EU seeks to eliminate unjustified barriers
April 3, 2019
Ambassadors from the European Union Member States have endorsed a deal reached with the European Parliament on a draft directive that facilitates EU companies’ cross-border conversions, mergers and divisions.
The EU is hoping to eliminate unjustified barriers to EU companies’ freedom of establishment in the single market, through the decision.
The new rules introduce comprehensive procedures for cross-border conversions and divisions and provide for additional rules on cross-border mergers of limited liability companies established in an EU member state. They also offer further simplifications that will apply to all three operations such as possibilities to speed up the procedure by waiving reports for members and employees in the event that the shareholders agree or the company or any of its subsidiaries do not have any employees.
“The business community and the European Court of Justice have increasingly highlighted the need for harmonised rules on the transfer of seat of the companies within the internal market – simple, unitary, modern rules offering adequate protection for the legitimate interests of shareholders, creditors and employees,” explained Romania’s Justice Minister, Dr. Tudorel Toader. “Mobility is, therefore, a right of honest entrepreneurs and the new directive ensures its effectiveness while protecting against the risk of abuse in the exercise of this right.”
“These new rules strike a delicate balance,” added Niculae B?d?l?u, Romanian Minister for Economy. “They enable EU companies to boost their competitiveness by reaping the full benefits of the single market. At the same time, they offer stronger safeguards for employees, shareholders, creditors, and are adapted to take into account the risks of potential abuses.”
The directive sets out procedures to verify the legality of cross-border operations under all the national legal orders concerned and introduces a mandatory anti-abuse control procedure. The procedure will allow national authorities to block a cross-border operation when it is carried out for abusive or fraudulent purposes, i.e. when it aims to lead to the evasion or circumvention of national or EU law, or for criminal purposes.
The agreed text provides for similar rules on employee participation rights in cross-border conversions, mergers and divisions. It also ensures that employees will be adequately informed of (and consulted about) the expected impact of the operation. Minority and non-voting shareholders’ rights will enjoy greater protection. At the same time, creditors of the company concerned are granted clearer and more reliable safeguards.
Finally, the directive encourages the use of digital tools throughout the cross-border operation. It will be possible to complete formalities, such as the issuance of the pre-operation certificate, online. All relevant information will be exchanged through existing, digitally interconnected, business registers.
Subject to approval of the provisional deal by the European Parliament’s Legal Affairs committee, the directive will be formally adopted by the two co-legislators, following the usual legal/linguistic scrutiny of the text, and will start applying 36 months after its entry into force.
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