Cross-border mergers, also cross-border divisions and migrations.

From 1st February 2023, in addition to cross-border mergers, cross-border divisions and cross-border conversions (migrations) will be possible in- and outbound Estonia

Starting from the next year February, EU companies can among other things migrate to another EU country without a liquidation. 07.December 2022, Estonian parliament adopted a law amending regulation on cross-border movements of EU companies. The law act transposes Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 (Directive). The purpose of the above is, inter alia, to enable companies to carry out, in addition to cross-border mergers, also cross-border divisions and migrations.

In many European countries the regulation already exists. Notably, to conduct the cross-border movements, both legislatures, i.e of state of origin and destination, must allow relevant cross-border actions. For instance, migrations are now yet possible from and to Estonia, Austria, the Czech Republic, France, Germany, Ireland, Italy, Latvia, Liechtenstein, Luxembourg, the Netherlands, Poland, Spain and the United Kingdom. Notably, all EU countries must transpose Directive by 31 January 2023.

Before amendment, there were cases in our practice, where Estonian company wanted to migrate itself from a public limited company into a company operating under the law of another EU state. In such a case, the business register has so far not satisfied the respective application, and the company had to go to court. It turned out to be practically impossible for companies to prepare correct documentation that could be acceptable by the commercial register and make an entry of cross-border migration in the commercial register. Since similar disputes in the past were complicated and it took years before a solution could be reached, this change is of the utmost importance and long-awaited. 

Participation in cross-border mergers, divisions and migrations is possible only for private limited companies and public limited companies registered in the Estonian commercial register. In addition, the law provides that cross-border movements are prohibited both when a company is in liquidation and relevant distribution of assets has begun, and when rehabilitation or bankruptcy hasbeen initiated against company. 

According to the new law, a number of cases are foreseen in which the registrar does not issue a required certificate, e.g. if the merger/division/migration does not comply with the applicable requirements, or if the cross-border movement is planned with the aim of circumventing company’s obligations etc. In addition, cross-border movement may also be rejected if it may pose a threat to Estonia’s security.

Cuesta’s experts have a long-term hands-on experience in the number of processes of cross-border movements. So that the possible legal hurdles will be foreseen, evaded and relevant risks mitigated.

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