Brussels, 10/05/2005 (Agence Europe) - In Strasbourg on Tuesday, the Parliament adopted the report by German Christian Democrat Klaus-Heiner Lehne on the proposed directive on cross-border mergers of corporate enterprises. This report is very close to the political agreement reached at the Competitiveness Council of November 2004 (EUROPE 8836). It is in line with the compromise on worker participation, which was the trickiest element of the dossier. The fact that the EP has got behind the Council's common position will now pave the way for the definitive adoption of the directive at first reading. “I am very pleased”, Klaus-Heiner Lehne told EUROPE. “This is a good result and a good compromise for the internal market. It will now be easier for companies to merge”, he added.
The directive aims to make cross-border mergers easier between companies from different Member States, either when one company absorbs the other or when a new company is set up. It will reduce the obstacles related to differences between national legislation and avoid having to jump through complex and costly legal hoops. It will apply to all corporate companies, such as joint stock companies or limited companies, but will not cover companies involved in collective investment in transferable securities. If they so wish, the Member States may exclude cooperatives from the scope of the directive.
The most delicate aspect of the whole dossier has been that of worker participation in case of a cross-border merger. The compromise reached is likely to avoid a reduction in or the loss altogether of participation rights which are initially guaranteed by a merging company. The rule of thumb will be that the legislation to be applied will be that of the Member State in which the society born of the cross-border merger will have its official headquarters. Under three conditions, however, this principle will not be applied: 1) if one of the merging companies employs over 500 and is managed under a worker participation regime; 2) if the national legislation applicable to the new company does not provide at least the same level of participation as that applied to the companies which are merging, which is measured by such means as the number of people on the board of directors or the supervisory board, or 3) If the legislation applicable to the new company does not provide for workers of subsidiaries of the new company located in other Member States to be able to enjoy the same rights of participation as those enjoyed by workers employed in the Member State where the merged company is established.
In such cases, worker participation within the merged company will be the subject of negotiations according to the conditions set out in Directive 2001/86/EC, which completes the statutes of the European Company. A negotiating group is set in place to determine a model for participation. If no agreement is reached, the reference provisions contained in the annex to Directive 2001/86/EC will apply. The most advantageous worker participation regime prevails if, before merger, participation was applied to one of the merged companies covering at least one third of the total number of workers in the new company. This one third threshold is the result of a compromise. Germany was hoping for a one quarter threshold. France was in favour of a more restrictive solution (50%). The initial Commission proposal did not amend the 25% threshold contained in Directive 2001/86/EC.
The “Lehne” report confirms the Council's common position in the case of later national mergers. During the three years following the cross-border merger, worker participation rights in the new company will be protected in the event of later national mergers. After this three-year period, it seems possible that the envisaged protective system may be removed. France, which feared the spread of co-management German-style, hoped there would be such a clause that it describes as an “extinction” clause.
On two points without substantive effect, the Lehne report adopted in plenary session differs slightly from that adopted at the EP Committee on Legal Affairs (see EUROPE 8920). Amendment 40 includes a new point relating to data that is to appear in the proposal for merger. Amendment 41 provides for the report on the repercussions of the merger to be presented to workers and to their representatives. The two amendments should not pose a problem to the Council.