European Commission pledges to clear merger barriers

The European Commission is trying to clear legal logjams preventing companies with share capital from different European Union (EU) Member States from merging.

Such transactions are illegal in the Netherlands, Sweden, Ireland, Greece, Germany, Finland, Denmark and Austria. However, under a new proposed company merger directive, they would be allowed across the EU, and would involve companies following the merger rules that would apply if they were merging with a company from their own country.

The Commission said the legislation would also ease the legal obstacles impeding mergers involving companies from jurisdictions that allow cross-border deals of this type, but which have contrasting merger rules, leading to “complex and costly legal arrangements”.

The proposal lays down some basic procedures for cross-border mergers, stipulating some formalities for merger terms – affecting issues such as the location of a registered office and reconciling rules on employee participation - to ease legal difficulties. EU internal market Commissioner Frits Bolkestein said the plan would “facilitate the co-operation and restructuring necessary to make Europe more competitive”.