Key Terms
- Cross-border conversion
- An operation whereby a company changes its legal form from that of the departure Member State to that of the destination Member State while transferring its registered office and retaining legal personality [Art. 86b(2)].
- Cross-border division
- An operation whereby a company transfers assets and liabilities to one or more newly formed recipient companies in another Member State, in exchange for shares issued by the recipient companies to the dividing company's members [Art. 160b].
- Pre-operation certificate
- A certificate issued by the departure Member State authority confirming that all legal conditions and procedural requirements for the cross-border operation have been fulfilled, mandatory before the destination authority may proceed [Art. 86m].
- Departure Member State
- The Member State in which the company conducting the cross-border conversion, merger or division is registered before the operation [Art. 86b(3)].
- Destination Member State
- The Member State in which the converted or newly formed company resulting from the cross-border operation will be registered [Art. 86b(4)].
- Draft terms
- The formal document drawn up by the administrative or management body setting out all mandatory elements of the planned cross-border operation, including legal forms, cash compensation, creditor safeguards and the indicative timetable [Art. 86d].
- Special negotiating body
- A body representing employees established for the purpose of negotiating employee participation arrangements in the resulting company, following the principles and procedures of Directive 2001/86/EC [Art. 86l(3)].
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Frequently Asked Questions
Which companies can use the cross-border conversion procedure under this Directive?
Any limited liability company listed in Annex II of Directive (EU) 2017/1132 with its registered office, central administration or principal place of business in the EU may convert cross-border, provided it is not in liquidation with begun asset distribution, not under resolution per Directive 2014/59/EU, and not excluded by national insolvency/restructuring rules [Art. 86a(1)–(4)].
What rights do dissenting shareholders have when a cross-border conversion is approved?
Members who voted against the draft conversion terms at the general meeting have the right to dispose of their shares for adequate cash compensation. They must declare their intention within one month after the general meeting, and payment must be made within two months after the conversion takes effect. Members may challenge the compensation amount before competent authorities in the departure Member State [Art. 86i(1)–(5)].
How are creditors protected during a cross-border operation?
Creditors whose claims predate draft terms disclosure and remain unmatured may apply to an appropriate administrative or judicial authority for adequate safeguards within three months of disclosure, if they can demonstrate that claim satisfaction is jeopardised and company-offered safeguards are insufficient. Additionally, pre-disclosure creditors retain the right to institute proceedings in the departure Member State for two years after the operation takes effect [Art. 86j(1), (4)].
Can the competent authority refuse to issue the pre-operation certificate?
Yes. The departure Member State authority must scrutinise the operation for legality and compliance with all procedural requirements. Where the authority identifies indicators of abuse, fraud or criminal activity — such as artificial arrangements lacking genuine economic substance — it must refuse the pre-operation certificate. The assessment may be extended by up to three months for additional investigation [Art. 86m, Recital 35].
When do employee participation negotiations become mandatory?
Negotiations are triggered where the company has, in the six months before draft terms disclosure, an average number of employees reaching four fifths of the departure Member State's participation threshold under Directive 2001/86/EC, or where the destination Member State does not provide at least the same participation level as existed before the conversion [Art. 86l(2)].
Does the Directive cover cross-border divisions into existing companies?
No. The Directive only covers cross-border divisions that result in the creation of new companies. Divisions transferring assets to already existing companies are excluded as too complex. Companies remain free to set up subsidiaries in other Member States through alternative structures [Recital 8, Art. 160a].
Can a completed cross-border operation be declared void after registration?
In principle, no — the Directive provides that a completed cross-border operation cannot be declared null and void once the registration in the destination Member State has taken place. However, Member States retain powers in criminal law, terrorist financing prevention, social law, taxation and law enforcement where post-operation evidence reveals abuse, fraud or criminal purposes [Recital 50, Art. 86u].
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