Company law: cross-border mergers Directive adopted and published

It will be of particular interest to small and medium sized companies that want to operate in more than one Member State, but not throughout Europe, and are not able to seek incorporation under the European Company Statute. The Directive is expected to reduce costs, while guaranteeing the requisite legal certainty and enabling as many companies as possible to benefit. It is one of the key actions for growth and employment under the Lisbon agenda.

Internal Market and Services Commissioner Charlie McCreevy said: "It will now be much easier for Europe's companies to cooperate and restructure themselves across borders. This will make Europe more competitive and enable businesses further to reap the benefits of the Single Market. I congratulate all parties on the swift adoption of this Directive and call upon Member States to ensure equally swift implementation at national level."

The Directive will facilitate mergers of limited-liability companies on a cross-border basis, which at present are impossible or entail prohibitive costs. It sets up a simple framework drawing largely on national rules applicable to domestic mergers and avoids the winding up of the acquired company. The Directive fills an important gap in company law and is the first measure to be adopted under the Commission's Action Plan on company law and corporate governance in the European Union, published in May 2003.

The Directive covers all limited-liability companies, with the exception of undertakings for collective investment in transferable securities (UCITS). Also, there are special provisions for cooperative societies. Given the diversity of cooperatives in the EU, Member States can, with the Commission's agreement, prevent a cooperative from taking part in cross-border mergers for a limited period of five years.

One of the main issues at stake during the adoption process was the provision on employee participation, given the widely diverging systems in force in Member States, and the related question of how to deal with cross-border mergers implying a loss or a reduction of employee participation. Under the adopted Directive, employee participation schemes should apply to cross-border mergers where at least one of the merging companies already operates under such a scheme. Employee participation in the newly created company will be subject to negotiations based on the model of the European Company Statute.