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      The Commission has adopted a proposal for a Directive
      concerning cross-border mergers between firms.  The proposal
      would allow public limited companies to extend their
      international cooperation as far as merger, with the aim of
      achieving the size and the economies of scale necessary to
      make full advantage of the European market, and
      strengthening their ability to compete with large
      undertakings from non-Member States.
      1. The legal machinery of merger between companies is
      designed for two main objectives :
      (a) to allow cooperation between firms to be taken to its
      ultimate conclusion, particularly in order to match their
      size to that of the market on which they operate;
      (b) to simplify procedures for restructuring a group.
      Mergers thus provide a legal tool which is particularly
      useful as a means of meeting the need for a durable and
      homogeneous Community market.
      2. Mergers of public limited companies from the same Member
      State ("national mergers") have already been dealt with by
      the Third Company Law Directive (2), now being incorporated
      into domestic law by the Member States.
      3. The Tenth Directive would take a further step forward by
      allowing mergers between companies from different Member
      States.  At present cross-border mergers are rendered
      impossible by the legal obstacle placed in their way by the
      legislation of almost all Member States.
      With the same aim of promoting cooperation between
      undertakings, the Council, on 12 March 1984, attempted to
      overcome the final problems associated with a series of tax
      measures, including one directly concerning mergers between
      companies across the Community's internal borders.
      In addition, it recommended early action in the field of
      company law on international mergers.  A prerequisite for
      measures on cross-border mergers is that such mergers should
      be legally possible.  This in not the case at present.
      (1) COM(84) 727
      (2) OJ L 295, 20.10.1978
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       This impossibility results not only from the tax burden
      associated with such operations, which should be removed by
      the proposed directive on the common system of taxation
      applicable to mergers, but also from purely legal obstacles:
      at the moment legislation in certain Community countries
      does not allow or does not provide for mergers, and in
      others such operations are subject to prohibitive
      conditions, such as the unanimous approval of the
      shareholders of the company being acquired.  In these
      circumstances, Community undertakings wishing to merge have
      to resort to complex techniques, usually requiring the
      formation of a group of companies headed by a financial
      holding company followed by the transfer og assets within
      the group. Even then the result if by no means identical to
      that of a merger, as all the original companies retain their
      separate legal ecistence.
      Contents of the Directive   As a result the harmonization
      already achieved in the field  of national mergers, the new
      Directive would be limited to  those matters which are
      specific to cross-border mergers.
      However, all mergers, both national and cross-border, are
      operations involving the same steps.
      (a)  the drawing up of joint draft terms of merger
      (b)  the approval of the merger by the appropriate organs of
      each of the companies involved (in principle the general
      (c) the drawing up of a report by the administrative or
      management bodies of each of the companies involved
      (d) the drawing up of an outside expert's report for each of
      the companies involved
      (e) a procedure for prior supervision, either judicial or
      administrative, of the legality of the merger, for drawing
      up and certification in due legal form of the acts required
      for the merger, for each of the companies involved.
      Following this sequence of preparatory acts, the merger maay
      then take effect on a given date, and it may be made
      effective against third parties by means of disclosure.
      One special aspect of cross-border mergers is that the
      merging companies are governed by the laws of different
      Member States.  However, it is very important to note that
      all of the preparatory acts (with the exception of the joint
      draft terms of merger and the disclosure obligations are
      carried out individually by each of the companies involved.
      As a result they may be carried out by each of the companies
      involved in a cross border merger in accordance with the law
      of its own Member State without any need to provide for
      uniform rules.
                                  - 3 -
       It is nevertheless necessary to synchronise certain steps
      in  the procedure.  This is the case for
      (a) the prior supervision or the drawing up and
      certification of acts in due legal form for each company
      in an order fixed by the directive
      (b) the publicity surrounding the completion of a merger.
      Finally, certain rules relating to cross-border mergers must
      be harmonized to a greater degree than was necessary for
      national mergers.  This has been achieved either by adopting
      uniform provisions in the directive or by designating the
      applicable law.  This is particularly the case for:
      (a) the contents of the draft terms of merger
      (b) the protection of creditors of acquired companies
      (c) the date on which the merger takes effect
      (d) the causes of nullity of mergers.


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