Last checked : 20/09/2018

Merging businesses

UK decision to invoke Article 50 of the TEU: More information

As of 30 March 2019, all EU law will cease to apply to the UK, unless a ratified withdrawal agreement establishes another date, or the European Council and the UK decide unanimously to extend the two-year negotiation period. For more information about the legal repercussions for businesses:

If you're looking for new business opportunities, you can also consider merging or taking over an existing company. The following rules concern 'limited liability companies' based in at least two different EU countries.

Cross-border mergers involving companies investing capital provided by private or public investors are exempt from EU merger rules.

EU rules must be applied to mergers when:

Your company purchases one or more other companies that are located in another EU Member State (merger by acquisition)

If you are the purchasing company, the assets and liabilities of the companies you buy will be transferred to you. You must then issue securities (such as shares) equal to the capital of the company you purchased, in exchange for the assets you received from the transfer.

You may have to make a cash payment of up to 10% of the nominal or accounting value of your company's securities.

Although the companies you purchased are technically dissolved, they are not officially under liquidation.

Two or more companies transfer all their assets and liabilities to a new company that you will form (merger by formation)

If you're forming the new company, you must issue securities (such as shares) equal to the capital of the companies transferring their assets. You should issue these securities to the owners of the asset-transferring companies. The value of the securities must be equal to the asset-transferring company's capital.

You may have to make a cash payment of up to 10% of the nominal or accounting value of your company's securities.

The companies transferring their assets will be dissolved at the end of the process without undergoing an official liquidation procedure.

A company transfers all of its assets and liabilities to your company which already holds all of their securities (merger by absorption)

Following the transfer, although the company transferring their assets is dissolved, they are not officially under liquidation.

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.

Preparing the documentation (common draft terms)

When your company is involved in a merger you must draw up a document, known as common draft terms of the merger, containing at least the following points:

Publishing the documentation

You must publish the common draft terms at least 1 month before the general assembly meetings take place. These meetings are attended by all the companies deciding on the merger.

You should publish the common draft terms either on the websites of the companies involved or on a dedicated website for mergers in the EU countries concerned.

Preparing the reports for the general meeting

You should usually prepare the following two reports before the general meetings. However, if all owners of the companies involved agree, you can omit the independent expert report.

Report by the management or administrative bodies

This report explains the legal and economic aspects, and implications of the merger for owners, creditors and employees. The report should be given to the owners of the company and to the staff representatives at least 1 month before the general meeting. If the management of any of the merging companies receives feedback (in good time) from the employees, it will be included in the report.

Independent expert report

This report (if required) is prepared for the owners of the companies involved. The report must be ready at least 1 month before the general meeting and should explain the exchange ratio that was laid down in the common draft terms to be used when offering securities for the acquired assets.

Agreeing on the draft terms

All the companies involved in the merger must agree on the draft terms during general meeting sessions.

All companies involved have the right to ensure that the implementation of the merger is conditional; depending on the continuing staff participation after the merger has taken place.

If you're the acquiring company, you can approve the merger without the need to attend the general meetings as long as the other companies involved agree. To do this you must ensure that:

Checking the legality of the merger

The merger must be checked for legality in each EU country involved before it can enter into force. This is normally done by a notary or court. After checking if everything is in order they will issue a pre-merger certificate.

Once the pre-merger certificate is issued, the merger can be completed; as long as the companies involved have approved the common draft terms. Then the relevant authority — in the country where the new company will be created and registered — must check the legality of the formation of the new company.

To find the relevant competition authority in each country, please use the list below.

Choose country:

  • Austriaaten
  • Belgiumbeen
  • Bulgariabgen
  • Croatiacren
  • Cypruscyen
  • Czech Republicczen
  • Denmarkdken
  • Estoniaeeen
  • Finlandfien
  • Francefren
  • Germanydeen
  • Greecegren
  • Hungaryhuen
  • Irelandieen
  • Italyiten
  • Latvialven
  • Lithuanialten
  • Luxembourglufr
  • Maltamten
  • Netherlandsnlen
  • Norwaynoen
  • Polandplen
  • Portugalpten
  • Romaniaroen
  • Slovakiasken
  • Sloveniasien
  • Spainesen
  • Swedenseen
  • United Kingdomuken

Entry into force

The same competent authority in the country where the acquiring or newly-formed company is registered then decides the date when the merger will take effect.

It is the responsibility of each company involved to publish information about the merger on its own national public register. The old company registrations can then be deleted.

Continued staff participation

As a general rule — if you're the acquiring/newly formed company — the future of staff participation in your company is determined by the rules of the EU country where your company is registered.

Staff participation in the acquired/newly formed company cannot be guaranteed by national law if:

Mergers for 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 would be rejected. Sometimes mergers are approved with certain conditions attached, for example they may commit to selling part of the combined business, or to license technology to another market player.

EU legislation

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