A new harmonised regime

Until now, only cross-border mergers in the EEA were subject to a harmonised regime. Now, the Mobility Directive introduces a harmonised legal framework for cross-border conversions and divisions of limited liability companies in the EEA. The new rules are – to a large extent – identical for the three types of cross-border reorganisations. This reduces the instances of fragmented interplay of national non-harmonised rules and brings more legal certainty.

The scope of the Mobility Directive is limited to reorganisations within the EEA, and does not include divisions where the recipient company is an already existing company. Certain Member States go further in scope and, for instance, apply the new regime also to divisions  where the recipient company is already existing or as soon as a foreign company is involved in the cross-border reorganisation, regardless of whether it is an EEA or non-EEA company. This will, for example, include reorganisations from or to the UK. See, for example, our country page for Spain or Belgium.

Mandatory cash-out right

Member States must impose minimum requirements with respect to minority shareholder protection in each type of cross-border reorganisation. This protection is mainly based on a cash-out right for dissenting shareholders and, in case of mergers and divisions, a right for shareholders to challenge the share exchange ratio and claim additional compensation.

The dissenting shareholders’ cash-out right already existed in certain EU jurisdictions (e.g., the Netherlands and Germany) but will now apply across the EU. 

Employee Participation

The Mobility Directive contains specific procedures to ensure that employee interests are  considered and protected. More companies will now have to comply with these rules regarding the preservation of employee participation in the company’s administrative or supervisory body, even if they have not yet reached the threshold triggering employee participation rights (i.e., when the number of employees is equivalent to 80% of the applicable threshold). This prevents circumvention by capturing cross-border reorganisations which would be implemented before reaching this threshold (“forum shopping”).

Increased scrutiny

The Mobility Directive significantly strengthens the control of the reorganisation’s legality by the competent authorities. The court, notary or other authority will check that the cross-border reorganisation was properly implemented and not set up for abusive or fraudulent purposes before issuing a “pre-reorganisation certificate”. This review period can last up to three months, is renewable and, depending on the authority concerned, can also affect the overall timetable of the reorganisation.

Longer implementation timeframe

The various stages of a cross-border operation (e.g. preparation of draft terms and reports by directors and independent experts, holding of general meetings) do not change significantly. However, with increased information requirements and reinforced protections for stakeholders, certain deadlines are now extended or modified. Companies must ensure these deadlines fit well together. For example, the Mobility Directive provides creditors with a right to request additional safeguards within three months following the disclosure of the draft terms (longer than some Member States previously allowed), and in Belgium this period is treated as a waiting period before shareholders can vote on the reorganisation.