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Reduced Information Obligations in the Case of Mergers and Divisions

Directive 2009/109/EC of the European Parliament and of the Council of 16 September amending Council Directives 77/91/EEC, 78/855/EEC and 82/891/EEC, and Directive 2005/56/EC as regards reporting and documentation requirements in the case of mergers and divisions (published in Official Journal No. L 259) was adopted on 16 September 2009. It is yet another Commission measure to support business and enhance the competitiveness of companies by reducing the administrative burden and the costs resulting therefrom. The new legislation also leaves it up to the companies or their shareholders to decide what reports they actually need. The simplified reporting and documentation requirements is primarily reflected in the Third (78/855/EEC) and Sixth (82/891/EEC) Company Directive which apply to, and lay down the rules for, national mergers and divisions.

The new legislation is based on the following principles, without limitation:

  • The national rules should include the possibility of abandoning the existing broad information obligations provided that all shareholders in the merging companies so agree; this shall primarily apply to the detailed reports currently required form the statutory bodies of each merging company, which must explain and justify the merger project, and to the interim financial statements;
  • The interim financial statements should not be required if the merging or dividing company is the issuer of listed securities and is therefore required to make available semi-annual reports (see the duty imposed by the Transparency Directive 2004/109 ES);
  • The merging or dividing companies may disclose the merger or division project as well as any other document to which the shareholders have the right to have access at their website; it will be possible to send copies of documents via e-mail;
  • The reporting requirements may be reduced and the approval of the merger by the general meeting may be abandoned where a parent company merges with its subsidiaries. Similar rules shall apply to the division of a company where the original proportion of interests is to be maintained;
  • The so far doubled submission of expert reports is to be cancelled for the formation of a new company by merger or division; if an independent expert drafts a merger or division report, the report required under the Second Directive (77/91/EEC) applicable to the formation of new companies shall no longer be required; the Company may alternatively determine that both reports be drafted by a single expert.
  • The amendment to the Tenth Cross-Border Merger Directive (2005/56 EC) introduces, without limitation, reduced requirements for the disclosure of the merger projects, which will be the same as for national mergers.

The Member States are required to transpose the provisions of the Directive to their legislation and ensure that they take effect by 30 June 2011. A team of experts led by KSB’s Prof. Dědič has been appointed to draft an amendment to the Czech Transformation Act that shall transpose the provisions of the Directive. The Commission shall review the actual impact of the directive on the reduction administrative burden on companies and submit further changes and amendments, if necessary, after five years following the effectiveness of the Directive.

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