FRENCH UPDATE – Cross-Border Mergers Into and Out of France

Executive Summary/Highlights

This memorandum describes the procedure and effects of a cross-border merger pursuant to Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (the “Cross-Border Merger Directive”), as transposed into French law.  We focus on the French corporate law aspects of such a transaction but refer to analogous principles in other European jurisdictions (in particular, the Netherlands and the United Kingdom).

This year will mark the official tenth anniversary of the transposition of the Cross-Border Merger Directive into the national law of most if not all Member States.

The Cross-Border Merger Directive has generally been regarded as a success, facilitating corporate mobility and permitting enterprises to more fully benefit from the right of free establishment and free movement throughout the EU.  This increased corporate mobility within Europe has promoted increased deal synergies, supporting regulatory competition among Member States and more generally reducing organizational costs.

As we describe below, implementing a cross-border merger under the Cross-Border Merger Directive remains complex and cumbersome even relative to other sophisticated transaction structures.  Reforms are currently under consideration to streamline the process, as well as to put in place a European regime for cross-border spin-offs, but remain at an early stage.

Despite uncertainties within the European Union, cross-border deal activity remains strong, including transactions structured as cross-border mergers.  For example, the TechnipFMC transaction which completed in January 2017 under a UK incorporated holding company represents the largest arm’s length cross-border merger under the Directive to date.  It remains to be seen whether Brexit-driven transactions will be a significant (although perhaps circumscribed) additional source of cross-border mergers in Europe in the coming years.

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