A new European directive intends to reduce to a minimum the administrative burdens on EU companies seeking mergers or divisions, by simplifying or waiving various information-related obligations.
On 2 October 2009 the directive 2009/109/EG of 16 September 2009, which further reduces the administrative burdens on European public limited liability companies in the area of mergers and divisions, was published. This directive entered into force on 22 October 2009. As a result, companies now benefit from simplified requirements on reporting and on publication of draft terms. This directive is a key contribution to the wider initiative, launched by the European Commission, for a broad simplification exercise in the areas of company law, accounting and auditing.
In particular, this directive aims at reducing reporting requirements of companies in the context of mergers and divisions, in order to provide more flexibility to member states and shareholders to decide which reports and/or formal approvals are really needed in each specific case. This specifically applies to the so-called “simplified mergers and divisions”.
In the case of mergers between parent companies and their subsidiaries where the parent’s holding in the subsidiary amounts to 90% or more of the shares, member states, under certain conditions, will not require a formal approval of the merger by the general meeting of the acquiring company. The same applies to certain divisions, in particular when companies are split into new companies that are owned by the shareholders in proportion to their rights in the company.
Companies are furthermore no longer obliged to make interim accounts available (at this stage this is mandatory if the last annual accounts relate to an accounting year that ended more than six months before the date of the merger or division proposal), under the condition that a half-yearly financial report is drafted and made available to the shareholders. The member states are able to extend this and to foresee in an exemption for the board of directors to draft interim accounts and reports in the framework of a merger or division if all shareholders agree.
The directive further aims at avoiding double reporting and, therefore, causing unnecessary costs for companies. An independent expert’s report on a contribution in kind as provided for under Directive 77/91/EEC is often not needed where an independent expert’s report protecting the interests of shareholders or creditors also has to be drawn up in the context of the merger or the division. Member states therefore can in such cases exclude companies from the reporting requirement under Directive 77/91/EEC, or can provide that both reports are drawn up by the same expert.
Finally, the directive aims at giving companies the opportunity to use their website to provide shareholders with the documentation required, as an alternative to the production of documentation via the companies register. Member states are granted permission to designate which websites companies may use for publication of draft terms of merger and/or division, and of other documents that have to be made available to shareholders and creditors in the process, provided that companies are not charged a specific fee for such publication. Other requirements can only be imposed if they are necessary for the security of the websites and the authenticity of the documents.
The member states of the European Union are deemed to transpose the provisions of the directive by 30 June 2011 at the latest. The provisions of the directive are only applicable to public liability companies (“Naamloze Vennootschappen” or “Sociétés Anonymes”) but it is expected that the transposition will be extended to other company forms.
