This document discusses cross-border mergers and corporate migration within Europe. It provides an overview of cross-border mergers, including definitions, the EU Merger Directive, reasons for mergers, and requirements. It also examines issues with implementing the Directive, different types of mergers and competent authorities, creditor protection, employee participation systems, and uses of cross-border mergers. Finally, it analyzes barriers to corporate migration within Europe and developments around the transfer of corporate seats.

1. Titre de la présentation
2015 CARL CONFERENCE
Brussels 17-19 DECEMBER 2015
SHARING VISION, ACHIEVING SUCCESS

2. BUSINESS
DAY
MARCALLIANCE &
MAZARS TAX
JOINING FORCES
Titre de la présentation
2

3. CROSS-
BORDER
MERGERS
&
CORPORATE
MIGRATION
WITHIN
EUROPE
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3

4. OVERVIEW
Date
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What is a cross-border merger?
The EC Directive
Reasons for merger
EU Merger Directive for tax
Requirements for a cross-border merger
Issues arising from implementation of Directive
Uses of cross-border mergers
Corporate migration in Europe
– the next steps?

5. ACQUISITION - V - MERGER
Date
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Acquisition
A
1.
2.
A acquires B’s shares
3.
Hive up assets (and liabilities?)
4.
Wind up (or liquidate) B
A B
B
A
B
A
B

6. ACQUISITION - V - MERGER
Date
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Merger
1. 2.
Transfer of all assets and
liabilities….
3.
….and B dissolved without
liquidation
A A AB B

7. FIVE MAIN DRIVERS OF CROSS-BORDER MERGERS
Synergies and business strategy
Reducing organisational costs
Minimising costs of regulatory compliance
Tax planning
Business-friendly regulatory environment
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8. ACQUISITION OR MERGER?
Acquisition
Transfer at fair market value and immediate taxation over hidden reserves / capital gains are
fully taxed
Merger
Roll-over relief
Fiscal book values of the assets and liabilities need to be adopted
Transfer of going concern / enterprise may be exempt from VAT
Tips & Tricks
Choice also depends of (i) amount of assets as each asset needs to be transferred separately
(sale contract versus ‘legal title’); (ii) industry sector: are there hidden reserves or not; (iii) does
the company benefit from higher depreciation potentials?
Date
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9. EU MERGER DIRECTIVE (1990/434/EEC, 2009/133/EC)
Cross-border mergers, (partial) divisions, transfers of assets and exchanges of shares may be
necessary in order to ensure the effective functioning of an internal market
Such operations ought not to be hampered by restrictions, disadvantages or distortions – thus
disadvantages are removed within the EU / EEA
Scope of the Directive mergers, (partial) divisions, transfer of exchange of shares
Transformation of the transferring company into a permanent establishment (p.e.) of the
company receiving the assets or connected with an existing p.e.
Deferral of taxation of the capital gains until actual disposal
Company of an EU / EEA member state, takes one of the forms in the Annex, tax resident
within the EU / EEA and subject to one of the taxes listed in the Annex
Date
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10. EU MERGER DIRECTIVE (1990/434/EEC, 2009/133/EC)
Definitions of article 2
Payment not exceeding 10% of the nominal value (article 2, paragraph b)
Carry-over of balance-sheet values (article 4)
Carry-over of provisions (article 5)
Transfer of losses (article 6)
No taxation of shareholder in case of transfer of balance-sheet values (article 8)
SE / SCE registered office transfer (article 12)
Anti-abuse measures (article 15) – (one of) its principal objectives is tax evasion or tax
avoidance, reduction of employee representation
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11. EU MERGER DIRECTIVE (1990/434/EEC, 2009/133/EC)
Date
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DateTitre de la présentation
UK LTD
‘receiving
company’
Dutch
p.e.
NL BV
‘transferring
company’

12. SEVIC SYSTEMS AND THE EC DIRECTIVE
Sevic Systems (ECJ 2003)
Freedom of establishment – Arts. 43 and 48 EC Treaty (now Arts.49 and 54 TFEU)
Third Company Law Directive 78/855/EEC – “Domestic Mergers Directive”
EU Commission’s aim to facilitate carrying out of cross-border mergers
Tenth Company Law Directive 2005/56/EC – implement by 15 Dec 2007
Date
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“cross-border mergers shall only be possible
between types of companies which may
merge under the national law of the relevant
Member States”
Art 4(1)(a) Directive 2005/56/EC

13. IMPLEMENTATION OF THE EU DIRECTIVE
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14. GEOGRAPHICAL SCOPE BEYOND THE EU
Date
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15. THREE TYPES OF CROSS-BORDER MERGER
Date
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1. Merger by absorption
2. Merger by absorption of wholly-owned subsidiary
3. Merger by formation of new company
Newco
A
A
A
B
B
B

16. OUTLINE OF CROSS-BORDER MERGER
Draft terms of merger
Directors’ report
Independent expert’s report on valuation
Shareholder meeting of each merging company
Pre-merger certificate from “competent authority” in each Member State
Confirmation of merger from competent authority in Member State of surviving entity
Employee participation/special negotiating body – extends the timetable
Date
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17. UK METHOD OF MERGER
Can UK companies merge under domestic law?
UK “scheme of arrangement”
Court can sanction compromise or arrangement
between company and (i) class of creditors or (ii)
class of members
Requires majority in number representing 75 % in
value
Court discretion - “the [scheme] proposal is such
that an intelligent and honest man, a member of the
class concerned, acting in respect of his interests
might reasonably approve” (Re Dorman Long & Co
[1934])
Date
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It’s Merger, Jim, but not as we know it …

18. UK SCHEME OF ARRANGEMENT
Alternative to takeover offer
 75% majority, rather than 90% acceptances for “squeeze-out”
“cancellation” scheme avoided stamp duty (but now repealed)
Extra powers for court to make provision (s.900 CA 2006)
transfer to transferee company of whole or part of undertaking and of property or liabilities
of transferor
“…the dissolution, without winding up, of any transferor company”
Part 27 Companies Act 2006 implements Third Company Law Directive – but relies on scheme
of arrangement
Impact Assessment – anticipated take-up of CBMs of “less than 1%”
But
ITAU BBA International Ltd [2012] - section 900 and Part 27 a “dead letter”
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19. UNIVERSAL SUCCESSION
Universal succession not recognised in
English law? National Bank of Greece and
Athens SA v Metliss [1958]
Can universal succession merger exist
between two English companies?
Nokes v Doncaster Amal. Collieries [1940]
Part VII FSMA 2000 – schemes for
insurance portfolio transfers
Likely approach of English courts to CBM?
Allow the transfer…but transferee
inherits the breaches
Easier for UK company to merge under
EU law than under UK law!
Date
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20. DIFFERENT TYPES OF “COMPETENT AUTHORITY”
Date
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21. CREDITOR PROTECTION
Date
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22. EMPLOYEE PARTICIPATION SYSTEMS
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23. ACCOUNTING TIME FRAMES
Effective legal date (“registration date”)
Accounting date (“decisive date”)
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24. COMMUNICATION BETWEEN NATIONAL REGISTRIES
“[T]he registry for the registration of
the company resulting from the
cross-border merger shall notify,
without delay, the registry in which
each of the companies was required to
file documents that the cross-border
merger has taken effect. Deletion of
the old registration, if applicable, shall
be effected on receipt of that
notification, but not before.”
Article 13, Cross-Border Mergers Directive
Date
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25. USES OF CROSS-BORDER MERGERS
Avoids taxable distribution to shareholders on liquidation?
Arm’s length commercial mergers? (Not in the UK – Nokes)
Automatic dissolution – no need for parent indemnities etc.
Legal entity rationalisation – remove dormant subsidiaries without winding up: cheaper; more
certain; do not require creditor consents
Migrate business from one country to another?
Date
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26. BARRIERS TO MIGRATION
Incorporation theory - v - real seat theory
Daily Mail (1988) – Member State may restrict
outbound migration
Centros (1999), Uberseering (1999),
Inspire Act (2003) – death of real seat theory?
Cartesio (2008) affirmed Daily Mail,
but possibility for company to convert
itself into company governed by
another member state
Vale Costruzioni (2012) –
principle of equivalence for inbound
conversions (what is “conversion?”)
Date
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27. TRANSFER OF CORPORATE SEAT
Result of Cartesio and Vale?
Member State can restrict
outbound, but not inbound
migration?
Use of a Societas Europaea?
Public company
Employee participation in
management
Draft directive on the cross-border
transfer of a company’s registered
office 14th Company Law Directive (shelved)
Date
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28. CROSS-BORDER COMPANY SEAT TRANSFERS
Date
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29. EUROPEAN COURT OF JUSTICE – TAX DEVELOPMENTS (1)
Date
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Access to the
Treaty?
Discriminate or
restrict?
Justification?
Necessary?
Adequate to obtain
its objective?
No appeal to EU-law
No conflict with EU-law
In conflict with EU-law
In conflict with EU-law
No conflict with EU-law
No
No
No
No
Yes

30. EUROPEAN COURT OF JUSTICE – TAX DEVELOPMENTS (2)
De Lasteyrie du Saillant (no. C-9/02)
N (no. C-470/04)
National Grid Indus (no. C-371/10)
European Commission / Republic Portugal (no. C-38/10)
European Commission / Kingdom Spain (no. 269/09)
Finanziaria di Diego della Valle & C. SapA – Administration des contributions en
matière d’impôts (no. C-380/11)
European Commission – Kingdom of the Netherlands
(no. C-301/11)
European Commission – Kingdom Spain
(no. C-64/11)
European Commission – Kingdom Denemark (no. C-261/11)
DMC Beteiligungs-gesellschaft mbH – Finanzamt Hamburg-Mitte (no. C-164/12)
Arcade Drilling AS (no. E-15/11)
Date
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31. EUROPEAN COURT OF JUSTICE – TAX DEVELOPMENTS (3)
National Grid Indus
a company that wish to transfer its place of effective management outside the Netherlands is
placed at a disadvantage in terms of cash flow compared to a similar company retaining its
place of effective management in the Netherlands
Imposing a tax assessment upon the transfer of a seat is justified in order to divided the power
to tax between member states and to maintain the coherence of the tax system
HOWEVER; IMMEDIATE TAX COLLECTION WITHOUT THE OPTION OF TAX COLLECTION
AT THE MOMENT OF REALISATION COULD NOT BE JUSTIFIED
National legislation should offer the choice between immediate payment or deferred payment,
possibly together with (i) interest, (ii) certainties and (iii) administrative conditions
Date
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32. SEAT TRANSFERS – A TAX POINT OF VIEW – COMPANY LAW
Date
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State RS IS State RS IS State RS IS
Austria x Germany x Poland x
Belgium x Greece x Portugal x
Bulgaria x Hungary x Romania x
Croatia x Ireland x Slovakia x
Cyprus x Italy x Slovenia x
Czech x Latvia x Spain x
Denmark x Lithuania x Sweden x
Estonia x Luxemb. x UK x
Finland x Malta x Iceland x
France x NL x Norway x

33. SEAT TRANSFERS – A TAX POINT OF VIEW – TAXATION / EU
BREACH
Date
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State T EU State T EU State T EU
Austria Maybe Yes Germany Yes Yes Poland No No
Belgium Yes Yes Greece ? ? Portugal Yes Yes
Bulgaria No No Hungary No No Romania No No
Croatia No No Ireland Yes Yes Slovakia Yes Yes
Cyprus No No Italy Yes Yes Slovenia No No
Czech Maybe No Latvia No No Spain Yes Yes
Denmark Yes Yes Lithuania ? ? Sweden Yes Yes
Estonia No No Luxemb. Yes Yes UK Yes Yes
Finland Yes Yes Malta No No Iceland ? ?
France Yes Yes NL Yes Yes Norway Yes Yes

34. SEAT TRANSFERS – A TAX POINT OF VIEW – DEFERRAL /
INSTALL
Date
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State DEF Years State DEF Years State DEF Years
Austria Not al. No Germany No 5 Poland No No
Belgium No No Greece n.a. n.a. Portugal Yes 5
Bulgaria No 7 Hungary No No Romania No No
Croatia No No Ireland Yes 6 Slovakia No No
Cyprus No No Italy Yes 10 Slovenia No No
Czech No No Latvia No No Spain Yes No
Denmark No No Lithuania n.a. n.a. Sweden Yes 5/10
Estonia No No Luxemb. No No UK Yes 6
Finland No No Malta No x Iceland No n.a.
France No 5 NL Yes 10 Norway Not al. No

35. FRUIT FOR THOUGHTS – GOING TO THE NEXT LEVEL
Transfer of the place of effective management from one country to another (within the EU, EEA
and beyond – non-discrimination)
Article 4 paragraph 3 of the OECD Model Tax Convention on Income and on Capital (standard
tie breaker clause)
Article 4 paragraph 4 of the tax treaty concluded by and between the United Kingdom and the
Netherlands
 Mutual Agreement Procedure (MAP)
 Phases: period before and after Mutual Agreement Procedure (MAP)
Seat transfer from Delaware via Curacao to Netherlands (and vice versa) ?
US Inversions ?
Date
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36. Date
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CROSS-BORDER
MERGERS &
CORPORATE
MIGRATION
WITHIN
EUROPE
Paul Lester
Cripps LLP
paul.lester@cripps.co.uk
+44(0)1892 506 336
Dick Van Sprundel
Mazars
Dick.vanSprundel@mazars.nl
+31 (0) 88 277 16 17