On September 15, 2023, significant changes regarding cross-border mergers of companies came into effect. In this article, we will discuss the details of the new regulations governing cross-border mergers in Poland.
The new regulations regarding cross-border mergers result from the implementation of the European Union company law package, specifically Directive 2019/2121 of the European Parliament and of the Council of November 27, 2019, amending Directive (EU) 2017/1132 concerning cross-border conversions, mergers, and divisions of companies. The aim of these changes is to harmonize the regulations concerning cross-border mergers in EU member states, making it easier for businesses to operate and increasing legal certainty in such operations.
The first element of the cross-border merger process is determining the applicable law. Based on this determination, the company will need to compile specific documents and address various issues.
The determination of applicable law can be divided into two periods - before obtaining a certificate of compliance with national law for the cross-border merger and after.
Until the certificate of compliance with national law for the cross-border merger is obtained, the merger is subject to the law of the country where the registered office of each merging company is located.
After obtaining the certificate, the merger is subject to the law of the country where the registered office of the acquiring or newly established company is located. This is significant because different countries may have different requirements and regulations regarding cross-border mergers.
Next, it is necessary to prepare a merger plan. This plan is agreed upon by all the companies participating in the merger.
The cross-border merger plan is a crucial document that regulates the entire process. It includes many details such as the purchase price of shares or stocks, the exchange ratio of other securities, rights of shareholders, and other conditions related to the allocation of shares or stocks in the acquiring or newly established company. The plan must also address issues related to employee participation in the new structure, the impact of the merger on employment, and many other significant aspects.
Another essential element is the expert opinion, which assesses whether the purchase price and the exchange ratio of shares or stocks are properly determined. The expert also evaluates the methods used to determine these prices and the exchange ratio, assessing whether they are adequate. The expert opinion is crucial for assessing the legality and fairness of the cross-border merger.
In specific cases, a cross-border merger may not require an expert opinion, making the entire process cheaper and faster. This is the case for single-member companies and when all shareholders of the merging companies have agreed to waive the requirement for an expert examination of the cross-border merger plan and the preparation of an expert opinion.
The management of the company prepares a report for shareholders and employees explaining the legal basis and justifying the economic aspects of the cross-border merger, including explaining the effects of the merger on employees and the future operation of the company.
The report contains a section intended for shareholders and a section intended for employees. The company may decide to prepare two separate reports, one for shareholders and one for employees.
Creditors, fearing the loss of their claims due to the merger, have the right to demand protection of these claims. The registration court reviews these requests and makes decisions on them. This is essential protection for creditors, ensuring that their rights are not compromised due to the merger.
A national company's creditor may, within one month from the date of disclosure or provision of the cross-border merger plan, demand protection of their claims that have not become due at the time of disclosure or provision of the plan, if it is likely that their satisfaction is jeopardized by the merger.
In case of a dispute regarding the protection of the claim, upon the request of the creditor, filed within three months from the date of disclosure or provision of the cross-border merger plan.
The new regulations also introduce additional protection for shareholders who do not agree with the merger. If a shareholder does not consent to the merger, they can demand the repurchase of their shares or stocks. The purchase price must be fair and reflect the actual value of the shares or stocks on the market. This gives shareholders confidence that their rights will be adequately protected if they do not agree to the merger.
In the penultimate stage of the cross-border merger process, the management of the company must apply for a certificate of compliance with national law for the merger in Poland. The registration court verifies and issues this certificate, which is the final step in the merger process.
As part of this process, it is also necessary to submit an application for an opinion by the Head of the National Revenue Administration (Szef KAS).
Szef KAS assesses whether there is reasonable suspicion that the cross-border merger may constitute a transaction aimed at tax avoidance.
After obtaining certificates for all the companies participating in the cross-border merger, it becomes possible to apply for the registration of the merger.
Cross-border mergers after September 15, 2023, are regulated by new regulations aimed at facilitating and increasing the legal security of such operations. Initiating such a process requires careful preparation of the merger plan, consideration of applicable law, obtaining an expert opinion, notifying shareholders appropriately, and protecting creditors' claims. This is a process that requires precision and strict adherence to regulations but can bring many benefits to businesses planning cross-border mergers.
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