Important changes for domestic & cross-border transactions

On September 1, 2023 new Dutch legislation on important changes to procedures concerning domestic and cross border mergers, cross-border demergers and cross-border conversions (hereinafter also referred to as: “cross-border transactions”) has come into effect.

The Dutch Mobility Directive Implementation Act (the “Act”) has implemented the Directive (EU) 2019/2121 and introduced important amendments in the Dutch Civil Code (“DCC”) to procedural rules on domestic and cross-border mergers.

Furthermore, after years of absence of formal legislation, the Act provides for a legal framework for cross-border conversions and cross-border demergers; regulations on these type of restructurings were previously lacking in the Netherlands although legal practice managed to deal with this type of cross-border transactions based on a number of rulings by the European Court of Justice.

Scope and applicability
The Act only regulates the cross-border transactions for Dutch private companies with limited liability (besloten vennootschappen met beperkte aansprakelijkheid, a “BV”) and Dutch public companies (naamloze vennootschappen, a “NV”). The (non-Dutch) transaction party has to be a limited liability company incorporated under the laws of another EU member state or the European Economic Area (EEA). Cross-border transactions of a BV or NV with entities outside the EU or the EEA are not regulated under the Act.

Summary of the contents of the Act
The Act provides for a legal procedure for both outbound and inbound cross-border transactions. For procedures for cross-border transactions that were already initiated before September 1, 2023, a transitional provision was introduced. The legal procedure under the Act is more complex than it was prior to the implementation thereof.

The procedure is still to be divided into three phases, being (a) the preparation phase, (b) the resolution taking phase, and (c) the implementation phase. Nevertheless more measures to safeguard the position of creditors, employees and shareholders of the Dutch BV or NV involved in the cross border transaction have been introduced.

The most important ones are the extended creditor opposition period at which creditors have another 2-month period during which they are entitled to ask the Dutch court for further safeguards. Furthermore, a mandatory fraud test by the Dutch notary has become a part of the  procedure for the cross-border transactions.

Procedure of a cross border transaction
The main procedural rules applicable to all types of cross border transactions, are, in short, as follows:

• shareholders should be informed of the consequences for them of the cross-border transaction and the rights and remedies available to them if they do not agree with the proposed compensation;        
         
• employees of the entities involved in the cross-border transaction (including their subsidiaries) should, inter alia, be informed of the consequences of the cross-border transaction for their employment relationship, furthermore material changes in working conditions must be explained;
   
• employee participation rights will be applicable sooner, as the criteria for applicability thereof, have been lowered;
   
• the board of directors of each company concerned must 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 five days before the date on which the general meeting decides in the proposal for the respective cross-border transaction;
   
• the objection period for creditors will in total be three months (for cross-border mergers there used to be a one-month waiting period);
   
• the Dutch civil-law notary must perform a fraud test in which the notary has to establish whether or not the cross-border transaction is being used for abusive or fraudulent purposes and if so the notary cannot issue the required pre-merger certificate to implement the cross border transaction; The pre-cross-border transaction certificate of the Dutch civil-law notary to be issued in relation to outbound cross border transactions has to be filed with the Dutch Trade Register, who will share this statement with the applicable foreign register. The required pre-cross-border declaration of foreign authorities, to be received by the Dutch civil-law notary in relation to inbound cross-border transactions, will have to be obtained from the Dutch Trade Register, who will obtain the same from the applicable foreign registry. Consequently, the timing of the cross-border transaction is inter alia dependent on the cooperation of the respective registries.

Domestic transactions
In addition to new procedures on cross border transactions in general, the Act also results in certain amendments applicable to Dutch procedures regarding mergers and demergers in general, from which also domestic procedures benefit, such as:

• the auditors statement of Section 2:328, paragraph 1 second sentence DDC and Section 2:334aa paragraph 2 DCC has been abolished for BVs. Consequently, it is possible for BV’s to enter into mergers or demergers -even in case of a demerger of assets and liabilities to an already existing entity, without the necessity of an auditor’s statement confirming that the value of the equity of a disappearing company (under a merger) or of a demerging entity that remains in existence (under a demerger) at least equals the nominal paid up amount of the shares being allotted pursuant the merger/ demerger;
   
• mergers between NV’s or BV’s which are indirectly held by the same person/ entity the provisions of Sections 2:326-2:328 DCC do not apply (thereby simplifying the procedure) as a consequence of which no new shares need to be allocated as part of the merger procedure.
   
• specific rules on value of the assets and liabilities to be left behind at the demerging company, as well as for the acquiring company upon a demerger, have been abolished. Dutch law assumes any considerations in respect of the impact of the demerger to be at the authority and discretion of the board of directors of the demerging entity. 

The Meijburg Legal team is very experienced in both advising on and implementing of cross border transactions. Feel free to contact any of the Meijburg Legal team members in case you have any questions or if they can be of any assistance in this respect.