Law on Cross-Border Mergers of Limited Liability Companies


Published: 0000-00-00

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REPUBLIC OF LITHUANIA
law on
cross-border mergers of LIMITED liability companies
 
13 December 2007 – No X-1367
Vilnius
 
Article 1.  Objective and Purpose of the Law
1. This Law shall regulate the cross-border merger of undertakings whose legal form according to the laws of the Republic of Lithuania is a public or private limited liability company.   During a cross-border merger one or several public limited liability companies merge with a public limited liability company corresponding in the legal form to a public limited liability company or one or several private limited liability companies merge with private limited liability companies corresponding in the legal form to private limited liability companies formed in accordance with the law of other EU Member States and having their registered office, central administration or principal place of business within the European Economic Area. 
 
2. Unless this Law provides otherwise, in cases of merging of public and private limited liability companies either cease to exist after a cross-border merger or result from a cross-border merger, the provisions of the Law of the Republic of Lithuania on Companies regulating the reorganisation of public and private limited liability companies by way of merger and, taking into account the cross-border nature of the merger, the decision-making procedures relating to such mergers, and the protection of the rights of creditors, debenture holders and shareholders, as well as the provisions of the  labour laws of the Republic of Lithuania regulating the protection of the employee rights shall apply.
 
3. The provisions of this Law shall not apply if at least one of the merging public or private limited liability companies is a management company or a collective investment undertaking operating in accordance with the Law of the Republic of Lithuania on Collective Investment Undertakings, the sole purpose of the incorporation whereof is, by offering the units or shares, to accumulate personal funds and invest such funds collectively into securities and/or other assets specified in the Law of the Republic of Lithuania on Collective Investment Undertakings, thereby sharing the risk, and whose securities (units or shares) attest to the holder’s right to request at any time that the securities be redeemed. Action taken by the public or private limited liability company to ensure that the stock exchange value of its units does not vary significantly from its net asset value shall be regarded as equivalent to such redemption.
 
4. This Law shall aim at ensuring the application of the EU legal act specified in the Annex to this Law.
 
Article 2. Definitions
 
1. Member State means a Member State of the European Union as well as a country of the European Economic Area.
 
2. Limited liability company (hereinafter referred to as the “company”) means:
 
1) a public limited liability company, private limited liability company  or a company formed in accordance with the law of other Member States, specified in Article 1 of First Council Directive 68/151/EEC of 9 March 1968 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community (OJ 2004, special edition, Chapter 17, Volume 1, p. 3), or
 
2) a company with share capital formed in accordance with the law of other Member States having legal personality and possessing separate assets to the extent whereof the company is liable for its obligations and subject to the same requirements under the national law as applicable to the companies referred to in subparagraph 1 of this paragraph concerning the protection of the interests of their members and others.
 
3. Member of the company means a natural or legal person who, in accordance with the law of one of the Member States, is the holder of the company securities or shares representing the company capital.
 
4. Cross-border merger (hereinafter referred to as the “merger”) means an operation whereby:
 
1) one or more companies, on being dissolved without going into liquidation, (the companies being acquired) are merged by acquisition with another existing company (the acquiring company) and all their assets and liabilities are transferred to the acquiring company;
 
2) two or more companies, on being dissolved without going into liquidation, are merged by formation of a new company and all the assets and liabilities of the dissolved companies are transferred to the new company; 
 
3) one or more companies, on being dissolved without going into liquidation, (the companies being acquired) are merged by acquisition with another existing company (the acquiring company) holding all the securities or shares of the companies being acquired representing their capital and all the assets and liabilities of the companies being acquired are transferred to the acquiring company.
 
 
 
Article 3. Terms of Merger
 
1. The board of each merging public or private limited liability company (where the board is not formed, the head) must draw up the common terms of merger which must include, inter alia, the following:
 
1) the name, legal form and registered office of each merging company; the name, legal form and registered office envisaged for the company resulting from the merger;
 
2) the mode of merger (merger by acquisition, merger by formation of a new company);
3) the ratio applicable to the exchange of securities or shares representing the capital of the companies which cease to exist after the merger into securities or shares representing the capital of the company resulting from the merger; 
4) the rules for the allotment to members of securities or shares representing the capital of the company resulting from the merger;
5) the difference in the price of securities or shares representing the capital of the company resulting from the merger belonging to and received by the members to be paid in cash;
6) the likely repercussions of the merger on employment;
7) the date from which members of the company which ceases to exist after the merger shall be entitled to share in profits of the company resulting from the merger and any special conditions affecting that entitlement;
8) the date from which the transactions of the company which ceases to exist after the merger shall be treated for accounting purposes as being those of the company resulting from the merger;
9) the rights conferred by the company resulting from the merger on members enjoying special rights or on holders of securities other than shares representing the company capital, or the measures proposed concerning them;
10) any special rights granted to members of the administrative, management, supervisory or controlling organs of the merging companies and the experts who examine the terms of merger;
11) where appropriate, the procedures by which arrangements for the involvement of employees in the definition of their rights to participation in the company resulting from the merger are determined;
12) information on the evaluation of the assets and liabilities which are transferred to the company resulting from the merger;
13) dates of the merging companies’ accounts used to establish the terms of the merger.
2. The statutes of the company resulting from the merger must be drawn up together with the terms of merger. Until the completion of the merger, the statutes shall be an inseparable part of the terms of merger. If the law of the Republic of Lithuania is applied to a company resulting from the merger, the provisions of the Law of the Republic of Lithuania on Companies shall apply to its statutes.
 
Article 4. Examination of the Terms of Merger
The terms of merger must be examined by one or more independent experts – an audit firm with which each merging public or private limited liability company concludes a contract. One or more independent experts shall draw up a report on the examination of the terms of merger intended for shareholders for each merging public or private limited liability company.
2. As an alternative to independent experts operating on behalf of each of the merging companies, one or more independent experts, appointed for that purpose at the joint request of the merging companies by a competent authority in the Member State whose law is applied to one of the merging companies or the company resulting from the merger, or approved by such an authority, may examine the terms of merger and draw up a single written report on the examination of the terms of merger to all the members.
3. If at the joint request of the merging companies, one or more joint independent experts are to be appointed for the examination of the terms of merger and for drawing up a single written report on the examination of the terms of merger in accordance with paragraph 2 of this Article, to act in accordance with the law of the Republic of Lithuania, namely an audit firm, such an audit firm must be approved by the manager of the Register of Legal Entities.
4. The audit firm specified in paragraph 1 of this Article or one or more joint independent experts specified in paragraph 2 of this Article must draw up a report on the examination of the terms of merger, which must include at least the particulars required by the Law of the Republic of Lithuania on Companies to be provided in the report on assessment of the terms of reorganisation.
5. The audit firm specified in paragraph 1 of this Article or one or more joint independent experts specified in paragraph 2 of this Article examining the terms of merger shall be entitled to request that each merging company present any information required for carrying out the examination.
6. The board of each merging public or private limited liability company (where the board is not formed, the head) shall ensure that at least 40 days prior to the general meeting of shareholders which has on its agenda the adoption of a decision on the merger the shareholders, creditors, employees’ representatives or employees of each merging public or private limited liability company shall be granted access to the report on the examination of the terms of merger.
7. The examination of the terms of merger and the report on the examination of the terms of merger shall not be required if all the members of each merging company agree thereto. The consent of shareholders of the public or private limited liability company shall be expressed in any form in which shareholders exercise the right to vote at the general meeting of shareholders.
 
Article 5. Report on Merger
1. The board of each merging public or private limited liability company (where the board is not formed, the head) must draw up a detailed written report on the merger intended for the shareholders. The report must specify the purposes of the merger, explain the terms of merger, explain and justify the legal and economic aspects of the merger, and explain the implications of the merger for shareholders, creditors and employees of the public or private limited liability company. 
2. The board of each merging public or private limited liability company (where the board is not formed, the head) shall ensure that at least 40 days prior to the general meeting of shareholders which has on its agenda the adoption of a decision on the merger the shareholders, creditors, employees’ representatives or employees of each merging public or private limited liability company shall be granted access to the report on the merger.
3. Where the board of the merging public or private limited liability company (where the board is not formed, the head), not later than 30 days before the general meeting of shareholders which has on its agenda the adoption of a decision on the merger, receives an opinion from the representatives of the employees of the appropriate public or private limited liability company, that opinion shall be appended to the report on the merger.
 
Article 6. Notification of the Merger
1. Each merging public or private limited liability company must publish the drawn-up terms of merger three times with at least 30-day intervals between publications in the daily specified in the statutes or publish them once at least 40 days before the general meeting of shareholders which has on its agenda the adoption of a decision on the merger in the daily specified in the statutes and notify all creditors of the company in writing. The publication or notice shall be mutatis mutandis subject to the requirements set forth by the Law of the Republic of Lithuania on Companies for the content of the publication or notice of the intended reorganisation.
2. From the date of publication of the drawn-up terms of merger in the daily specified in the statutes, a public or private limited liability company which ceases to exist after the merger shall acquire the status of a public limited liability company or a private limited liability company being merged as a result of the cross-border merger, while the public or private limited liability company resulting from the merger – the status of the public or private limited liability company participating in the cross-border merger.
3. Not later than on the first day of publishing of the drawn-up terms of merger in the daily specified in the statutes, the terms of merger together with the statutes of the company resulting from the merger, the report on the examination of the terms of merger and the report on merger must be submitted to the manager of the Register of Legal Entities. Each merging public or private limited liability company shall also submit to the manager of the Register of Legal Entities information about:
1) the registers in which data in respect of each merging company as indicated in the legal acts of the appropriate Member States implementing provisions of Article 3(2) of First Council Directive 68/151/EEC of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, are required by member states of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the community, as well as the registration numbers of these companies in those registers;
2) the arrangements made by the merging companies for the discharge or additional securing of an obligation to creditors, the exercise of the rights of any minority members of such companies, also the address and time at which complete information on those arrangements may be obtained free of charge.
4. In addition to the legal norms of the Republic of Lithuania which regulate the reorganisation of public and private limited liability companies, as well as the documents, data and information which must be published, the manager of the Register of Legal Entities shall also ensure the publication of the following particulars of each merging company – the name, legal form, registered office – and the data specified in paragraph 3 of this Article relating to each merging public and private limited liability company.
 
Article 7. Decision on the Merger
1. A decision on the merger shall be taken, taking account of the reports specified in Articles 4 and 5 of this Law, by the general meeting of shareholders of each merging public or private limited liability company.
2. A decision on the merger shall approve the terms of merger and the statutes of the company resulting from the merger.
3. If the law of a Member State to which at least one merging company is subject provides for a procedure to scrutinise and amend the ratio applicable to the exchange of securities or shares representing the capital of the merging companies or a procedure to compensate minority members of such companies, without preventing the registration of the merger, the general meeting of shareholders of each of the merging public or private limited liability companies shall, in its decision on the merger, be entitled to explicitly express its opinion on the possibility for that merging company to have recourse to such procedure to be initiated before the court.
4. The general meeting of shareholders of the merging  public or private limited liability company may reserve the right to make implementation of the merger conditional on ratification by the general meeting of shareholders of the arrangements decided on with respect to the participation of employees in the company resulting from the merger.
5. A document issued in proof of a decision of the general meeting of shareholders on the merger must be submitted within 5 days to the manager of the Register of Legal Entities.
 
Article 8. Scrutiny of the Legality of the Merger
1. For the scrutiny of the legality of merger procedures of a merging public or private limited liability company, the legal norms of the Republic of Lithuania regulating the scrutiny of the legality of reorganisation procedures of public and private limited liability companies by way of merger shall apply.
2. If the law of the Republic of Lithuania applies to the company resulting from the merger, when scrutinising the legality of merger procedures, it must be ascertained, inter alia, that the merging companies have approved the terms of merger in the same terms and, where appropriate, that arrangements for employee participation in decision-making have been determined. The legality of merger procedures shall be scrutinised when the following documents have been submitted:
1) the documents necessary for effecting scrutiny procedures of the legality of reorganisation of public and private limited liability companies by way of merger specified in the legal acts of the Republic of Lithuania;
2) the certificates issued within 6 months to each merging company, as formed in accordance with the law of another EU Member State, by the institutions specified in the legal acts of other Member States attesting to the proper completion of all pre-merger acts and formalities;
3) the terms of merger approved by the general meeting of members of each merging company formed according to the law of another Member State.
3. If the law of another Member State applies to the company resulting from the merger, the manager of the Register of Legal Entities shall, after scrutiny of the legality of a public or private limited liability company merger procedure, issue to each merging public or private limited liability company a certificate attesting to the proper completion of the pre-merger acts and formalities. Each merging public or private limited liability company must, within 6 months of issue of the certificate, submit it to the authority referred to in legal acts of other Member States together with the terms of merger approved by the general meeting of shareholders.
 
4. The certificate referred to in paragraph 3 of this Article shall be issued not earlier than 10 days after the scrutiny of the legality of the merger has been carried out.
 
 
Article 9. Completion of the Merger
1. If the company resulting from the merger is subject to the law of the Republic of Lithuania, the merger shall be deemed completed from the date of registration of the new public or private limited liability company formed after the merger or the registration of the amended statutes of the public or private limited liability company resulting from the merger in the Register of Legal Entities.
 
2. A new public or private limited liability company formed after the merger or the amended statutes of the public or private limited liability company resulting from the merger shall be registered in the Register of Legal Entities not earlier than after the lapse of 10 days from the completion of scrutiny of the legality of the merger.
 
3. From the date specified in paragraph 1 of this Article, the merger may not be declared null and void.
4. The manager of the Register of Legal Entities shall ensure the publication of the information on completion of the merger according to the procedure established in the regulations of the Register of Legal Entities of the Republic of Lithuania.
 
5. If the company resulting from the merger is subject to the law of the Republic of Lithuania, the manager of the Register of Legal Entities shall ensure submission of the information on completion of the merger to the appropriate registers of the Member States to which documents of the merging companies have been submitted.
 
6. If the company resulting from the merger is subject to the law of another Member State, the manager of the Register of Legal Entities shall, upon receiving information on the completion of the merger from the register of the appropriate Member State, remove the public or private limited liability company which ceases to exist from the register.
 
Article 10. Consequences of the Merger
1. All the assets and liabilities of the merging public or private limited liability companies shall be transferred to the company resulting from the merger from the date of completion of the merger established in Article 9 of this Law or by legal acts of the appropriate Member State whose law will be applied to the company resulting from the merger. Where the law of a Member State to be applied to at least one of the merging companies requires the completion of special formalities before the transfer of assets, rights and obligations by the merging companies to the company resulting from the merger becomes effective against third parties, those formalities shall be binding on the public or private limited liability company resulting from the merger.
2. The shares of the merging public or private limited liability companies, save for the exceptions established in paragraph 3 of this Article, shall be exchanged for the securities or shares of the company resulting from the merger representing the capital of the company resulting from the merger, and the shareholders of the public or private limited liability companies which cease to exist after the merger shall become members of the company resulting from the merger.
3. If, when exchanging shares of the merging public or private limited liability companies for new securities or shares of the company resulting from the merger representing the capital in the company resulting from the merger, the shareholders of public or private limited liability companies which cease to exist after the merger are paid the difference in price in cash, cash payments shall not exceed 10 % of the nominal value of new securities or shares representing the capital of the company resulting from the merger received by the shareholders, or in the absence of a nominal value, of the accounting par value of those securities or shares.
4. Paragraph 3 of this Article shall not apply when larger cash payments are allowed under the law of another Member State to be applied to at least one of the merging companies or to the company resulting from the merger.
5. The decision adopted during the procedure specified in paragraph 3 of Article 7 of this Law shall be binding on the public or private limited liability company resulting from the merger and its members.
6. No securities or shares in the acquiring company representing the capital of the acquiring company shall be exchanged for the securities or shares in the company being acquired representing the capital of the company being acquired which are held:
1) by the acquiring company or through a person acting in his own name but in the interests of the acquiring company and on its behalf;
2) by the company being acquired itself or through a person acting in his own name but in the interests of the company being acquired and on its behalf.
7. The rights and obligations of the merging public or private limited liability companies arising from contracts of employment or from employment relationships shall be transferred to the company resulting from the merger at the date of completion of the merger.
 
Article 11. Simplified Formalities
1. Where a merger by acquisition is carried out by a company which holds all the shares of the company being acquired representing the capital of the company being acquired or other securities conferring the right to vote at the general meeting of members of the company, subparagraphs 3, 4, 5 and 7 of paragraph 1 of Article 3, Article 4 and paragraph 2 of Article 10 and, for the company being acquired, paragraph 1 of Article 7 shall not apply.
2. Where a merger by acquisition is carried out by a company which holds 90 % or more of the shares of the company being acquired representing the capital of the company being acquired or other securities conferring the right to vote at the general meeting of members of the company, reports on examination of the terms of merger referred to in Article 4 of this Law shall be required only to the extent that the law of a Member State governing at least one of the merging companies so requires.
 
 
Article 12. Final Provisions
This Law shall not apply to merger where the terms of merger are submitted to the manager of the Register of Legal Entities prior to the entry into effect of this Law.
 
I promulgate this Law passed by the Seimas of the Republic of Lithuania.
 
 
 
 
PRESIDENT OF THE REPUBLIC                                                 VALDAS ADAMKUS
 
 
 
                                                                                    Annex to
the Republic of Lithuania
Law on Cross-Border Mergers of Limited Liability Companies
 
 
 
 
IMPLEMENTED LEGAL ACTS OF THE EUROPEAN UNION
 
 
Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (OJ 2005 L 310, p. 1).