TAIEX
Ana Maria DOBRE
Chisinau,
14 - 15 May 2012
General remarks
 Objective of EC Treaty : to establish a common market;
 remove obstacles to the free movement of goods,
persons, services & capital between Member States (MS)
 Harmonise the laws of MS as required to ensure proper
functioning of common market, avoiding distortion of
competition and increasing trust in cross-border
economic relationships.
European company law represents the cornerstone of
the internal market.
 EU company law has evolved significantly over the last
40 years.
 The rationale behind the EU harmonization process: It
was believed that the diversity of national company laws
would frustrate the goal of an optimally functioning
internal market, distort competition and lead to a race-tothe-bottom=>Member State, in order to attract companies
to incorporate in their jurisdiction, would create as
flexible as possible company law, ignoring an appropriate
level of protection of shareholders and creditors.
The scope of EU Company Law harmonization
The Treaty on the Functioning of the European Union provides the legal basis to adopt
Directives harmonizing EU company law (Article 50).
the protection of interest of shareholders and others, the
constitution and maintenance of public limited-liability
companies' capital, takeover bids, branches disclosure,
mergers and divisions, minimum rules for single-member
private limited-liability companies, shareholders' rights
and related areas such as financial reporting and
accounting. Considerable work has also been
accomplished on different legal forms such as the
European Company (SE), the European Economic
Interest Grouping (EEIG) and the European Cooperative
Society (SCE).
The role of the Court of Justice of the European Union
 Enforcement of the freedom of establishment;
 Please see CJEU cases like:
 Centros Ltd,
 Überseering,
 Inspire Art Ltd;
 Viking Line;
 Cartesio;
Directive 2005/56/EC of the European Parliament and of the Council of
26 October 2005 on cross-border mergers of limited liability companies
 http://europa.eu/legislation_summaries/internal_market/businesses/c
ompany_law/l26041_en.htm;
 The Directive applies to mergers of limited liability companies:
 formed in accordance with the law of a Member State;
 with their registered office, central administration or principal place of
business within the Community;
 if at least two of them are governed by the law of different Member
States.
 Member States may decide not to apply the Directive to cross-border
mergers involving a cooperative society even in the cases where the
latter would fall within the definition of "limited liability company".
 Lastly, companies the object of which is the collective investment of
capital provided by the public (UCITS) are excluded from the scope of
the Directive.
Directive 2005/56/EC of the European Parliament and of the
Council of 26 October 2005 on cross-border mergers of limited
liability companies
Procedures governing cross-border mergers
 The management or administrative organ of each of the merging companies is
required to draw up the common draft terms of cross-border merger. The Directive
contains a list of the twelve compulsory particulars that constitute the minimum
content of the common draft terms, which must be published in the manner prescribed
by the law of each Member State in accordance with the Directive on disclosure by
limited liability companies at least one month before the date of the general meeting
which is to decide on them.
 The management or administrative organ of the merging companies must prepare a
report on the proposed cross-border merger for the members and employees that
explains the legal and economic aspects of the cross-border merger and its
implications.
 An independent expert report on the merger must be drawn up. It will not be
required if all the members of each of the companies involved in the merger have so
agreed. The expert report and the proposed cross-border merger report must be
made available at least one month before the date of the general meeting.
 On the basis of the documents referred to above, the general meeting of each of the
merging companies must decide on the approval of the common draft terms of crossborder merger.
Directive 2005/56/EC of the European Parliament and of the
Council of 26 October 2005 on cross-border mergers of limited
liability companies
Scrutiny of legality
 Each Member State must designate the authority competent for scrutinizing
the legality of the cross-border merger as regards that part of the procedure
that concerns each merging company subject to its national law. That
authority must issue a pre-merger certificate attesting to the proper
completion of the pre-merger acts and formalities.
 Each Member State must designate the authority competent for scrutinizing
the legality of the cross-border merger as regards that part of the procedure
that concerns the completion of the cross-border merger and, where
appropriate, the formation of a new company resulting from the cross-border
merger where the company created by the cross-border merger is subject to
its national law. That authority must ensure that the merging companies have
approved the common draft terms of cross-border merger in the same terms.
Directive 2005/56/EC of the European Parliament and of the
Council of 26 October 2005 on cross-border mergers of limited
liability companies
Legal effects
 Following scrutiny of legality, the law of the Member State to whose jurisdiction
the company resulting from the cross-border merger is subject must determine
the date on which the cross-border merger takes effect and the arrangements for
publicising completion of the merger in the public register. The old registration
must not be deleted until that notification has been received.
 Cross-border mergers have the following effects:
 the companies being acquired or the merging companies cease to exist;
 all the assets and liabilities of the companies concerned by the merger are
transferred to the new entity (either the acquiring company or the new company);
 the members of the companies being acquired become members of the new
entity.
 Where the laws of the Member States require the completion of special
formalities before the transfer of certain assets, rights and obligations by the
merging companies becomes effective against third parties, the company
resulting from the cross-border merger is responsible for carrying out those
formalities.
Directive 2005/56/EC of the European Parliament and of the
Council of 26 October 2005 on cross-border mergers of limited
liability companies
 where the national legislation applicable to the company resulting from the
cross-border merger does not provide for employees of establishments of
that company that are situated in other Member States, the same entitlement
to exercise participation rights as is enjoyed by those employees employed
in the Member State where the company resulting from the cross-border
merger has its registered office.
 Under the Directive supplementing the Statute for a European Company with
regard to the involvement of employees, the threshold for applying the
benchmark provisions laid down for the European Company is increased to
331/3% of the total number of workers in the merging companies that have
had to operate under any form of worker participation system. For a period of
three years after the cross-border merger has taken effect, the rights of the
workers are protected in the event of any subsequent domestic mergers.
 The provisions on worker participation apply to any domestic merger
subsequent to a cross-border merger for a period of three years after the
cross-border merger has taken effect.
Directive 2005/56/EC of the European Parliament and of the
Council of 26 October 2005 on cross-border mergers of limited
liability companies
 Legal effect:
 The general principle as regards the employees' rights of participation is that
national laws governing the company resulting from the cross-border merger
apply.
 By way of exception, the principles and arrangements relating to worker
participation laid down by the relevant regulation and the Directive on the
European Company (SE) apply as follows:
 where at least one of the merging companies has, in the six months before
publication of the draft terms of the cross-border merger, an average number of
employees that exceeds 500 and is operating under an employment participation
system;
 where the national legislation applicable to the company resulting from the crossborder merger does not provide for at least the same level of employee
participation as operated in the relevant merging companies, measured by
reference to the proportion of employee representatives amongst the members
of the administrative or supervisory organ which covers the profit units of the
company, subject to employee representation;
Why was there a need for cross-border mergers EU
Directive?
 Before the enactment of this directive, the European companies had
to be subjects to their own jurisdiction, therefore, subjects to
different legislations of the Member States.
 They could be either legally prevented from merging with a company
incorporated in another Member State or subject to strict procedures.
 The harmonization of national rules on internal mergers was not
sufficient to reach an agreement also on cross-border mergers due
to the significant differences still existing among national rules, in
particular in relation to the employees’ participation in the decisionmaking body of companies.
Why was there a need for cross-border mergers EU
Directive?
 Cross-border mobility of European companies, from a taxation point
of view was possible already in the 90’s=> Council Directive
90/434/EEC of 23 July 1990 on the common system of taxation
applicable to mergers, divisions, transfers of assets and
exchanges of shares concerning companies of different
Member States;
 The directive aims at reducing the cost of cross-border transactions,
at guaranteeing their legal certainty and offering
the option of
merging to the maximum number of companies=> those who do not
wish to set up an European Company(SE).
Why was there a need for cross-border mergers EU
Directive?
Case C-411/03, SEVIC Systems AG: Freedom of establishment –
Articles 43
EC and 48 EC – Cross-border mergers – Refusal of registration in the
national
commercial register – Compatibility
 The reference is made in the context of an action brought by SEVIC
Systems AG (‘SEVIC’), a company established in Neuwied
(Germany), against a decision of the Amtsgericht Neuwied rejecting
its application for registration in the national commercial register of
the merger between itself and Security Vision Concept SA (‘Security
Vision’), a company established in Luxembourg, on the ground that
the German law on company transformations provides only for
mergers between companies established in Germany.
Case C-411/03, SEVIC Systems AG: Freedom of establishment –
Articles 43 EC and 48 EC – Cross-border mergers – Refusal of
registration in the national commercial register – Compatibility
 1.
Freedom of movement for persons – Freedom of establishment –
Provisions of the Treaty – Scope – Cross-border mergers – Included (Art. 43
EC);
 2.
Freedom of movement for persons – Freedom of establishment –
National provision preventing registration of cross-border mergers in the
national commercial register – Restriction on the freedom of establishment –
Justification – Conditions (Arts 43 EC and 48 EC);
 The right of establishment covers all measures which permit or even merely
facilitate access to another Member State and the pursuit of an economic
activity in that State by allowing the persons concerned to participate in the
economic life of the country effectively and under the same conditions as
national operators.
Case C-411/03, SEVIC Systems AG: Freedom of
establishment – Articles 43 EC and 48 EC – Cross-border
mergers – Refusal of registration in the national commercial
register – Compatibility
 Cross-border merger operations, like other company transformation
operations, respond to the needs for cooperation and consolidation between
companies established in different Member States. They constitute particular
methods of exercise of the freedom of establishment, important for the
proper functioning of the internal market, and are therefore amongst those
economic activities in respect of which Member States are required to
comply with the freedom of establishment laid down by Article 43 EC. (see
paras 18-19);
 Articles 43 EC and 48 EC preclude registration in the national commercial
register of the merger by dissolution without liquidation of one company and
transfer of the whole of its assets to another company from being refused in
general in a Member State where one of the two companies is established in
another Member State, whereas such registration is possible, on compliance
with certain conditions, where the two companies participating in the merger
are both established in the territory of the first Member State.
Case C-411/03, SEVIC Systems AG: Freedom of establishment –
Articles 43 EC and 48 EC – Cross-border mergers – Refusal of
registration in the national commercial register – Compatibility
 Such a difference in treatment can be permitted only if it pursues a
legitimate objective compatible with the Treaty and is justified by
imperative reasons in the public interest, such as protection of the
interests of creditors, minority shareholders and employees, and the
preservation of the effectiveness of fiscal supervision and the
fairness of commercial transactions. Furthermore, application of such
a difference in treatment must be appropriate for ensuring the
attainment of the objectives pursued and not go beyond what is
necessary to attain them (see paras 23, 28, 31, operative part);
Case C-411/03, SEVIC Systems AG: Freedom of establishment –
Articles 43 EC and 48 EC – Cross-border mergers – Refusal of
registration in the national commercial register – Compatibility
Possible justification for the restriction
The German and Netherlands Governments argued that internal
mergers are subject to conditions more particularly designed to
protect the interests of creditors, minority shareholders and
employees, and to preserve the effectiveness of fiscal supervision
and the fairness of commercial transactions.
They submit in that respect that specific problems arise in relation to
cross-border mergers and that the solution to those problems
presupposes the existence of specific rules designed to protect those
interests in the context of a cross-border merger that involves the
application of several national legal systems in a single legal
operation.
Such rules, they submit, presuppose a harmonization of the
legislation at the Community level.
Case C-411/03, SEVIC Systems AG: Freedom of
establishment – Articles 43 EC and 48 EC – Cross-border
mergers – Refusal of registration in the national commercial
register – Compatibility
 In that context, the Netherlands Government points out that the Commission
of the European Communities submitted to the Community legislature on 18
November 2003 the Proposal for a Directive of the European Parliament and
of the Council on cross-border mergers of companies with share capital
(COM(2003) 703 final), the first and second recitals of which state:
 ‘(1)
The need for cooperation and consolidation between companies from
different Member States and the difficulties encountered, at the legislative
and administrative levels, by cross-border mergers of companies in the
Community make it necessary, with a view to the completion and functioning
of the single market, to lay down Community provisions to facilitate the
carrying-out of cross-border mergers …
 (2)–
… The above-mentioned objectives cannot be sufficiently attained by
the Member States in so far they involve laying down rules with common
features applicable at transnational level; owing to the scale and impact of
the proposed action, they can therefore best be achieved at Community level
…’
Case C-411/03, SEVIC Systems AG: Freedom of establishment –
Articles 43 EC and 48 EC – Cross-border mergers – Refusal of
registration in the national commercial register – Compatibility
It should be noted in that respect that, whilst Community harmonization
rules are useful for facilitating cross-border mergers, the existence of such
harmonization rules cannot be made a precondition for the implementation of
the freedom of establishment laid down by Articles 43 EC and 48 EC (see, to
that effect, Case C-204/90 Bachmann [1992] ECR I-249, paragraph 11).
It should nevertheless also be noted that whilst, by reason of the adoption
of the Third Council Directive 78/855/EEC of 9 October 1978 based on
Article 54 (3) (g) of the Treaty concerning mergers of public limited liability
companies (OJ 1978 L 295, p. 36), harmonised rules exist in the Member
States concerning internal mergers, cross-border mergers pose specific
problems.
Case C-411/03, SEVIC Systems AG: Freedom of
establishment – Articles 43 EC and 48 EC – Cross-border
mergers – Refusal of registration in the national commercial
register – Compatibility
It is not possible to exclude the possibility that imperative reasons in
the public interest such as protection of the interests of
creditors, minority shareholders and employees (see Case C208/00 Überseering [2002] ECR I-9919, paragraph 92), and the
preservation of the effectiveness of fiscal supervision and the
fairness of commercial transactions (see Case C-167/01 Inspire
Art [2003] ECR I-10155, paragraph 132), may, in certain
circumstances and under certain conditions, justify a measure
restricting the freedom of establishment.
 But such a restrictive measure would also have to be appropriate for
ensuring the attainment of the objectives pursued and not go beyond
what is necessary to attain them.
Case C-411/03, SEVIC Systems AG: Freedom of
establishment – Articles 43 EC and 48 EC – Cross-border
mergers – Refusal of registration in the national commercial
register – Compatibility
 To refuse generally, in a Member State, to register in the commercial register
a merger between a company established in that State and one established
in another Member State has the result of preventing the realization of crossborder mergers even if the interests mentioned in paragraph 28 of this
judgment are not threatened. In any event, such a rule goes beyond what is
necessary to protect those interests.
 Articles 43 EC and 48 EC preclude registration in the national commercial
register of the merger by dissolution without liquidation of one company and
transfer of the whole of its assets to another company from being refused in
general in a Member State where one of the two companies is established in
another Member State, whereas such registration is possible, on compliance
with certain conditions, where the two companies participating in the merger
are both established in the territory of the first Member State.
What about international mergers?
 Corporate aspects of International Mergers are not governed by a




single set of rules.
The implementation of an International Merger requires complying
with the international private law and the applicable national law.
Should the principle of International Mergers be permitted (or not
prohibited) by the applicable jurisdictions?
Technical difficulties;
There are some alternatives to International Mergers;
Second Directive (77/91/EEC)
General remarks:
minimal harmonization=>MS are allowed to choose
stricter rules;
 Scope: to ensure minimum equivalent protection for both
shareholders and creditors of public limited liability companies
in the EU;
 Applies to public companies – in some MS the provisions
were made applicable also to private co’s;
 Member States may decide not to apply this Directive to
investment companies with variable capital and to
cooperatives;
Second Directive (77/91/EEC)
General remarks:
The Directive has been amended by Directive 92/101/EEC of
23 November 1992, with effect from 1 January 1994, so as to
extend the rules on the acquisition of the company’s own
shares to cover acquisitions by subsidiaries.
Further amendments have been introduced by Directive
2006/68/EC, which was meant to reduce administrative
burdens.
Second Directive (77/91/EEC)
Main aims:
-the coordination of national provisions relating to their
formation and to the maintenance, increase or reduction
of their capital;
- ensure that public companies start off with adequate
capital;
- ensure that during life of company, the capital is properly
maintained;
Second Directive (77/91/EEC)
Deals with :
 Formation of public companies;
- minimum subscribed capital (€25000);
- shares may not be issued at a price lower than nominal
value;
- shares at least 25% paid up ;
- non cash consideration for shares must be valued by
expert ;
Second Directive (77/91/EEC)
 Maintenance of capital
- rules regarding distribution of dividends;
- prohibition of company to subscribe to its own shares;
- rules regulating the acquisition of own shares;
- financial assistance given by company for purchase of its
own shares;
- procedures to be followed in case of serious loss of
capital;
- rules on reduction of capital;
Second Directive (77/91/EEC)
 Increase in capital;
- the decision to increase the capital of the company rests
with the shareholders;
- shares issued for cash are to be offered on a preemptive basis to existing shareholders;
In implementing this directive MS must ensure equal
treatment of all shareholders who are in the same
position.
Second Directive (77/91/EEC)
CJEU
Article 25 and 29, concerning the increase of capital has
Direct effect within national legislation=>the two articles
may be relied upon by individuals against the public
authorities before national courts.
Karella v Minister for Industry, Energy and Technology and
Organismos Anasygkrotiseos Epicheiriseon AE. (Joined cases C19/90 and C-20/90): National rules providing for the capital of a
company in difficulties to be increased by administrative act - Not
permissible; Governments was not permitted to direct an increase in
share capital without the consent of existing shareholders (see also
Siemens AG v Henry Nold, Case C-42/95);
Thank you kindly!
anamariadobre@gmail.com