The Commission proposed the draft Directive on cross-border
mergers in November last year, aiming to create a new legal
framework that would allow companies from one Member State to
engage more easily and with greater certainty in cross-border
mergers with companies from other Member States.
At present there are no specific procedures under EU law for
cross-border mergers. This can lead to long delays for mergers as
arrangements are worked out on an individual basis or by dual
listing arrangements and take-overs, involving companies in complex
and costly legal arrangements.
The Directive, says the Commission, will particularly help small
and medium sized companies that wish to operate in more than one
Member State, but not throughout Europe, and cannot therefore seek
incorporation under the European Company Statute, which came into
force in October.
The draft approved by the Council covers all limited liability
companies except undertakings for collective investment in
transferable securities (UCITS, or mutual funds). Given the very
diverse types of cooperatives in the EU, Member States may exclude
them from taking part in cross-border mergers, says the
Commission.
In general, mergers will be governed in each Member State by the
principles and rules applicable to their "domestic" mergers.
One of the main issues at stake in the Council discussions was
the provision on employee participation. Member States have widely
differing worker participation (co-determination) systems. This
raised the question of how to deal with cross-border mergers that
could lead to a loss or a reduction of employee participation.
According to the Commission, the compromise provisions approved
by the Council mean that employee participation companies created
under the Directive will be subject to negotiations based on the
model of the European Company Statute.
Under that model, a special negotiating body will be established
to aid in reaching agreement on participation arrangements. In the
case of failure, standard rules on employee involvement would
apply, stipulating that the higher standard of workers
participation existing among the merging companies will apply to
the merged entity if at least one third of the total number of
employees before the merger were covered by a workers'
participation scheme.
The European Parliament must approve the draft before it can
become law. This, says the Commission, is likely to take place in
early 2005.
