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Third Council Directive – Domestic mergers of public limited liability companies (78/855/EEC)

The directive lays down rules concerning mergers between public limited liability companies from the same Member State. It applies to public limited companies. Any Member State may choose not to apply it to cooperatives in company form or where the merger would result in the disappearance of a company which is the subject of insolvency proceedings.

To fall within the scope of the Directive a merger must result in:

  • the full absorption of one or more companies by another, or
  • the formation of a new company.

Whether the merger is by acquisition or by the formation of a new company, the process consists of three stages:

Stage one: the drawing-up of draft terms of merger, an instrument negotiated by the administrative or management bodies of the merging companies. The draft terms of merger must contain a required minimum of particulars, including the share exchange ratio and the new rights of shareholders. The draft must be published in the manner prescribed by the law of each Member State.

Stage two: a discussion, within each of the companies, by a general meeting of shareholders, ending in a vote on the merger decision. Once it has been taken, the merger decision must also be published.

Stage three: the actual merger. This involves the transfer, both as between the companies and as regards third parties, of all the assets and liabilities of the company being acquired to the acquiring company or of the merging companies to the new company.

Rules governing the nullity of mergers are laid down in order to protect members and third parties. The cases of nullity are limited to formal illegalities (for example, lack of judicial or administrative preventive supervision of legality, irregularity vitiating the decision of the general meeting). A series of restrictions are placed on the ordering and enforcement of nullity.

A number of specific provisions are laid down with a view to protecting the interests of members and creditors of the companies, whereas the protection of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses is referred to Directive 77/187/EEC on transfer of undertakings (see below).

Legal basis

  • Art. 44 II lit.g EC (former Art. 54 III lit.g EEC)

Amendments

  • No

Links

Alle Overview of Directives