The Mobility Directive: Enhancing mobility between EU Companies

In November 2019, the European Commission published Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (the ‘Directive’), a directive forming part of the EU Company Law Package (the ‘Package’), an initiative launched by the European Commission in 2018 with a two-fold objective; the first objective being the digitalisation of certain aspects of company law, and the second being that of improving cross border mobility for companies. The Directive is a product of the second objective of the Package and developments in EU case law. In essence, the Directive seeks to codify a new legal framework for cross border conversions and divisions and seeks to supplement and improve the already existing rules on cross border mergers (Directive (EU) 2017/1132.)

Before the introduction of the Directive, there was no consistent legal framework for cross border conversions or divisions within the EU, in that, such reorganisations where typically governed by applicable laws within domestic laws. This often caused difficulties for companies since different jurisdictions adopt different rules, timelines, and procedures, often leading to fragmentation, inconsistency and legal uncertainty which may, in turn, lead to the creation of barriers to the exercise of the freedom of establishment, and ultimately resulting in suboptimal protection offered to the stakeholders involved. The Directive therefore seeks to address this issue, allowing companies to undertake economic opportunities within the internal market on the basis of freedom of establishment.

The overarching objective of the Directive is therefore, to create a standardised procedure for carrying out cross border reorganisations achieved through the harmonisation of these procedures, whilst simultaneously providing increased rules which offer enhanced protection for stakeholders such as employees, creditors, and members.

All member states are required to bring into force laws and regulations and administrative provisions necessary to transpose the Directive into national law by 31 January 2023.