Overview on the European Restructuring Regimes
In transposing the Mobility Directive, the Law introduced new provisions on the European Regimes in the Company Law: (i) Articles 1025-1 through 1025-20 on European mergers, (ii) Articles 1034-1 through 1034-20 on European divisions, and (iii) Articles 1062-1 through 1062-18 on European cross-border conversions. A reading of the relevant new provisions shows that the procedures regarding such European restructurings within the scope of the European Regimes are harmonised as much as possible and will therefore be dealt with together in the following overview.
Applicability
Only Luxembourg companies taking the form of a société anonyme (SA), a société à responsabilité limitée (SARL) or a société en commandite par actions (SCA) can participate in the restructurings covered by the European Regimes (Articles 1025-1, 1034-1 and 1062-1).
The European Regimes do not apply, inter alia, to cooperative companies (even if organised as SAs), UCITS, companies in liquidation having started the distribution of assets to shareholders, credit institutions, investment firms or European Companies (société européenne) (Articles 1034-2 and 1062-2).
Any aspects of the restructuring not expressly regulated by the European Regimes are regulated by the provisions of the General Regimes (in particular the rules applicable to the decision-making relevant for the restructuring operations).
Restructuring Plan
Similarly to General Regimes, companies involved in European restructurings need to agree on a common restructuring plan (“Restructuring Plan”), i.e. a European cross-border common merger plan (projet commun de fusion transfrontalière européenne: Article 1025-4), a European cross-border common division plan (projet commun de scission transfrontalière européenne: Article 1034-4) and a European cross-border common conversion plan (projet commun de transformation transfrontalière européenne: Article 1062-4) for the envisaged transaction, covering certain points further detailed in the Company Law.
Publication formalities
Further to the Restructuring Plan, companies required to hold general meetings approving the restructuring also need to publish at least one month before their holding a notice addressed to shareholders, creditors and representatives of employees (or, in case of no representative being appointed, employees themselves) informing them of their right to provide comments on the Restructuring Plan at least five days before the relevant general meeting (Articles 1025-5, 1034-5 and 1062-5 respectively).
Board Report(s)
Either a joint report or two separate reports, containing certain specific information now set out in the Company Law, have to be prepared and addressed to shareholders and employees respectively (Articles 1025-6, 1034-6 and 1062-6 respectively).
The Board Report or Reports are made available in electronic form to the shareholders and representatives of employees (or if none, the employees) at least six weeks before the relevant general meeting.
Any comments received from representatives of employees (or, in case of no representative being appointed, employees themselves) need to be transmitted to shareholders and annexed to the Board Report.
The Board Report (or section of the Board Report) addressed to shareholders is not mandatory (i) for companies having a sole shareholder or (ii) if all shareholders have waived the requirement.
The Board Report (or section of the Board Report) addressed to employees is not mandatory if the relevant company or any of its subsidiaries has no employees other than those belonging to its management or supervisory body.
The entire Board Report(s) can be dispensed with if (i) all shareholders have waived the requirement and (ii) the section for employees is not mandatory.
Expert Report
At least one (1) month before the relevant general meeting an Expert Report needs to be made available to shareholders (Articles 1025-7, 1034-7 and 1062-7 respectively).
The Expert Report can be dispensed with either if all shareholders of each company participating in the restructuring have so decided or if a company has a sole shareholder.
Availability of documents and reports before the general meeting
No notable changes have been introduced for the documents to be made available at the registered offices of the restructuring companies or on their websites at least one month before the relevant general meeting (Articles 1025-8 and 1034-8 respectively for European mergers and divisions). Nevertheless, as mentioned above, Board Report or Reports need to be made available in electronic form to the shareholders and representatives of employees (or if none, the employees) at least six weeks before the relevant general meeting.
Approval by general meetings
The general meetings of the restructuring companies may either approve, reject or modify (if no incidence for third parties, in particular workers and creditors) the Restructuring Plan (Articles 1025-9, 1034-9 and 1062-8 respectively).
Protection of shareholders
During the relevant general meeting before a notary, shareholders may vote against the restructuring and declare that they wish to transfer their entire shareholding (or part of shareholding if provided for in the Restructuring Plan) in return for the compensation set out in the Restructuring Plan. Such shareholders will then be entitled to the compensation within two months of the restructuring taking effect (Articles 1025-10, 1034-10 and 1062-9 respectively).
Transferring shareholders may challenge the amount of compensation payable in courts within one (1month of the relevant general meeting approving the restructuring.
In respect of mergers and divisions, shareholders that did not exercise the right to transfer their shares can challenge the adequacy of the exchange ratio (number of shares in the absorbing or new company being obtained in lieu of shares held in the disappearing company) set out in the Restructuring Plan and apply to the courts for an additional cash payment within one month of the relevant general meeting approving the restructuring.
None of the above-described legal challenges will suspend the restructuring operations.
Protection of creditors
The right of creditors, whose claims came into existence before publication of the Restructuring Plan, to ask for additional sureties must be exercised within three months of the publication of the Restructuring Plan (rather than within two months of the publication of the effectiveness of the restructuring as foreseen in the General Regimes) (Articles 1025-11, 1034-11 and 1062-10 respectively). Again, such legal challenge does not suspend the restructuring operations.
Role of Luxembourg notary
Luxembourg notaries need to first verify whether all the procedures and formalities required by Luxembourg law for the implementation of the restructuring have been complied with and issue a preliminary certificate (Articles 1025-12, 1034-12 and 1062-11 respectively). For the purposes of the verification, notaries need to be provided all relevant documents (either online or in person) and are required to carry out the verification within three months of receipt of such documents (which period may be extended). Notaries will in particular verify whether the restructuring operation is carried out for abusive or fraudulent purposes, in order to remove a company from the application of EU or national laws or to circumvent such laws or for illegal purposes.
Such preliminary certificate is filed with the Luxembourg trade register and transmitted by the register to the register(s) of the companies that participate in the restructuring operations (Articles 1025-13, 1034-13 and 1062-12 respectively).
If the company resulting from the restructuring is subject to Luxembourg law, the notary is additionally charged with verifying and confirming that all steps (Luxembourg and foreign) relating to the restructuring have been carried out in accordance with all legal requirements (Articles 1025-14, 1034-14 and 1062-13 respectively). For these purposes the notary can rely on preliminary certificates concluding that all required procedures and formalities have been carried out in the other member states of the EU to which one or more of the restructuring companies are subject.
Communications between different Luxembourg Business Registers
Restructuring companies will separately apply their respective laws vis-à-vis the forms of the publication of the accomplishment of the restructuring in their respective trade registers (Articles 1025-16, 1034-16 and 1062-15 respectively).
If the company resulting from the restructuring is subject to Luxembourg law, the Luxembourg Trade and Company Register will promptly inform the trade register of each of the restructuring companies that the restructuring has taken effect.
If a Luxembourg company is being dissolved without liquidation following the effectiveness of the restructuring, its deletion from the Luxembourg Trade Register will take place as soon as this receives notification of the effectiveness of the restructuring from the trade register of the company resulting from the restructuring.
Nullity
Once the restructuring has become effective, its validity may no longer be challenged (Articles 1025-20, 1034-20 and 1062-18 respectively).
Specificities of the European Regimes
The specificities of the different European Regimes as they apply to a particular restructuring operation can be summarised as follows:
European Regime regarding mergers
The European Regime applies to the same type of mergers including upstream and side-stream mergers, considered under the General Regime as amended by the entry into force of the Law. However, it will apply even if the cash compensation exceeds 10% of the nominal or par value of the company resulting from the merger.
The laws of the country to which the company resulting from the merger is subject determine the date of effectiveness of the merger (Article 1025-15).
Between the merging companies, the merger is effective on confirmation by the notary (as above described) that all legal requirements have been fulfilled.
Against third parties, the merger is effective from the date of publication of the minutes of the general meeting of the company that results from the merger.
European Regime regarding divisions
The European Regime applies to the following forms of divisions (Article 1034-1).
Complete divisions
A company transfers all of its assets and liabilities, upon dissolution without liquidation, to two or more newly created companies. Its shareholders receive shares in the recipient company or companies, and possibly a cash payment
Partial divisions
A company transfers part of its assets to one or more newly created companies. Its shareholders receive shares either in the recipient company or companies, or both in the recipient companies and the company being divided, along with a possible cash payment.
Division by separation
A company transfers part of its assets to one or more recipient companies. In this case, the dividing company receives itself the shares in the recipient company or companies.
Unlike the General Regime, the European Regime does not apply to (i) total or partial divisions to one or more pre-existing companies or (ii) mixed divisions where the patrimony of the company being divided is distributed to one or more pre-existing companies and one or more newly constituted companies.
However, it will apply even if the cash compensation exceeds 10% of the nominal or par value of the company that comes into being by reason of the division.
The date of effectiveness of the division is determined by the laws of the country to which the company being divided is subject (Article 1034-15). It is now expressly foreseen that the division will only take effect in Luxembourg on the date of publication of accomplishment of the division in the Luxembourg trade register.
European Regime regarding European Cross-Border Conversions
The European regime for European cross-border conversions applies to cross-border conversions meeting all the following conditions (Article 1062-1):
- the conversion of a company established in the form of société anonyme (SA), a société à responsabilité limitée (SARL) or a société en commandite par actions (SCA) under Luxembourg law into a company of another EU Member State essentially having an equivalent form under the laws of another EU Member State (as listed in Annex II of Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law), considering the harmonisation of EU company law developed by the European lawmaker, or the conversion of a company established in another EU Member State from equivalent to the mentioned Luxembourg ones into a company established in the aforementioned forms of société anonyme (SA), a société à responsabilité limitée (SARL) or a société en commandite par actions (SCA) under Luxembourg law;
- the conversion does not cause the dissolution, liquidation or winding up of the company;
- the conversion involves at least the transfer of the company’s registered office to the EU Member State of destination; and
- the company retains its legal personality.
The laws of the country of destination of the conversion determine the date of effectiveness of the European cross-border conversion (Article 1062-15).
For companies involved in a cross-border conversion, the conversion is effective upon confirmation by the notary that all legal requirements have been fulfilled, as further indicated above (Article 1062-14). The conversion takes effect against third parties from the date of the publication of the confirmation attesting to the completion of the European cross-border conversion.
Share on
