Dutch Mobility Directive Implementation Act will enter into force on 1 September 2023 has been saved
Dutch Mobility Directive Implementation Act will enter into force on 1 September 2023
Important changes to procedures concerning cross-border transactions
The Dutch Mobility Directive Implementation Act will enter into force on 1 September 2023. This Act introduces a number of important changes to cross-border mergers and introduces a legal framework for cross-border conversions and demergers. The Act provides for a transitional regime for cross-border transactions that have already started.
The Dutch Mobility Directive Implementation Act (hereinafter: 'the Act') governs the implementation of Directive (EU) 2019/2121 (the 'Mobility Directive') of the European Parliament and of the Council of 27 November 2019 amending (and extending) Directive (EU) 2017/1132 ('the Company Directive') as regards cross-border conversions, mergers and demergers. The Act introduces a number of important changes to cross-border mergers and introduces a legal framework for cross-border conversions and demergers.
Although it was already possible to carry out cross-border conversions (and to a lesser extent demergers) based on the case-law of the Court of Justice of the European Union (CJEU), a regulatory framework was lacking. This was an obstacle to the exercise of freedom of establishment within the EU, as it entailed legal fragmentation and legal uncertainty. The Mobility Directive seeks to remove this obstacle in order to make it easier to implement a cross-border conversion, merger or demerger.
The Mobility Directive had to be implemented in the EU/EEA Member States by 31 January 2023 at the latest. However, this has only been achieved by some EU/EEA Member States. The Netherlands did not meet this implementation date, but the parliamentary process has now been completed and the Act will enter into force on 1 September 2023.
Content of the Act
The Act reproduces the scope of application from the Mobility Directive. This means that the Act only applies to the Dutch private limited liability companies (B.V. and N.V). The Mobility Directive does not provide a legal framework for cross-border transactions for other legal forms.
Division into three phases
In line with the Mobility Directive and the rules in Book 2 of the Dutch Civil Code on domestic mergers and demergers, the process regarding cross-border conversions, mergers and demergers is divided into three phases: 1) the preparatory phase, 2) the decision-making phase and 3) the execution phase. In the preparatory phase, all preparatory acts relating to the cross-border conversion, merger or demerger shall be carried out. This may include drawing up the conversion, merger or demerger proposal and informing shareholders, creditors and (if established) the works council. In the decision-making phase, the general meeting takes a decision on the proposal drawn up in phase 1. If the general meeting gives the green light, the execution phase begins. Among other things, the deed is executed by the notary and the conversion, merger or demerger is registered at the Dutch Chamber of Commerce.
Provision of information to shareholders, creditors and employees
An interesting change in the preparatory phase is that the shareholders and the works council (or employees) of the companies concerned receive more information at an earlier stage about the cross-border conversion, merger or demerger than is stipulated in the Companies Directive. For example, the list of subjects to be included in the explanatory notes is extended and a distinction is made between information for shareholders and employees. Shareholders should be informed of, inter alia, the consequences of the conversion, merger or demerger for them and the rights and remedies available to them if they do not agree with the proposed compensation. Regarding employees, the consequences of the conversion, merger or demerger for employment relationships and material changes in working conditions must be explained, among other things. The management board of each company concerned must also draw up a notification addressed to the shareholders, creditors and the works council (or employees) stating that they can submit comments on the proposal to their respective company no later than 5 days before the date on which the general meeting decides on the proposal. This notification should be filed at the Trade Register or made public by electronic means at the time of the filing or publication of the proposal.
Longer opposition period
Furthermore, an important change is that the objection period for creditors is extended from one month to three months. During this period, creditors can object to the proposal and, for example, demand a guarantee from the companies concerned.
The fraud test
In the Act, the already existing test by the notary is extended with the fraud test (as part of the issuance of a pre-transaction certificate by the notary). The fraud test means that no certificate will be issued by a notary for the cross-border merger if it is established that it was set up for abusive or fraudulent purposes that lead to or aim at evasion or (unlawful) circumvention of Union or national law, or for criminal purposes. The mandatory fraud test also applies to other cross-border transactions.
The Act provides for a transitional regime for cross-border transactions that had already started at the time of the entry into force of the Act (1 september 2023). If the transaction proposal has already been filed with the trade register of the Dutch Chamber of Commerce, the procedure can be continued on the basis of the law currently in force. When the proposal is deposited after the Act will enter into force, the new legislation will apply to the cross-border transaction.