27 junio 2023 Guido Portier  -  Marleen Wessel  -  Christy Wils EU Law - Mergers and Acquisitions - Mobility

The Mobility Directive - Dutch implementation legislation adopted

Background

On 27 November 2019, the EU Directive 2019/2121 (the “Mobility Directive”) on cross-border mergers, demergers and conversions (“CBTs”) was adopted. The Mobility Directive aims at facilitating the European freedom of establishment by making it easier for companies to effectuate CBTs, while at the same time strengthening the rights of creditors, employees and minority shareholders.

On 5 December 2022, the Dutch draft bill to implement the Mobility Directive was sent to the House of Representatives (Tweede Kamer) for consideration (the “Bill”). A memorandum of amendment to the Bill was published on 24 April 2023, introducing a transitional provision. The Bill was adopted by the House of Representatives on 1 June 2023 and by the Senate (Eerste Kamer) on 27 June 2023.

As the Mobility Directive should have been implemented by 31 January 2023, the European Commission sent a formal notice of infringement to several EU Member States, including the Netherlands, on 22 March 2023. Therefore, it is expected that the aim shall be to have the Bill enter into force without further delay, but the exact date is not known yet.

The CBT process

A key feature of the Mobility Directive and the Bill is the alignment of the CBT process for cross-border mergers, demergers and conversions (inbound and outbound). Although minor variations apply depending on the jurisdictions involved, the core CBT process consists of three phases: (i) preparation, (ii) decision-making and (iii) implementation.

I.  Preparation

The required CBT proposal and explanatory report are drawn up by the management boards of the companies involved. The details to be included in these CBT documents are prescribed by Dutch law and the law of any other jurisdiction involved in the CBT process. The shareholders, creditors and the works council or employees must be notified of the opportunity to submit remarks to the CBT proposal. Unless an exemption applies, a Dutch auditor examines the CBT documents and issues a statement and report. Thereafter, the CBT documents are deposited for inspection and the deposit is announced in the Dutch State Gazette.

II. Decision-making

After the preparation phase, a three month creditor protection period commences. During this period creditors can successfully oppose the CBT if they can demonstrate that there are no adequate safeguards that their claims will be satisfied. Not earlier than one month after the announcement in the Dutch State Gazette, the general meetings of the companies involved may adopt the resolutions to effect the CBT. Up to one month after the CBT resolutions, shareholders who voted against the CBT may request a cash compensation for their shares from the company, resulting in their shares ceasing to exist as part of the CBT process. Within this period, qualifying shareholders can also request that independent experts are appointed to re-examine and establish by way of binding advice the amount of additional cash compensation or the exchange ratio (as applicable) to be applied for all shares of the relevant class.

III. Implementation

A pre-CBT attestation of the competent authority in each jurisdiction involved in the CBT is required attesting to compliance with all formalities in that jurisdiction. After these attestations have been issued, the implementation formalities can be completed. The CBT will become effective at such time as determined by the laws of the relevant jurisdiction. Thereafter, certain (de)registration formalities will need to be observed.

Key changes

A high-level outline of the changes following implementation of the Mobility Directive in accordance with the Bill is captured in the below table:

TopicKey changes
NotificationShareholders, creditors and the works council or employees must be notified of the opportunity to submit remarks to the CBT proposal.
Availability CBT documentsIn addition to current deposit requirements, the CBT documents must be made available for shareholders and the works council or employees at least six weeks prior to the CBT resolutions.
Creditor protectionThree months from the CBT announcement (currently one month for mergers and demergers and two months for outbound conversions).
Qualified majority resolutionShareholders’ resolution to implement a CBT requires a majority of at least two thirds (currently two thirds if less than half of the issued capital is represented for mergers and demergers and at least 90% for outbound conversions). Majority or quorum requirements may not exceed 90%.

Appeal against exchange ratio

(merger and demerger only)

Qualifying shareholders may request the competent court to have an independent expert review if the exchange ratio is reasonable and, if not, to establish a reasonable exchange ratio that will apply to all holders of shares of the same class.
Appeal against exit priceShareholders who vote against the CBT and exercise their exit right in time may request the competent court to have an independent expert review if the exit price is reasonable and, if not, to determine the additional cash compensation to be paid to all exiting holders of shares of the same class.
Employee co-determination rightsThe threshold for applying the procedure for employee co-determination rights in the CBT is lowered to 80% of the threshold that applies to national employee co-determination rights, i.e. in the Netherlands this means the threshold will be 80 employees (currently 500 employees for mergers).
Employee negotiations

If employee co-determination rights apply, the EU process for employee negotiations must be followed, which involves installation of a special negotiation group consisting of employees to negotiate the co-determination rights to apply after the CBT with the companies involved.

If the negotiations are not successful within one year, the EU reference terms will apply (currently, for mergers, the EU reference terms for co-determination of employees may be applied without negotiations with employee representatives, but that will no longer be possible).

Auditor statementsMust include confirmation that the exit price is reasonable, in addition to the statements currently required.
Fraud testNew fraud test to be applied before the competent authority may issue the pre-CBT attestation. In the Netherlands a civil law notary must establish that the CBT does not serve illegal or fraudulent purposes aimed at avoiding or (illegally) circumventing EU or national law, or criminal purposes.
Transitional provisionThe new CBT procedures will not apply to CBTs for which the transaction documentation was deposited with the relevant register before the Bill enters into force.