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Brussels, 25 November 2004

Commission welcomes Council agreement on making cross-border mergers easier

The European Commission has welcomed the Council’s agreement on its political approach to the Directive on cross-border mergers, proposed by the Commission in November 2003 (see IP/03/716 and MEMO/03/112). This key measure responds to strong demand from businesses and will allow cross-border mergers of limited liability companies in the European Union. Today such mergers are impossible or very difficult and expensive. The Directive will be particularly helpful for small and medium sized companies that want to operate in more than one Member State, but not throughout Europe, and thus cannot seek incorporation under the European Company Statute (see IP/04/1195).

Single Market Commissioner Charlie McCreevy said: “The difficulty or impossibility of cross-border mergers is a major practical obstacle to Europe’s competitiveness. It is high time it was put right. The Commission’s proposal and the Council’s agreement mean we are on the way to doing that and I offer my full cooperation to the European Parliament in taking this forward further. I would like to congratulate the Dutch Presidency for its handling of this and Member States for responding in a spirit of compromise. This is an important step towards the EU’s efforts in breathing new life into the Lisbon Strategy. We are hopeful that the European Parliament will be able to support the agreement. ”

The Directive as agreed by the Council covers all limited liability companies except undertakings for collective investment in transferable securities (UCITS, or mutual funds). Given the very diverse types of cooperatives in the EU, Member States may exclude them from taking part in cross-border mergers.

In general, mergers will be governed in each Member State by the principles and rules applicable to "domestic" mergers.

One of the main issues at stake in the Council discussions was the provision on employee participation. Member States have widely differing worker participation (co-determination) systems. This raised the question of how to deal with cross-border mergers which could lead to a loss or a reduction of employee participation.

Employee participation in the newly created company will be subject to negotiations based on the model of the European Company Statute. Under that model, a special negotiating body should be established in order to agree on participation arrangements. In case of failure, standard rules on employee involvement would apply, stipulating that the higher standard of workers participation existing among the merging companies will apply to the merged entity if at least one third of the total number of employees before the merger were covered by a workers’ participation scheme.

The proposed Directive is subject to the co-decision procedure whereby both the Council and the Parliament must agree on the final text. The European Parliament is expected to adopt its opinion early in 2005.

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