8 Recommendations

For a clear answer to the question of whether cross-border division is possible from an international private law perspective in all Member States of the EU, legislation on cross-border division at EU level has to be drawn up.

An EU directive concerning cross-border division is, taking into account the existing System consisting of the Third directive on national mergers (now Directive 2011/35/EU) and the Tenth directive on cross-border mergers, the most appropriate legislative instrument to harmonise the legislation of the Member States of the EU on cross-border division.

Section 1 and section 26 paragraph 2 Sixth directive on national division have to be amended as a consequence of which the implémentation of the Sixth directive is no longer voluntary but mandatory.

An EU Directive on cross-border division should contain references to the Sixth directive on national divisions and, with respect to provisions which will be drawn up especially for cross-border division, it may be based on the principles of the Tenth directive and the conflict rules of international private law contained therein.

In an ideal situation, the scope of an EU Directive on cross-border division is as wide as possible, both with respect to the forms of cross-border division and the corporate legal forms that can be involved in a cross-border division.

Legislation at EU level on cross-border division does not exclude anterior legislation on cross-border division on the level of the Member States of the EU.

Notwithstanding legislation on cross-border division on the level of the Member States of the EU or EU level, the Dutch legislator, as well as other national legislators in the Member States of the EU, may take the initiative to draw up legislation on cross-border division whereby also non-EU Companies are involved. Such legislation would improve the competitive positions of each Member State of the EU in relation to other States in the world.

It would be desirable for legislation to be enacted on the basis of which Companies governed by the laws of the Netherlands, Aruba, Curaçao or Saint Martin or governed by the laws of the public bodies of the Netherlands: Bonaire, Saba and Saint Eustatius can be involved in a ‘cross-border’ division within the Kingdom of the Netherlands.

The scope of section 2 SE Regulation has to be extended so that an SE can also be formed in the fiamework of a cross-border division.

An EU Directive on cross-border division is a constructive and necessary supplement to the existing legislation on cross-border corporate restructuring and clarifies which corporate legal forms can be involved in a cross-border division.

A list on EU level, in which Companies governed by the laws of the Member States of the EU are to be considered as having the same or similar corporate legal form, would be a welcome addition.

The scope of the Sixth directive has to be extended to private limited hability Companies. Within the framework of that amendaient of the Sixth directive, Directive 2011/35/EU concerning national mergers will have to be ahgned with the Tenth directive and the scope of Directive 2011/35/EU will also have to be extended to private limited liability Companies.

The Sixth directive and future legislation on cross-border division should provide that Companies that are involved in insolvency proceedings can be involved in a cross-border division, except for Companies that are involved in insolvency proceedings as enumerated in Annex A of Council Regulation (EC) no. 1346/2000 on insolvency proceedings.

Section 2 paragraph 2 Sixth directive in conjunction with section 3 paragraph 2 Directive 2011/35/EU should be mandatory, so that a dissolved company can be involved in a (cross-border) division, provided that this is restricted to Companies which have not yet started to distribute their assets to their shareholders.

If the Dutch legislator wishes to protect assets of Companies that belong to a so-called non-distributable tied-up capital (beklemd vermogen), which is the case if a Dutch foundation has been converted into a limited liability company, it should determine that cross-border division of Companies with limited liability – except public limited liability Companies – with such tied-up capital is not possible, or it should introduce special safeguards with respect to cross-border divisions, consisting of (i) a court approval for the cross-border division or (ii) the possibihty to file objection against the intended cross-border division by the minister of Safety and Justice.

The Sixth directive has to be made mandatory, so that every Member State of the EU has to facilitate (i) the division whereby the dividing company ceases to exist and (ii) the division whereby the dividing company does not cease to ex ist, both in the form of (i) a division by acquisition and (ii) a division by the formation of one or more newly established Companies.

Legislation on cross-border division on EU level should prescribe that the cross-border division proposal – also referred to as ‘draft terms of cross-border division’ – should contain more information than the national division proposal. Section 5 Tenth directive can be applied by analogy.

Legislation on cross-border division on EU level should prescribe that, as to the form of the cross-border division proposal, the law applicable to the Companies involved in a cross-border division that contains the most stringent provision should apply.

With respect to the role of extemal experts – auditors – in case of a cross-border division, legislation on cross-border division on EU level should provide for a provision similar to section 8 paragraph 1 Tenth directive.

In the case of an – from a Dutch perspective – outbound cross-border division whereby the dividing company does not cease to exist, the Dutch legislator should provide that the extemal expert – auditor – should, when certifying that the value of the part of the property to be retained by the dividing company, increased with the value of the shares in the capital of the acquiring company or Companies to be acquired by the dividing company upon the cross-border division becoming effective, at least equals the paid and called up part of the capital and the reserves which the dividing company must maintain immediately after its division under the law or its articles of association, and increased with the total compensation which shareholders are entitled to demand pursuant to section 2:334eel Dutch Civil Code, also take into account the amount of compensation to be paid to the minority shareholders of the dividing company that opposed the cross-border division.

Within the framework of creating rules on cross-border division, the Dutch legislator should limit the scope of section 2:334aa paragraph 2 Dutch Civil Code and section 2:334bb Dutch Civil Code to Dutch Companies involved in a cross-border division.

Documents for the cross-border division, such as the division proposal, should also be made public with the offices of the Companies involved in a cross-border division for the Works council or for the employees of those Companies, by analogy with section 7 Tenth directive.

Legislation on cross-border division on national – Dutch – level should provide that the cross-border division should be announced in the Dutch State Gazette, by analogy with section 2:333e Dutch Civil Code.

Legislation on cross-border division on national – Dutch – level should explicitly provide that creditors of the dividing company, as well as creditors of each acquiring company, can oppose the cross-border division based on Dutch creditor protection rules.

Legislation on cross-border division on EU level should provide for harmonisation on the subject of creditor protection. A harmonised creditor protection System should be a combination of a system of creditor protection before the cross-border division becomes effective and a system of creditor protection after the cross-border division has become effective. In that framework, also the provisions on crediter protection in case of a national merger, national division and cross-border merger should be harmonised.

Legislation on cross-border division on EU level should be in accordance with section 4 paragraph 2 Tenth directive on the subject of the protection of minority shareholders that opposed the cross-border division. In the framework of the transposition of legislation on cross-border division on EU level in Dutch legislation, the Dutch legislator should provide for a redemption right for holders of ordinary shares that opposed the cross-border division. A separate provision has to be made to prevent unwanted accumulation with section 2:334eel Dutch Civil Code. An exception has to be made to the principle that the redemption right is applicable to all shares held by one shareholder, if and when that shareholder also holds shares without voting rights and/or shares without profit rights. The rédemption right should not be applicable in the case of (i) a cross-border division whereby the acquiring company will be incorporated within the framework of the cross-border division and such acquiring company allots shares to the dividing company – instead of to the shareholders of the dividing company – and (ii) a triangular cross-border division of a company governed by Dutch law, whereby a group company of the acquiring company is governed by Dutch law and such a group company allots shares to the shareholder(s) of the dividing company – instead of the acquiring company itself. In both cases, the shareholders of the dividing company will not become shareholders of a company governed by the laws of another Member State of the EU.

To avoid obstacles by the implémentation of cross-border divisions, the protection of employee participation rights within the meaning of Directive 2001/86/EC as currently laid down in section 16 Tenth directive should not be applicable.

If and when the protection of employee participation rights is necessary within the framework of cross-border division, provisions on cross-border division on EU level should be in accordance with section 16 Tenth directive concerning cases in which negotiations with a Special Negotiating Body (“SNB”) about employee participation rights in the acquiring company should be commenced. As a resuit thereof, employee participation rights are protected in the same way for different kinds of cross-border restructurings.

If and when the protection of employee participation rights is necessary within the framework of cross-border division, it should be determined that for each acquiring company a SNB consisting of employees who will be employed with each acquiring company should be established. If the acquiring company already exists before the cross-border division, it should be determined that the employees of the acquiring company will also be represented in the SNB.

If and when the protection of employee participation rights is necessary within the framework of cross-border division, legislation on cross-border division on EU level should determine that negotiations have to take place between the SNB and the management boards of the acquiring Companies. If the acquiring company is newly incorporated within the framework of the cross-border division, it should be determined that negotiations have to take place between the SNB and the management board of the dividing company on behalf of each acquiring company that will be newly established within the framework of the cross-border division.

If and when the protection of employee participation rights is necessary within the framework of cross-border division, legislation on cross-border division on EU level should determine that the SNB may decide not to open negotiations on employee participation, as a consequence of which the employee participation rights will be governed by the law of the Member State that is applicable to the acquiring company.

If and when the protection of employee participation rights is necessary within the framework of cross-border division, legislation on cross-border division on EU level should determine that the management board(s) of the acquiring company or acquiring Companies – if the acquiring company/companies already exist(s) before the division – or the management board of the dividing company – if the acquiring company or acquiring Companies are newly incorporated in the framework of the cross-border division – may decide not to open negotiations with the SNB, as a consequence of which standard rules as laid down in the annex of Directive 2001/86/EC will be applicable to each acquiring company.

If and when the protection of employee participation rights is necessary within the framework of cross-border division, legislation on cross-border division on EU level should determine that negotiations on employee participation have to be reopened if a national or cross-border division or merger will take place within a period of three years after the cross-border division has become effective. Such provision is in accordance with section 16 paragraph 7 Tenth directive.

Legislation on cross-border division on EU level should determine that each Member State of the EU shall designate the court, notary or other competent authority in the outbound Member State to scrutinise the legality of the cross-border division and to attest to the proper completion of the pre-cross-border division acts and formalities.

Legislation on cross-border division on EU level should determine that each Member State shall designate the court, notary or other authority competent to scrutinise the legality of the cross-border division as regards that part of the procedure which concerns the completion of the cross-border division in the inbound Member State, including the incorporation of a new company within the framework of the cross-border division as the acquiring company.

Dutch legislation on (cross-border) division should be amended, so that national and cross-border divisions may become effective subject to a condition or time limit. The Sixth directive on national divisions should be mandatory on this subject and Directive 2011/35/EU should be amended accordingly.

Legislation on cross-border division on EU level should determine that, in principle, a cross-border division will become effective as determined in the law of the Member State applicable to the dividing company, except where a cross-border division will become effective subject to a condition or time limit.

Legislation on cross-border division on EU level should determine that a cross-border division, with respect to the dividing company, may only be registered if and when the cross-border division is registered with respect to the acquiring company or acquiring Companies. The methodology of section 13 paragraph 2 Tenth directive can be followed.

Legislation on cross-border division on EU level should contain a definition on EU level regarding the transfer of assets and liabilities by cross-border division.

Legislation on cross-border division on EU level should contain a mandatory legal framework regarding the création of limited property rights on shares and other special rights allotted by the acquiring company or acquiring Companies, if and when such rights were established on the shares in the dividing company.

Legislation on cross-border division on EU level should provide for mandatory harmonisation of the laws of the Member States of the EU regarding the liability of the acquiring company/companies and the dividing company – if the dividing company does not cease to exist – for liabilities of the dividing company, so that this liability is either limited to the net assets acquired by the cross-border division, or unlimited.

Legislation on cross-border division on EU level should exclude the possibility of nullity of a cross-border division and the possibility to declare a cross-border division null and void. This exclusion should not only concern the grounds for nullification of a division as mentioned in section 19 Sixth directive, but should exclude also other grounds for nullification of a cross-border division, such as the nullification on the basis of the actio pauliana.

The non-existence of cross-border division – as a separate concept besides the possibility of nullity or the possibility to declare a cross-border division null and void – has to be avoided as far as possible.

If and when the non-existence of cross-border division should be possible, legislation on cross-border division should prescribe that a cross-border division is only non-existent if and when a cross-border division does not meet certain requirements enumerated in an exhaustive list on EU level. These certain requirements should be limited to (i) the fact that only one company can be divided within the framework of a cross-border division, (ii) the transfer under universal title of succession and (iii) the approval of the authorities in the outbound Member State and the inbound Member State. Furthermore, this legislation should prescribe that the non-existence of cross-border division is only possible when the non-existence is established by a court or other competent authority, as is the case in the nullification of national divisions.