On 1 September 2023, the Act on Cross-Border Conversions, Mergers and Demergers Directive (36 267) is expected to enter into force. The Act implements Directive (EU) 2019/2121, also referred to as the Mobility Directive. The Act provides for new procedural rules for cross-border conversions and demergers and changes in the procedural rules for cross-border mergers, collectively referred to here as 'cross-border operations'. Among other things, a fraud test is introduced, and there are more guarantees for shareholders, creditors and employees. It also contains transitory law for processes of a cross-border operation that are already ongoing.
The Act only applies to limited liability companies, such as private limited liability companies (“besloten vennootschappen” or “bvs”) and public limited liability companies (“naamloze vennootschappen” or “nvs”) in the Netherlands. In addition, each limited liability company concerned must be incorporated under the laws of another member state of the EU or the European Economic Area. It should be noted that under the Act only cross-border demergers to acquiring companies incorporated for the demergers are permitted, so a cross-border demergers to an existing company is not possible.
New procedural rules
The procedural rules concern the three stages of each cross-border operation: the preparatory phase (1), the decision-making phase (2), and the execution phase (3). The new rules of the Act are largely in line with the current provisions of the Dutch Civil Code for domestic mergers and demergers, but both shareholders and the Works Council (or in the absence thereof: employees) receive more information, and sooner, in phase 1. A new element is that the civil-law notary performs a fraud test prior to the execution phase. This means that if the civil-law notary establishes that a cross-border operation is being used for, briefly put, unlawful or other fraudulent purposes, the civil-law notary will not issue the so-called pre-merger certificate and will not allow the cross-border operation. Another new element is that in phase 2, after the decision on the cross-border operation, dissenting shareholders have the right to challenge the compensation included in the proposal, if they do not consider it reasonable.
At present, the Netherlands does not yet have statutory regulations for cross-border conversions and demergers, but a statutory regulation is in place for cross-border mergers. In practice, cross-border conversions in particular are already taking place on the basis of case law of the EU Court of Justice. Cross-border demergers are still rare in the Netherlands.
The Act will enter into force on 1 September 2023. With regard to transitional law, it is important that cross-border operations from or to the Netherlands that have already commenced before the date of entry into force are structured in accordance with the existing procedures. We will update this blog as soon as there are new developments.
Furthermore, the same implementation decree also regulates that a provision from the Act on the management and supervision of Dutch legal entities on the statutory rules on absence and inability to serve for supervisory board members of the nv will enter into force on 1 January 2024. For more information, please see our previous newsletter on the subject.