Transposition of the Mobility Directive – Increased protection for shareholders in the case of a cross border merger, conversion or division
23/03/23
Let’s start with some exciting news! On 15 March 2023, the draft Belgian Act transposing the Mobility Directive was submitted to the Chamber!
Once voted, the Act will enter into force 10 days after its publication in the Belgian Official Gazette. As a special transitional measure, the draft Act provides that the new rules will only apply to transactions for which the common draft terms are filed after the entry into force of the Act. That is good news as it means that transactions that are already underway can be completed under the existing rules.
In our previous article, we discussed the increased protection for employees in the case of a cross-border merger, conversion or division. In this follow-up article, we highlight the increased protection for shareholders.
Increased shareholder protection is one of the key issues addressed in the Mobility Directive. It was essential to harmonise safeguards for shareholders in cross-border transactions to ensure that shareholders are offered the same minimum level of protection regardless of the Member State in which the company is situated.
The harmonised protection for shareholders in cross-border transactions has three dimensions.
First, it introduces the right for shareholders who vote against the approval of the common draft terms, to dispose of their shares for a cash compensation payment , also known as the ‘exit right’. This exit right will not only apply to shareholders, but also to holders of profit certificates. It will not, however, apply to bondholders. The latter will, nevertheless, have other rights as creditors of the company (this will be further discussed in our next newsflash so stay tuned!).
Secondly, shareholders who exercise the exit right, but who believe that the cash compensation offered is inadequate, have the right to lodge a claim in court for an additional cash payment.
Thirdly, shareholders who do not exercise the exit right, but who consider that the share exchange ratio set out in the common draft terms of the cross-border transaction is inadequate, have the right to lodge a claim in court for an additional cash payment or to be granted additional shares.
All three categories of rights, adopted for the protection of shareholders, are to be covered in the report of the management body to be addressed to the shareholders.
There is, however, an important exemption for intra-group restructurings: no reporting is required for parent-subsidiary cross-border mergers or sidestream mergers where all shares are held by the same shareholder. The shareholders can also unanimously waive the reporting obligation.
If you have any questions regarding the above or are struggling with a specific case and would like some help, don’t hesitate to reach out. We’d love to hear from you!
In the next edition of this series of newsflashes, we’ll highlight some of the most important implications of the Mobility Directive for creditors.
