2 Cross-border mergers
| (25101)
15305/03
COM(03) 703
| Draft Directive on cross-border mergers of companies with share capital
|
| Legal base | Article 44(1) EC; co-decision; QMV
|
| Department | Trade and Industry
|
| Basis of consideration | Minister's letter of 31 March 2004
|
| Previous Committee Report | HC 42-iv (2003-04), para 2 (7 January 2004)
|
| To be discussed in Council | Not known
|
| Committee's assessment | Politically important
|
| Committee's decision | Not cleared; further information awaited
|
Background
2.1 A possible cross-border mergers Directive has been under consideration
for about 20 years. The Commission published such a draft Directive
in 1984.[3] However, the
European Parliament was unable to finalise its opinion on the
proposal, largely because of issues related to employee participation
on company boards in some Member States. The Commission finally
withdrew the proposal in 2001. Agreement on a Directive on cross-border
mergers is an objective of the Financial Services Action Plan,
which is aimed at creating an integrated financial market within
the EU by 2005. The plan is part of the Lisbon Agenda to make
the EU "the most competitive and dynamic knowledge-based
economy in the world" by 2010. Such a Directive is also part
of the Action Plan on Company Law and Corporate Governance.[4]
2.2 Earlier this year we considered a draft Directive
which would establish a new framework for corporate restructuring
through cross-border mergers of companies with share capital and
would take effect from 1 January 2005.
2.3 The document's provisions for facilitating cross-border
mergers of companies with share capital in the EU include:
- each company to remain subject
to its national law on domestic mergers, except as otherwise provided
to take account of the cross-border nature of the transaction;
- a general meeting to approve the draft terms
of the merger to be obligatory;
- scrutiny of the legality of the cross-border
elements of the merger to be based on provisions contained in
the European Company Statute Regulation;
- the date from which the merger takes effect to
be decided by the law of the Member State in which the acquiring
or newly-formed company is situated;
- to ensure legal certainty, after the date the
merger takes effect, mergers not to be capable of being declared
null and void; and
- protection of existing employee participation
rights.
2.4 In dealing with employee involvement issues,
the Commission has not sought to include employee information
and consultation provisions, arguing that these are addressed
by existing employment legislation. Where participation arrangements
exist in one or more of the merging companies, but the law of
the Member State applicable to the company created by the merger
does not require such rights, there would be negotiation with
representatives of the employees of all the merging companies,
to agree the employee participation arrangements to be applied
to the newly-created company. If no agreement is reached, standard
rules on participation as provided for in relation to the European
Company Statute would apply. Where there are no existing participation
rights in any of the merging companies, the Directive would not
impose any participation requirements. Where participation arrangements
exist in one or more of the merging companies, and the law of
the Member State applicable to the company created by the merger
has rules on employee participation, these rules would apply to
the company.
2.5 When we considered this proposal we asked for
confirmation that, given the Government's reservations about the
proportionality of the provisions proposed in relation to employee
participation, it would be seeking improvements before supporting
the draft Directive.
The Minister's letter
2.6 The Minister of State for Industry and the Regions
and Deputy Minister for Women and Equality, Department of Trade
and Industry (Jacqui Smith) writes now to say in relation to employee
participation "I would, indeed, confirm that the Government
is seeking to explore with other Member States whether a more
practical approach to these provisions might be achieved in the
final text of the Directive".
2.7 The Minister adds: "it is intended that
the Department of Trade and Industry will shortly issue a public
consultation document on the Commission proposal in order to better
inform our negotiating approach, including with regard to employee
participation issues", and undertakes to let us see the consultation
document when published.
Conclusion
2.8 We are grateful to the Minister for what she
tells us about the Government's approach to the draft Directive.
We look forward to seeing the consultation document and, indeed,
in due course the outcome of the consultation exercise. Meanwhile
we will continue to hold the document under scrutiny.
3 (7531) 4290/85; see HC 21-xi (1985-86), para 1 (19
February 1986). Back
4
(24609) 10041/03; see HC 63-xxxi (2002-03), para 12 (10 September
2003). Back
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