the share exchange ratio;
  • terms relating to the allotment of shares;
  • the rights conferred by the acquiring company.

The administrative or management bodies of the companies must make the draft terms of merger public at least one month before the date fixed for the general meeting, pursuant to the conditions laid down in the Directive on protecting the interests of members and third parties. They shall be exempt from this requirement if the draft terms are made available on the company website for that period. In order to be valid, the merger must be approved by the general meeting of each of the merging companies.

All mergers require the approval of the general meeting of each of the merging companies. However, Member States need not make the merger subject to approval by the general meeting if:

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

One month before the date fixed for the general meeting, shareholders may inspect documents (unless they have already been published on the website) such as:

  • the draft terms of merger;
  • the annual accounts;
  • the reports of the administrative bodies.

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

After a merger, the following situations may occur:

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

The laws of the Member States may lay down nullity rules for mergers, in particular if:

  • nullity is to be ordered in a court judgment;
  • a defect liable to render a merger void can be remedied;
  • the judgment declaring a merger void does not affect the validity of obligations.

Acquisition of one company by another which holds 90 % or more of its shares

One or more companies may be wound up without going into liquidation and transfer all of their assets and liabilities to another company which is the holder of all their shares, in accordance with the provisions described earlier. Nevertheless, Member States may choose not to impose certain requirements.

This Directive repeals Directive 78/855/EEC.

Key terms of the Act
  • Merger by acquisition: the operation whereby one or more companies are wound up without going into liquidation and transfer to another all their assets and liabilities in exchange for the issue to the shareholders of the company or companies being acquired of shares in the acquiring company and a cash payment, if any, not exceeding 10 % of the nominal value of the shares so issued or, where they have no nominal value, of their accounting par value.
  • Merger by formation of a new company: the operation whereby several companies are wound up without going into liquidation and transfer all their assets and liabilities to a company that they form, in exchange for the issue to their shareholders of shares in the new company and a cash payment, if any, not exceeding 10 % of the nominal value of the shares so issued or, where they have no nominal value, of their accounting par value.

REFERENCE

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal

Directive 2011/35/EU

1.7.2011

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OJ L 110, 29.4.2011

Last updated: 22.07.2011
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