Restructuring across EU borders
If you're looking to expand your business within the EU, you can consider restructuring your company across borders. EU rules allow limited liability companies to merge, divide, or convert their legal form while preserving rights for shareholders, employees, and creditors.
These restructuring options are designed to make it easier to grow, reorganise, or relocate your business operations across different EU countries — all while maintaining legal continuity.
Warning
EU rules on mergers, divisions, and conversions apply in most cases to limited liability companies based in at least two different EU countries. However, investment companies (whether public or private) are exempt from these rules.
Mergers of companies across borders
A cross-border merger allows two or more companies from different EU countries to merge into one. This can be done either by one company absorbing another or by forming an entirely new company. Mergers are a common way to grow your business, enter new markets, or consolidate operations.
EU rules ensure that the rights of shareholders, creditors and employees are protected throughout the process.
Merger by acquisition
In a merger by acquisition, your company absorbs one or more companies from other EU countries. The acquired companies transfer all their assets and liabilities to your company, and in exchange, their shareholders receive shares of your company.
Key points:
- Your company takes over the assets and liabilities of the acquired companies.
- Shareholders of the acquired companies become shareholders of your company in proportion to the value of their original holdings.
- A cash adjustment (up to 10% of the share value) is allowed to address differences in value.
- The acquired companies are dissolved, but not liquidated — meaning they legally cease to exist, but their assets and liabilities continue under your company.
Sample story
Growing a business through acquisition
An Italian company decides to grow by acquiring two smaller businesses — one based in Spain and the other in the Netherlands. Instead of purchasing their shares directly , the Italian company undertakes a cross-border merger by acquisition.
As part of the transaction, all the assets and debts of the Spanish and Dutch companies are transferred to the Italian company. In return, the shareholders of the Spanish and Dutch companies receive shares in the Italian company equivalent in value to their original holdings.
However, the share values did not align perfectly — the value of the Italian company’s shares was slightly lower than that of the two target companies. To bridge this gap, the Italian company included a cash payment amounting to 8% of the nominal value of the newly issued shares. This kind of cash compensation is allowed under EU rules, up to 10%.
After the merger, the Spanish and Dutch companies were dissolved, but not liquidated — meaning they ceased to exist legally, but their assets and liabilities were fully absorbed by the Italian company.
Merger by forming a new company
In this type of merger, two or more companies from different EU countries combine to create an entirely new company. Each merging company transfers all its assets and liabilities to the newly formed company, which becomes their legal successor.
Key points:
- All merging companies transfer their assets and liabilities to the new company.
- Shareholders of the merging companies become shareholders of the new company in proportion to the value of their original holdings.
- A cash adjustment (up to 10% of the share value) is allowed to balance out valuation differences.
- The merging companies are dissolved without being liquidated.
Sample story
Two clean energy firms create a new company
Two mid-sized companies — one based in France and the other in Austria — had been working closely together in the clean energy sector. They decided to combine their strengths by merging into a newly formed company established in the Netherlands.
Instead of one company absorbing the other, they created a brand-new company, which took over all the assets, liabilities, and business operations of the two merging companies. In return, shareholders of the original companies received shares in the new company proportional to the value of their previous holdings.
As the Austrian company was valued slightly lower, a small cash payment — equal to 8% of the nominal value of the shares issued — was made to its shareholders to even out the difference. This kind of cash adjustment is permitted under EU law, provided it does not exceed 10%, and is often used to balance differences in valuation or to avoid issuing fractional shares.
Following the merger, the merging French and Austrian companies ceased to exist without liquidation, and business continued seamlessly under the new, jointly owned company.
Mergers of large companies
If the turnover of the combined businesses is greater than certain specified amounts both worldwide and within the EU, you must request approval from the European Commission irrespective of where your company is based. The Commission will examine the proposed merger's impact on competition in the EU.
If the merger is deemed to significantly restrict competition, it may be prohibited. However, most of those mergers that pose competition concerns are cleared conditionally, for example, both parties could sell part of the combined business to get approval.
Warning
EU countries may choose not to apply the above-mentioned rules to cross-border mergers involving cooperative societies, even if they are defined as limited liability companies.Divisions: transferring assets to new entities
A division is when a company transfers all or part of its assets and liabilities to one or more newly established entities. Divisions can be full (resulting in the dissolution of the original company) or partial (where the company being divided remains operational alongside the newly created ones).
Businesses may choose this option to specialise in certain activities, enter new markets, or separate operations for strategic reasons. As with mergers, EU rules ensure legal protections for all stakeholders.
Full division
In a full division, a company based in one EU country transfers all of its assets and liabilities into two or more newly formed companies established in different EU countries. Each new company receives a portion of the original company’s assets and liabilities and continues its business.
Key points:
- The company being divided is dissolved without liquidation.
- All assets and liabilities of the company being divided must be transferred to the newly formed companies.
- Shareholders of the company being divided become shareholders of the newly formed companies in proportion to the value of their original holdings.
- A cash adjustment (up to 10% of the share value) is allowed to balance out valuation differences.
Sample story
Full division: one business becomes three
A Belgian manufacturing group underwent a full division, resulting in the creation of three new companies based in France, the Netherlands, and Austria.
Each new company received a portion of the group’s assets, operations, and liabilities, allowing them to focus on different markets and business areas. The Belgian company was dissolved, but not liquidated, since all its assets and liabilities had been transferred to the newly formed companies.
Shareholders of the original Belgian company received shares in the French, Dutch, and Austrian companies proportional to the value of their original holdings. As the value of the new shares did not match up perfectly for all shareholders, some received a cash payment equal to 6% of the shares’ nominal value to compensate for the difference. Under EU law, cash compensation of up to 10% is permitted to balance valuation discrepancies in such restructurings.
This allowed the business to reorganise across borders and continue operating under a new, more streamlined structure.
Partial division
In a partial division, a company transfers part of its assets and liabilities to one or more newly formed companies based in other EU countries. Unlike a full division, the original company continues to exist and operate.
Key points:
- Only part of the assets and liabilities of the company being divided are transferred.
- At least some of the shareholders of the company being divided become shareholders of the newly formed company or companies, and at least some of the shareholders of the company being divided must remain in the company being divided or must become shareholders of both — depending on how ownership is allocated.
- The company being divided is not dissolved.
- A cash adjustment (up to 10% of the share value) may be included to balance valuation differences.
Sample story
Partial division: moving part of a company to a new one
A manufacturing company decided to separate its logistics operations into a dedicated business. Instead of closing down and starting over, it carried out a partial division.
It transferred part of its assets and liabilities — mainly trucks, warehouses, and related contracts — to a newly formed company focused exclusively on logistics.
The original company’s shareholders received shares in the new logistic company, proportional to their ownership in the original company. Because the share values between the two companies did not align perfectly, some shareholders received a cash payment — equal to 7% of the shares’ nominal value to balance the difference. Under EU rules, such cash compensation is permitted up to 10%.
The original company kept its core manufacturing business and continued operating without being dissolved or re-registered.
Conversions: moving your company to a new country
A cross-border conversion allows your company to move its registered office to another EU country while keeping its legal personality. This means you don’t need to dissolve, wind up, or go into liquidation to convert your company into a legal form of the destination country.
As with mergers and divisions, EU rules ensure legal protection for shareholders, creditors and employees.
Conversion (changing legal form)
Key points:
- Your company keeps its legal personality, assets, and liabilities.
- The shareholders of your company continue to be shareholders of the converted company.
- The registered office is transferred, and the company converts into the legal form of the destination EU country.
- You must follow legal requirements in both the country you are leaving and the one you are moving to.
- You need to draw up, approve and publish draft terms before the conversion.
Sample story
Moving a business to another EU country
A small tech company originally registered in Italy as an S.r.l. (the Italian version of a private limited company) decided to move its headquarters to the Netherlands for better access to investors.
Instead of closing down and starting a new company, it underwent a cross-border conversion. It transferred its registered office to the Netherlands and became a Dutch B.V., the Dutch equivalent of a private limited company. The company kept its assets, employees, and shareholders, but from that point onward operated under Dutch company and governance rules.
Preparing the draft terms
When your company is involved in a cross-border merger, division or conversion, you must draw up a document, known as the draft terms. This document sets out the essential details of the planned operation so that shareholders, employees, and relevant authorities can understand its scope and implications before it is approved.
What to include in your draft terms
The draft terms should contain all the relevant information of the operation, such as:
- name, legal form and registered office of the companies involved, and of the resulting company
- the exchange ratio, any applicable cash payment, and the terms for allotting shares in the company resulting from the cross-border operation (i.e. in the case of cross-border merger or division, how many shares shareholders receive and the amount of cash payments (if applicable)
- likely effects on employees
- the date from which the new shareholders have the right to dividends in the case of a merger or division
- the instruments of constitution and where applicable, the statutes of the company resulting from the cross-border operation
- information on the procedures for employee arrangements for dealing with the board members in the company resulting from the operation (where appropriate)
- information on the evaluation of the assets and liabilities being transferred to the company resulting from the cross-border operation.
Publishing the draft terms
You must disclose the draft terms at least 1 month before the date of the general meetings of the companies involved. This can be done by:
- publishing the draft terms in the business register of the EU country where the companies are located
- publishing the draft terms on the companies’ websites, if required by national law of the EU country where your company is located
Approving the draft terms
The draft terms must be approved by shareholders at the general meetings of the companies involved in the cross-border operation.
Preparing the reports for the general meeting
You should usually prepare the following two reports before the general meetings. However, if all shareholders of the companies involved agree, you can omit the independent expert report.
Management or administrative body's report
This report
- explains the legal and economic implications of the merger, division or conversion for shareholders and employees
- must be shared with the shareholders and employee representatives (or employees themselves) at least 6 weeks before the date of the general meeting
- includes any opinions from employees or their representatives.
Independent expert report
This report
- explains the share exchange ratio and cash compensation for shareholders who oppose the approval of the draft terms
- must be ready at least one month before the general meeting
- can be omitted if all shareholders agree.
Employee participation
As a general rule, if you are the acquiring or newly formed company, employee participation rights – meaning rights to influence company decisions, such as having representatives on the board of directors or supervisory board – are determined by the rules of the EU country where your company is registered.
However, under EU operations rules, if employees had such participation rights before the operation, (e.g. seats on the management board) the resulting company must keep the same level of employee involvement.
If your company (or any company involved) had a significant number of employees—at least 80% of the legal threshold for participation in their country—within six months before announcing the operation, you cannot automatically apply the employee participation rules of the destination EU country or of the company resulting from the merger or division. This is designed to prevent companies from avoiding employee rights by converting, merging or dividing into an EU country with weaker protections.
Legal checks and pre-operation certificate
Before the operation can take effect, authorities in each EU country involved must check its legality. This is typically done by a court, notary, or other competent authorities depending on the country. Once all legal requirements are fulfilled, a pre-operation certificate is issued.
After this, the competent authority in the destination EU country (for conversions) or the EU country of the resulting company (for mergers and divisions) will verify
- the draft terms have been approved
- employee participation arrangements have been respected
- and for new companies, the legality of their formation.
When the restructuring takes effect
The operation takes effect according to the laws of the destination EU country (for conversions), the EU country of the company resulting from the merger (for mergers) and the EU country of the company being divided (for divisions). Business registers in the relevant EU countries must notify each other once the operation is complete. They will also update their records to reflect the formation of new companies or the removal of dissolved companies.
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