The freedom of establishment has long been one of the cornerstones of the European internal market. The possibility of restructuring companies beyond the borders of a single Member State is considered an essential part of this.
Until recently, only cross-border mergers were regulated at the EU level – by Directive 2005/56/EC of 25 November 2005. Other cross-border restructurings, such as (partial) demergers and conversions, were only possible through the application of the national laws of the Member States involved, which resulted in legal fragmentation and uncertainty. In several judgments, the European Court of Justice has accepted the possibility in principle of these transactions, while at the same time stressing the need for further harmonisation. In 2019, when adopting the new Code of Companies and Associations (CCA), the Belgian legislator, as a pioneer and on its own initiative, introduced a procedure for cross-border demergers and conversions in Belgian law, in the absence of a harmonised European framework.
EU Directive 2019/2121 of 27 November 2019, known as the Mobility Directive, modernises the applicable rules for cross-border mergers and, for the first time, introduces rules for cross-border demergers and conversions. The Mobility Directive provides additional measures to protect shareholders, creditors and employees in all forms of cross-border restructurings, including the existing forms of cross-border mergers. In particular, it provides an exit right for shareholders of the participating companies who have voted against the proposed transaction, and a right to challenge the proposed exchange ratio before the competent authority. Furthermore, it adds new forms of cross-border restructuring to the existing range of restructuring techniques that are available today under Belgian law, such as the cross-border “merger between sister companies” and the cross-border “division by separation”. This creates additional flexibility for companies wishing to restructure across national borders.
The Mobility Directive was required to be implemented in national law, specifically in Books 12 and 14 of the CCA, by 31 January 2023 at the latest. The Belgian legislator has not met this deadline. However, the Council of Ministers has recently approved a preliminary draft act and has sent it to the Council of State for advice. We are keeping a very close eye on the preparation of this implementing act.
In the meantime, the question arises as to the implications for pending or envisaged cross-border restructurings. It is to be hoped that, unlike in some other Member States, the Belgian legislator will opt for a gradual entry into force of the new rules, to avoid pending transactions being jeopardised by these forthcoming new rules.
Please do not hesitate to contact us should you have any questions on this topic.