Cross-border merger in the EU
A simple overview is provided below of the merger procedure according to the EU-Verschmelzungsgesetz (EU Mergers Act). This overview is not exhaustive.
In the case of cross-border mergers of corporations in the EU (in Austria stock corporation (AG), limited liability company (GmbH), European Company (SE)), the EU Mergers Directive, which was transposed into national law in Austria by way of the EU Mergers Directives, shall apply (this does not apply to mergers to start up an SE). In accordance with this directive, the company law of the respective State of residence of an undertaking concerned, i.e. the law of different countries, shall apply.
In the case of matters of form, draft terms of the merger etc. all the national merger regulations of the States in which the undertakings concerned have their registered offices must be taken into consideration. The key aspects of the provisions of the Aktiengesetz (Austrian Stock Corporation Act) and the GmbH-Gesetz (Limited Liability Companies Act) that apply to mergers of Austrian corporations must also be applied to cross-border mergers.
In order for the merger to become effective, the law of the acquiring and/or newly founded company shall be decisive.
In the case of an outbound merger (e.g. of an Austrian limited liability company, GmbH, to a German limited liability company, GmbH), the rights of shareholders and creditors are specifically protected by a redemption fee (indicating the shares for cash compensation) and/or security for existing receivables.
Among other things, the following must be drawn up (incorporating additional requirements compared with non-cross-border mergers)
- common draft terms of merger (correspond essentially to the Merger Agreement): The merger plan must include, inter alia, additional information regarding anticipated impact of the merger on employed workers, the employment situation and conditions of employment.
- a merger report: This must contain additional information on the impact of the merger on employees (e.g. on their compensation claims/severance claims and pension entitlements) and the creditors of the company in question. A common merger report for both companies is permitted in accordance with Austrian law.
One special feature of this is that the merger report must be sent to the Works Council and/or to all the affected employees of the Austrian company at least one month prior to the Shareholders’ Meeting.
Where an Austrian stock corporation (AG) is involved, its Supervisory Board must audit the merger on the basis of the merger report and the audit report. This usually also includes the reasonableness of the cash settlement paid to exiting shareholders. Austrian law allows the appointment of a common merger auditor.
Where a limited liability company (GmbH) is involved, the shareholders may forego the merger audit under certain circumstances. The declaration of renunciation should be incorporated into the common notarial draft terms of merger.
The intended merger shall be registered with the court that is competent for the transferring company. A preliminary certificate from this court, which confirms the proper performance of the merger, must be submitted with the registration of the cross-border merger with the court for the acquiring company.
In the case of a cross-border merger, extensive co-determination rights of the employees must also be taken into account.
Additional information on the regulations that apply to mergers in Austria can also be found at USP.gv.at.
- Sections 96 to101 of the GmbH-Gesetz
- Sections 220 to 233 of the Aktiengesetz
- Sections 258 et seq. of the Arbeitsverfassungsgesetz
responsible for content: Federal Ministry of Justice