Considering the current and persisting effects of the global crisis, businesses strive to minimise their costs to increase the efficiency of their operations. With that said, without a tailored legal tool, the opportunities for increasing the efficiency of a group of companies operating in several national jurisdictions have been complicated and have involved an intensive administrative burden.
Increasingly complicated were cross-border mergers of limited liability companies – they had been impeding the functioning of the single market of the European Community. This issue was addressed on the legislative level of the Community by adoption of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (“the Directive”), as a further step towards integration and harmonisation of corporate law within the Community.
Cross-border merger regulation was transposed into Slovak law by Act 657/2007 Coll. amending the Commercial Code, fully transposing the Directive. We are pleased to report that the first cross-border mergers have been successfully completed in Slovakia. In some of them, Slovak companies have become the acquiring companies of foreign transferring companies. The procedures and succession of individual steps of cross-border mergers are akin to national mergers. First, draft terms of a cross-border merger must be prepared and the draft terms must be common for all companies participating in the cross-border merger. Thereafter, the draft terms are to be publicised in the involved member states. Subject to performance of all other statutory conditions and after having obtained approvals by the general meetings of the participating companies in the cross-border merger, the cross-border merger draft terms may be signed in the form prescribed for this type of cross-border merger in each of the involved member states. After that, the competent national authority in each member state where the companies participating in the cross-border merger operate must scrutinise the legality of the procedures implemented by the companies to complete the cross-border merger. In Slovakia, the applicable authority is a notary public, who shall issue a certificate confirming performance of the obligations required for cross-border mergers; the certificate has the form of a notarial record. A cross-border merger becomes effective upon approval of its registration in the registry where the participating acquiring company must file its documents. Consequently, the registry or registries having jurisdiction over the transferring companies will deregister the transferring companies upon delivery of the notice of the foreign register court confirming the cross-border merger.
It is worth noting that the legal regulations of individual member states differ to a considerable degree when it comes to corporate law and registration of corporations. Therefore, the succession of steps taken by the companies involved in a cross-border merger varies in many aspects, despite being based on the transposed Directive.
Though appearing simple, in practice one may encounter many obstacles in the process; these are attributable mainly to differing transpositions of the Directive to the legal systems of individual member states or differing accounting regulations applicable in individual jurisdictions where the companies participating in the cross-border merger operate. All in all, the legal regulation of cross-border mergers undoubtedly is the next step towards ensuring proper functioning of the single market of the Community, introducing many benefits such as improved allocation of liquidity within a group, reduced risk of insolvency by eliminating obligations within a group, or a simplified organisation structure and less overhead within a group.
JUDr. Jana Pagáčová, Attorney/Junior Partner,
Leader of Corporate and M&A Practice Area Group
JUDr. Michal Hulena, Attorney,
Member of Corporate and M&A Practice Area Group
This article is of an informative nature only. For more information please contact our Law Office:
Ruzicka Csekes s.r.o.
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11. Apr 2011 at 0:00