Extraordinary cross-border transactions: new rules with the implementation of the European Directive

Legislative Decree No. 19 of March 2, 2023, published in the Gazzetta Ufficiale No. 56 of March 7, 2023, implementing Directive 2019/2121/EU (hereinafter also the “Directive”), which amended the previous Directive 2017/1132/EU on extraordinary cross-border transactions, entered into force last March 22. The provisions dictated by the Directive are intended to introduce harmonized and comprehensive regulation of corporate transactions involving companies governed by the laws of at least two different EU member states, or non-EU states.

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cross-border transactions

The main new element is the extension of the scope of intervention. In fact, the European legislator has moved from dealing only with cross-border mergers of limited liability companies, already the subject of Directive (EC) 2005/56, transposed into Italian law by Legislative Decree No. 108/2008, to harmonizing also cross-border transformation and demerger operations.

The objective of the Directive is to encourage freedom of establishment, ensure greater mobility in the single market and the pursuit of other essential objectives of European integration. In this way, the legislator seeks to provide new opportunities for economic growth and fair competition for businesses, while ensuring adequate protection for the main stakeholders involved in these operations, such as employees, creditors and minority shareholders.

 

The main changes

As mentioned, Legislative Decree No. 19/2023 regulates at the transnational level no longer only merger, but also cross-border transformation and demerger. Tthe hypotheses introduced in the Decree cover extraordinary transactions involving:

  • one or more Italian corporations and one or more corporations that have their registered office or central administration or principal place of business established in the territory of the European Union;
  • companies other than joint stock companies or corporations that do not have their registered office or central administration or principal place of business established in the territory of the EU (if the application of the regulations transposing the Directive is in any case provided for by the law of the States participating in the transaction);
  • non-corporate entities or other types of operations, if compatible with the regulations concerning international private law (L. 218/1995).

Excluded from the application of the new rules are SICAVs and entities subject to resolution procedures or crisis prevention measures (with some exceptions).

The new legislation regulates the aforementioned transactions at every stage, starting with the content of the documentation (the project, the reports of the directors and “independent experts”), and ending with the manner in which the transaction is approved by the shareholders and the provisions on publicity and effectiveness. Two key steps provided for in the directive are included in the procedure, namely:

  • the issuance of the “preliminary certificate” attesting to compliance with the procedures and formalities governing the transaction in the state of departure;
  • the completion of the “legality check” by the competent authority in the State of arrival. Of particular importance will, in fact, be the role of the Notary involved in the transaction.

Legislative Decree No. 19/2023 also makes changes to the Civil Code, in accordance with the new features of the Directive, and in particular:

  • 2510-bis is inserted, which regulates the transfer of headquarters abroad;
  • the rules on demergers are supplemented and the demerger by spin-off is introduced, through the new Article 2506.1, by which a company assigns a part of its assets to one or more newly established companies, attributing the relevant shareholdings not to its shareholders, but to itself, continuing its activity.

The protection of stakeholders in extraordinary transactions

As anticipated, specific measures have been introduced to protect those with the main interest in the transactions, namely creditors, employees and minority shareholders.

As far as creditors are concerned, the possibility is given to object to the transaction even when the transaction results in a company from another state that has debts to governments or public bodies such as to prevent the issuance of the preliminary certificate, unless they have been satisfied or guaranteed.

As for the workers, considering that in some European countries there are special arrangements for their participation and involvement in the management of the company, specific negotiation procedures regulated by legislation are granted, so that their position is protected even in the event that the company resulting from the extraordinary transaction is governed by the law of a state that, as in the case of Italy, does not provide for such forms of participation and involvement.

Finally, the shareholders of the Italian company who did not take part in the approval of the transformation, merger or demerger project are granted the right of withdrawal, to be exercised within the terms and in the manner specifically provided for by the new legislation (this entailed the amendment to Articles 2437 and 2473 of the Civil Code).

Conclusions

The provisions of Legislative Decree No. 19/2023, with the exception of the amendments to the Civil Code mentioned above, which take effect as of the date of publication of the decree, will take effect as of July 3, 2023 and will apply to cross-border and international transactions with reference to which – as of the aforementioned date – no participating company has yet “published” the project.

These regulatory changes can only be welcomed, leading Italy to be able to compete with other European states on an equal footing on cross-border extraordinary transactions and thus allowing harmonized access to investors from other European countries who have an interest in operating in Italy.

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