The Implementation of the Cross-Border Mergers Directive in Luxembourg - A Critical Assessment

Many cross-border mergers do take place in Luxembourg. Most practical difficulties in implementing the new regime were solved in the first months/years following the transposal of the Cross-Border Mergers directive. As a matter of fact most of the cross-border mergers taking place in Luxembourg are of a rather uncomplicated kind as they are often intra-group mergers, between companies with no or very few employees and furthermore in a vast majority of cases between a parent company and its 100% subsidiary.
In the most recent practice however, the following questions/issues were raised :
- the directive only addresses mergers. Other restructurings such as divisions, transfers of assets, of a branch of activity or of the universality of the company’s assets are not covered by the directive and this even though they can likewise take place across the borders and can be difficult to carry out in the absence of some harmonized regime;
- a new company law reform was recently adopted in Luxembourg, introducing, a.o., a new article 1865bis in the Civil Code that allows “dissolution-confusion” in one-shareholder companies. The question can be raised whether this provision could be applied across the borders (f.e. could a French company being the sole shareholder of a Luxembourg company decide to dissolve it without having to consider the provisions of the Cross-Border Mergers Directive ?);
- another provision of the recently adopted company law reform does re-balance things when considering the cross-border merger as a means for the company to change “nationality” (or law applicable thereto). In the past companies were eventually forced to use the detour of the CBM in order to avoid the requirement of unanimity imposed by law for the transfer of the seat. Since aforementioned reform unanimity is no longer required for the cross-border transfer of the seat.
The usefulness of the Cross-Border Merger Directive is therefore not in the least questioned in Luxembourg but it is regrettable that this would appear part of a “work-in-progress” that however does not show concrete signs of being completed any time soon.