How does a cross-border merger work?

By 7 September, 2018October 8th, 2018No Comments

Another method of moving your business to a foreign jurisdiction is by way of cross-border merger. Merger is the legal act of two or more legal entities whereby one of them acquires all assets and liabilities of the other or whereby a new legal entity, incorporated by them jointly by that legal act, acquires their assets and liabilities. So your Dutch Company which you are seeking to dispose of ceases to exist either way. Legal entities may merge only with legal entities which are of the same legal type. Rather than delving deeply into the lengthy merger proceedings I will give a brief overview of these steps while highlighting the most important additional requirements relating to cross-border mergers.

In order to initiate the process, the boards of managing directors of the legal entities intending to merge must prepare a merger proposal. The proposal is followed by a written explanatory statement by the managing directors. At this stage an accountants report and certificate detailing all financial information of both parties is required. Subsequently the merger proposal must be filed and announced. What follows is an objection period for creditors. If there are no objections within the allotted period of time, and the resolution to merge is adopted by a qualified majority of the general meeting, a board resolution will follow. No merger is legally valid unless it is affected by a notarial deed (called “deed of merger”). The deed must be executed within six months from the date of the notice announcing the filing of the merger proposal at the office of the Commercial Register. The merger takes legal effect and comes into force on the day immediately following the date on which the deed of merger has been executed. The merger must be registered in the Commercial Register at the place(s) of the merged parties’ respective offices within eight days from the date on which the deed of merger has been executed.

In the case of a cross-border merger, the merger proposal must give more information than when there is no international element. Specifically it must mention the legal type, name and registered office of the acquiring company, the probable consequences of the merger for employment, information on the valuation of the assets and liabilities which are transmitted to the acquiring company, the date of the annual accounts or interim statement of assets and liabilities and finally a proposal on the level of compensation for a share on application of Section 2:333h of the Dutch Civil Code. A Dutch civil law notary should certify that it has appeared to him/her that the procedural provisions were observed.

Services provided by KC Legal:

  • Preparation of the merger proposal;
  • Preparation of the written explanatory statement for the board of directors;
  • Preparation of financial reports;
  • Filing and announcement of merger proposal;
  • Preparing and filing the emigration corporate income tax returns.