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Austria finally implements the EU Cross-Border Conversions, Mergers and Divisions Directive

The EU Directive 2019/2121, also known as the « Cross-Border Conversions, Mergers and Divisions Directive, » is a set of regulations aimed at facilitating cross-border operations for businesses within the European Union.


Main Objective of the Directive

The directive was adopted by the European Parliament and Council in November 2019 and took effect on January 31, 2020. The directive applies to cross-border conversions, mergers, and divisions of companies in the EU. It aims to provide a clear legal framework for these operations, in order to reduce administrative burdens and promote cross-border investment and growth.

Based on the case law developed by the European Court of Justice in a number of leading cases (Centros, Überseering, Inspire Art, etc.), companies in the EU could generally relocate within the single market on the basis of the freedom of establishment. These principles were, however, not codified in the statutes of the EU law. The directive had therefore also the purpose to improve legal certainty and codify the existing case law of the ECJ.

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Under the directive, companies seeking to carry out a cross-border conversion, merger, or division must meet certain conditions and follow a clear process. The directive also sets out the rights of shareholders and other stakeholders in these operations, and requires companies to provide clear and timely information about the planned operation. In addition, the directive includes provisions aimed at protecting the rights of employees in the context of cross-border operations. For example, it requires companies to inform and consult with employee representatives in advance of a planned cross-border operation, and to respect existing employee participation rights. The directive also includes provisions aimed at preventing abuse and fraud in the context of cross-border operations. It requires member states to put in place effective measures to detect and prevent abuse, and provides for sanctions and remedies in case of non-compliance.

Transposition of the Directive into Austrian Law

Overall, the EU Directive 2019/2121 represents a significant step forward in promoting cross-border investment and growth within the European Union. The deadline for transposition into national law was set on January 31, 2023.

Just recently, on January 23, 2023, the Austrian Ministry of Justice has announced that the directive will be implemented with a delay through enacting the new EU Company Reorganization Act (“EU-Umgründungsgesetz – EU-UmgrG”), which would introduce rules on cross-border conversions, mergers and divisions and amend several existing laws in the area of company law and reorganization. The respective draft legislation has already been published by the Ministry of Justice and the evaluation deadline is set on February 24, 2023. It is expected that the new legislation will come into force soon thereafter since Austria is already late with the transposition of the directive.

The Austrian government has emphasized that the transposition of this directive into Austrian law reflects the Austrian government’s commitment to promoting a modern and business-friendly regulatory environment, in line with the goals of the EU’s Single Market. By providing a clear legal framework for cross-border conversions, mergers, and divisions, and by protecting the rights of shareholders and employees, the transposition of the directive aims to promote economic integration and support businesses of all sizes in Austria and throughout the EU.

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