I. Introduction

 Law 5055/2023 for the implementation of Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions of limited liability companies was recently published in Greece. Pursuant to this recently enacted law, which was entered into force on 29/9/2023, new regulations for cross-border mergers are introduced repealing the previously applicable Articles 1-17 of Law 3777/2009, while a legal framework for cross-border conversions and divisions is regulated for the first time.

The new law aims at systematizing an undivided regulatory framework for cross-border corporate transformations, which will create legal stability and certainty, remove restrictions on the freedom of establishment of limited liability companies in the European Union internal market and protect all parties involved in a cross-border corporate transformation, creditors, shareholders and partners.

The new Law 5055/2023 which is codified into a single legal act in Chapters IA’, IB’ and Z’ of the already existing Law 4601/2019 on domestic corporate transformations, enables the execution of any cross-border corporate transformation of a domestic company with a company or companies incorporated in different European Union member states. It is noted that the scope of the cross-border corporate transformations covers only limited liability companies (SA, PC, LLC, LP, SE)[1], i.e. cross-border transformations of partnerships (General Partnership, Limited Partnership) are excluded, thus introducing a significant divergence from domestic company transformations.

ΙΙ. Cross-border mergers

 The new Law introduces notable amendments concerning the cross-border mergers compared to the previous regime of Law 3777/2009, in particular with regard to the information and protection of the parties involved, namely the partners or shareholders, the creditors and employees.

The cross-border merger procedure commences with the preparation of the draft terms of the cross-border merger by the management bodies of the merging companies, which is registered and published in the General Commercial Registry (GEMI), at least one (1) month before the date of the General’s Meeting resolution for the approval of the cross-border merger.

By virtue of the new law, the Board of Directors or the company’s managers are obliged to prepare a report on the legal and financial aspects of the cross-border merger which -as an additional obligation- must include two separate parts: the first one will be addressed to shareholders/partners and the other to employees.

Furthermore, detailed provisions are introduced for the first time for the protection of shareholders/partners and creditors, contrary to the previous regime by virtue of which they were treated as an undivided category. In particular, the shareholders-partners who voted against the approval of the draft terms of the cross-border merger shall have the right to dispose their shares for adequate cash compensation, while the period within which the creditors are entitled to request from the company appropriate guarantees is extended to three (3) months contrary to the one (1) month provided for in domestic mergers.

In addition, favourable provisions for the protection of the employees are introduced for their information and consultation, along with their right to submit their opinion on the draft terms of the cross-border merger.

Further, the new law introduces simplified provisions regarding cross-border merger by absorption and in particular if the absorbing company holds ninety percent (90%) or more, but not the entirety of the absorbed company’s shareholdings, the approval of the draft terms of the cross-border merger by the General Meeting of the domestic absorbing company is not required.

Finally, the completion of the transformation requires the issuing of the certificate preceding the cross-border merger by the competent authorities of the member state of origin, while a legality check is carried out by the competent authorities of the destination member state and the necessary publicity formalities are observed in order for the results of the cross-border merger to commence.

ΙΙΙ. Cross-border divisions and conversions – The transfer of registered seat

The innovation of Law 5055/2023 concerns mainly the cross-border transformations of division and conversion, which for the first time are enacted by law.

In particular, the procedure of cross-border divisions is regulated in a similar way to that of cross-border mergers, with regard to the necessary procedures and formalities of the draft terms of the cross-border division, the publicity, the report of the Board of Directors or managers addressed to shareholders or partners and employees, the report of independent experts, the approvals by the General Meeting, the protection of shareholders/partners/creditors/employees and the granting of the certificate preceding the cross-border division.

It is noted that in the context of a cross-border division the beneficiary company or companies are always newly established and not existing companies, as may be the case in a domestic division.

Likewise, the cross-border conversion is governed by similar provisions and procedure, and constitutes the act whereby a company, without being dissolved or wound up, converts the legal form under which it is registered in a member state into a legal form of the destination member state and transfers there its registered seat, while retaining its legal personality.

It is worth noting that the introduction of cross-border conversion rules has made a significant change to the issue of transfer of seat of companies between different EU members, since until recently there was not a single statutory regime with the result that each EU member had a different approach to the issue. Under the previous regime, in case a foreign company with its registered seat in a member state wished to transfer its seat to Greece, GEMI -in practice- approved the transfer, if this was also permitted by the country of origin, even though there was no legal regime in force,  based on European Law and in particular on the principle of “freedom of establishment within the EU”.  However, the different regulations of each member state made the procedure complex or even impossible as there were countries (for example Ireland) that did not recognise the right of transfer of seat at all.

With the implementation of the new directive, a common legislative solution has been provided, as the transfer of the registered seat is now exclusively conducted through the transformation of cross-border conversion. In this way and following the relevant procedure, a company, without changing its legal personality, can transform itself into a limited liability company of its choice in another EU member state. It should however be noted that at present a regulatory gap has arisen for cross-border transformations and in particular cross-border divisions and conversions with EU member states that have not transposed the Directive until today, despite the deadline for harmonisation with national laws which has already lapsed.

The non transposition of the Directive by some states, such as Cyprus, has resulted in the difficulty of carrying out cross-border transformations of companies established in such states due to the lack of the relevant national legal framework. Notably, in the case that a company established in a state that has not yet transposed the Directive (e.g. Cyprus) wishes to transfer its seat to a state that has incorporated the Directive (e.g. Greece), the paradox is that neither the transfer of the seat that was applicable under the previous regime nor the cross-border conversion can proceed, until the Directive is eventually incorporated.

ΙV. Concluding remarks

In conclusion, the incorporation of Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 into the Greek national law with the adoption of recent Law 5055/2023, although it covers only limited liability companies, constitutes an important and innovative development in the formation of a systematic, harmonised and uniform framework for the transformation of companies within the European Union, which is expected to create favourable conditions and legal certainty, in order for the companies to expand their economic activity within the European Union more easily and grow economically, without encountering procedural obstacles. The full transposition of the Directive in all member states in the coming months is expected to fill the gap created for the implementation of cross-border transformations during the transitional period.

 

[1] The provisions of Law 5055/2023 do not apply to companies having as an object the collective investment of capital raised from the public, which operates on the principle of risk-spreading and whose units are purchased or repaid, directly or indirectly, from its assets.