First Cross-Border Demerger in the Netherlands
On 1 January 2010 the Corporate Transactions Team of Kennedy Van
der Laan realized the first legal cross-border demerger
("CBD") of the Netherlands. This concerned a legal
demerger of a Belgian company in which a business unit was acquired
by a Dutch group company and the remaining activities were acquired
by a Belgian group company.
The CBD is an efficient cross-border transaction form that may
recently be chosen in the Netherlands under certain circumstances.
This article describes the possibilities to apply the CBD in
transactions in which Dutch companies are involved and, in
addition, explains the most important complications of the CBD.
On 15 July 2008 the European Directive on cross-border mergers
was implemented into the Dutch Civil Code. Pursuant to these
statutory provisions, a Dutch company or cooperation is allowed to
enter into a legal cross-border merger ("CBM") with a
limited liability company or European cooperative society that is
subject to the laws of another EU Member State. Before this date, a
CBM was already deemed admissible on the basis of the judgment of
the European Court of Justice in 2005 regarding SEVIC.
It follows from this judgment, which line is confirmed in the
subsequent judgment of the European Court of Justice in 2008
regarding Cartesio, that in the event of a CBD an EU Member State
of the acquiring company has to allow the transfer under universal
title of goods of a company of another EU Member State according to
whose laws the CBD is permitted. Therefore, a Dutch company can be
a party to a CBD in which it acquires goods of a divided company of
another EU Member State if this other Member State permits the
realization of the CBD. This transaction is referred to as an
inbound CBD. However, an outbound CBD, in which a
Dutch company as dividing company is a party to a CBD, is not
permitted under Dutch law; this would require a statutory provision
in the Dutch Civil Code, for which the Minister of Justice did not
see the need in 2009. Only Finland and Denmark have laid down the
CBD by law. Some EU Member States, including Belgium, do permit an
outbound CBD without a statutory provision. A Dutch
company can enter into an inbound CBD with companies of
these EU Member States.
The most important advantage of the CBD and the reason to prefer
a CBD to an assets-liabilities transaction is the universal title
of transfer of goods. In the event of a transfer of a running
business unit the convenience of this automatism is evident.
Delivery obligations do not have to be met and the transfer of all
goods legally takes place simultaneously. The CBD does require both
parties to comply strictly with applicable procedures in the EU
Member States, which requires a careful analysis in the absence of
a clear statutory provision.
According to current Dutch law the procedure of the legal merger
must be followed and, moreover, it is sensible to also comply with
the regulations that apply to the CBM.
The Dutch demerger procedure and required documentation and those
of the EU Member State of the other parties involved must be
brought in line with each other exactly. The procedure starts with
the filing of the joined demerger proposal with the trade register
and the office addresses of the dividing parties and is realized
after the execution of the Dutch notarial deed of demerger on the
day after the deed is signed. The Dutch notarial deed of demerger
may only be signed after the Court has declared that during the
opposition period of one month no creditor has raised an objection,
and that a legally valid resolution to divide has been passed by
the general meeting or the board. Moreover, a lawyer or notary of
the EU Member State of the company to be divided must have
confirmed in an opinion that this law allows for an
outbound cross-border demerger.
However, Section 2:333k of the Dutch Civil Code may delay the
realization of a CBD in the Netherlands by four months. This
provision, in summary, obliges the parties to a CBM, if one of them
has a personnel representation that has the right to nominate a
certain number of members of the board, to negotiate with personnel
representatives about a co-governance agreement and maintenance of
the co-governance rights after the realization of the CBD. If this
provision is applicable, the negotiated co-governance agreement
must be included in the articles of association of the Dutch
company. In addition, if a Works Council has been established on
the basis of Section 25 of the WOR, an advice needs to be requested
in time.
In the event of internal reorganizations, the auditor's
report and account required on the basis of Section 2:334aa of the
Dutch Civil Code will often not be necessary if the shareholders of
the parties involved in the CBD agree thereto. If, however, shares
are granted as a result of the CBD, the auditor's report as
meant in Section 2:334bb of the Dutch Civil Code must be issued and
attached to the demerger proposal.
The CBD is an efficient cross-border reorganization form, and
shall certainly become more interesting after the outbound
CBD will have been regulated in the Dutch Civil Code following the
CBM. Our Corporate Department will be pleased to explain the
possibilities of the CBD in more detail to you. Please contact Jan
Schouten, partner Corporate Transactions (+31 20 5506 853) or Jesse
van de Zand (+31 20 5506 648).