The cross-border merger
We now look at the cross-border legal merger. Before 1 January 2012 the possibility already existed in Curacao that in connection with a merger, a foreign legal entity as the disappearing legal entity could merge with a comparable legal form of Book 2 of the Civil Code on the condition that the law governing that foreign legal entity was not incompatible with the merger and the manner in which it was brought about (Section 2:323a of the Civil Code). This inbound merger possibility still exists.
Since 1 January 2012 it is also possible that a legal entity within the sense of Book 2 of the Civil Code (a Curacao legal entity) as the disappearing legal entity can merge with an acquiring legal entity under foreign law (Section 2:323b of the Civil Code). This is the so-called outbound merger. A condition in this case is also that the law governing that foreign legal entity is not incompatible with the merger and the manner in which it is brought about.
With regard to the acquiring (foreign) legal entity the rules of the foreign law applicable to that legal entity and applicable to such a merger are taken into account as much as possible. Sections 2:310 up to and including 2:334 of the Civil Code are applicable but exclusively with regard to the disappearing legal entity. This means for instance that the objection provisions of Section 2:316 of the Civil Code are applicable.
The Dutch arrangement whereby a minority shareholder casting his vote against the merger can request the court to award him compensation is not included in Book 2 of the Civil Code. For that matter it is imaginable that a shareholder who suffers a loss as a consequence of the merger, can under certain circumstances claim compensation for it. However, a claim in that sense must be judged under the ordinary rules of the law of property as they are colored by the law on legal persons, according to the Explanatory Memorandum.
At the moment the Netherlands only has provisions for a cross-border merger of companies with share capital within the European Union or the European Economic Area (Sections 2:333b up to and including 2:333l of the Dutch Civil Code). As indicated above this means that a Curacao NV or BV cannot merge with a Dutch company with shares. And although within a constitutional sense Bonaire belongs to the Netherlands, an NV or BV with its registered seat in Bonaire cannot merge with a Dutch company with shares either. The reverse is also impossible.
As I mentioned earlier it is indeed possible for a company registered in Bonaire or Curacao to be converted for instance into a Luxembourg company, which then incorporates a subsidiary in the Netherlands, after which the parent and subsidiary merge downstream, with a Dutch company as the result. In my opinion it is defensible that a cross-border merger is possible between a company registered in Curacao as the disappearing company and a company registered in Bonaire as the acquiring company. The reverse is also possible because Bonaire only has the inbound merger.
In the Netherlands a draft bill has been ready since the beginning of 2012 for a legislative proposal for cross-border conversion of companies with share capital. This bill has been drafted by the Dutch Corporate Law Committee.
The European Court of Justice ruled in 2008 (16 December 2008, C-210/06, NJ 2009, 202, Cartesio) that a cross-border transfer of seat – and thereby conversion into a legal entity according to the law of another member State – should be able to take place within the European Union on the condition that the member State of immigration is open to this and unless overriding reasons of public interest preclude this. This Dutch legislative proposal is a response to this ruling and is aimed at an adjustment to Book 2 of the Dutch Civil Code. All provisions with regard to conversion are collected in a new Title 7A.
The legislative proposal provides arrangements for:
- the situation in which a Dutch NV or BV is converted into a company with shares according to the law of a different member State of the EU or EEA or is converted into an NV or BV according to the law of the Bonaire, St. Eustatius or Saba public bodies (Sections 2:334oo under a, 334pp-334ww and 334yy of the Dutch Civil Code); and
- the situation in which a company with shares from a different member State of the EU or EEA or an NV or BV according to the law of the Bonaire, St. Eustatius or Saba public bodies is converted into a Dutch NV or BV (Sections 2:334oo under b, 334xx-334yy of the Dutch Civil Code).
The proposed arrangement relates exclusively to companies with shares (in the Netherlands: the NV or BV). Outside the European territory the possibility of conversion – in both directions – is only intended for companies with shares in the BES Islands. It is recommended that the bill is adjusted such that conversion also becomes possible in relation to Aruba, Curacao and St. Maarten. But this would require an adjustment to the Charter!
In this connection I would also like to point out that the cross-border conversion from an NV or BV will have no legal effect if the Dutch Minister of Safety and Justice objects to it for reasons of public interest by filing a statement to this end with the office of the Trade Register, within two months after the announcement of filing the proposal. The company can appeal to the Dutch Trade and Industry Appeals Tribunal against this objection. (To be continued)
Attorney (Lawyer) / Partner
(5 April 2013)