The lack of a legal framework for cross-border transformations and divisions has so far been repeatedly stressed in the EU, leading to fragmentation of legal solutions and legal uncertainty that create barriers to the exercise of freedom of establishment. one from the main demands of EU entrepreneurs was to create a clear regulation concerning the cross-border transfer of the registered office of the company, combined with its cross-border transformation and cross-border division of the company.
Directive 2019/2121 (hereinafter the Directive), amending the Directive Directive 2017/1132, published 12 December 2019, establishes comprehensive cross-border transformation and division procedures and regulates additional rules on cross-border mergers of limited liability companies established in Member States. The scope of the Directive is not covered by the cross-border breakdown of the transfer of assets and liabilities to at least one the existing company.
Directive 2019/2121 changes Directive 2017/1132 for certificates confirming the admissibility of operations, introducing digital tools and processes to ensure online application procedures and to provide all information and documents
The Directive introduces a new concept of cross-border transformation. Cross-border conversion is an operation whereby a company, without liquidation and dissolution, transforms its legal form of the home country into the legal form of the host country to which it intends to move (i.e. the Member State of destination) and transfer at least its registered office to the host country of destination, while preserving its legal personality.
In addition, the Directive aims to introduce stronger protection for creditors and minority shareholders and significantly simplify all cross-border operations. In order to ensure effective control of cross-border operations, the competent authorities of the Member States of a company or companies conducting a cross-border operation should be entitled to issue a certificate confirming the admissibility of conversion, merger or division (hereinafter referred to as ‘the certificate confirming the admissibility of the operation’).
Directive 2019/2121 changes Directive 2017/1132 with regard to certificates confirming the admissibility of operations, introducing digital tools and processes to ensure online application procedures and to provide all information and documents.
To protect all stakeholders in cross-border operations (shareholders, creditors, employees) The Directive requires a draft plan for a cross-border operation to be drawn up and made available. In addition to certain requirements contained in Directive 2017/1132, The cross-border operation plan should also include all information on the details of the money offer to the shareholders leaving the company and any collateral offered to creditors, in particular guarantees or pledges.
The cross-border operation operator shall prepare and make available a report to the employees and partners explaining and justifying the legal and economic aspects of cross-border operations and explaining the impact of cross-border operations. Staff members, either personally or by their representatives, should be able to express their opinion, which shall be attached to the report at the time of its expression.
Given the complexity of cross-border transformations, mergers and divisions (hereinafter jointly referred to as ‘cross-border operations’) the interests of persons whose cross-border operation will concern, the Directive creates a framework whose scope must be taken into account by the Member States at national level. To this end, the competent authorities of the Member States concerned should ensure the conditions under which the decision on cross-border operations should be taken in a fair, objective and non-discriminatory manner on the basis of all relevant elements required under Union and national law.
Certain exceptions to the application of the Directive are also provided for. For example, it does not apply to companies in liquidation where the division of assets started. Member States shall have the possibility to further exempt companies covered by other winding-up proceedings.
Member States can also decide not to apply Directives to companies subject to insolvency proceedings, as defined in national law or the preventive restructuring framework, whether or not such proceedings are part of or regulated outside the national insolvency framework.
Directive 2019/2121 entered into force on 1 January 2020 Member States are required to transpose it into their national legal order by 31 January 2023