Merger Involving the Participation of a Limited Liability Company (EPE)
(Articles 39–41, Law 4601/2019)
In previous articles, we examined the special provisions applicable to mergers involving a Sociétés Anonymes / public limited company (S.A.). Similar special rules also apply when a Limited Liability Company (EPE) participates in the merger, due to the particular characteristics of this corporate form. Central importance is attached to the participation share, the company quotas, the decision-making process and the relational dimension of the corporate structure. In this article, we examine the special rules that supplement the general merger framework where an EPE participates.
Scope of application and applicable law (Art. 39)
The special rules apply where an EPE participates in the merger, either as the absorbing or the absorbed company (Art. 39). In a merger through the formation of a new company, the same rules apply mutatis mutandis, with the new company being treated as the absorbing company (Art. 22). This is of practical importance because certain of the special rules depend on the specific role of the EPE in the merger. For matters not specifically regulated, the provisions of the special law on EPEs (Law 3190/1955) apply supplementarily to the participating EPE.
Additional content of the draft merger agreement (Art. 40)
The general rules governing the draft merger agreement and the information of the partners are supplemented by special provisions where an EPE participates (Art. 40).
Where the absorbing company is an EPE, the draft must contain additional details regarding participation after the merger (Art. 40 para. 1). The same rule applies mutatis mutandis where the new company is an EPE (Art. 22). More specifically, it must state the participation share and the company quotas to be acquired by each shareholder or partner of the absorbed company. In the case of formation of a new company, the same information concerns the partners or shareholders of the companies that cease to exist. This determines the position of each new partner in the EPE after completion of the merger. In the legal review, these details must be consistent with the exchange ratio, the capital and the articles of association as restructured. Any omission or inconsistency may require correction before registration (Art. 17).
If the absorbed company is a public limited company or a partnership limited by shares, the two nominal values do not need to coincide (Art. 40 para. 1) and, in practice, they usually will not. Therefore, the nominal value of the participation in the EPE may differ from the nominal value of the share. This rule prevents technical obstacles that would result from a mechanical matching of different forms of corporate participation. In an EPE, moreover, all company quotas have equal nominal value (Art. 4 para. 2, Law 3190/1955).
The scope of application of the two paragraphs of Art. 40 is not identical. Paragraph 1 concerns an absorbing EPE and applies mutatis mutandis where the new company formed through the merger is an EPE (Art. 22). By contrast, paragraph 2 concerns an EPE that already participates in the merger, whether as absorbing or absorbed, and that already has existing partners and managers. It does not concern the new EPE before its incorporation, since there are no partners yet to be informed.
The written report to the partners is not required where all partners of the participating EPE are at the same time its managers (Art. 40 para. 2). In the same case, the obligation to inform them under the general rule also does not apply (Art. 9 para. 3). This special exemption is based on the complete identity between the persons holding and managing the corporate information. It differs from the general possibility of written agreement by all shareholders, partners and other holders of securities with voting rights in each participating company (Art. 9 para. 5). This special exemption does not abolish the other information rights of the partners. Before it is applied, the complete identity of partners and managers must be confirmed and documented in the file. If even one partner is not a manager, the special exemption does not apply. In that case, the general regime of Art. 9 must be considered.
Required majority and right of information (Art. 41)
Approval of the merger by the meeting of the partners of the EPE requires a double majority (Art. 41 para. 1). More than half of the total number of partners must vote in favour. At the same time, those partners must represent at least 65% of the company capital (Art. 38 para. 1, Law 3190/1955). Both conditions must be met. If either is missing, the required corporate resolution approving the merger has not been validly adopted.
These are the statutory minimum requirements. Before the meeting, the articles of association must also be reviewed, because they may impose a stricter majority or unanimity requirement for the merger.
In addition to the special majority required for the merger, a separate review is needed of the amendments which, under EPE law, require unanimity. These include a change in the nationality of the company and an increase in the obligations or liability of the partners. Unanimity is also required for a reduction of rights arising from the articles of association, unless the law provides otherwise (Art. 38 para. 3, Law 3190/1955). If the necessary amendments connected with the merger fall within one of these categories, the consent of all partners must be secured.
The right to inspect the merger documents is exercised during a specially shortened period for the EPE (Art. 41 para. 2). This continuous period begins at the latest ten days before the meeting and ends at its conclusion. During that period, each partner may inspect at the registered office the merger documents provided by law (Art. 11).
Availability must be ensured throughout the entire ten-day continuous period. The company must organise access in good time and be able to prove when and how the documents were made available. It may substitute availability at the registered office with continuous posting of the documents on its website for the same period (Art. 11 para. 5). Before the ten-day period begins, the completeness of the file, the proper operation of electronic access and the additional obligations triggered by it should all be checked.
Each partner may, upon simple request, obtain free of charge a full copy or extract of the relevant documents (Art. 11 para. 4). With the partner’s prior consent to the use of electronic means, the copies may be sent by email. If the website allows downloading and printing throughout the entire period, the obligation to provide copies does not apply (Art. 11 para. 5). Even in that case, however, the documents must also be made available at the registered office.
In summary: practical importance and value
The participation of an EPE in a merger requires a distinct review of the company’s role, the corporate approval process and the information given to the partners. The role of the EPE determines the additional content of the draft merger agreement, while approval presupposes correct calculation of the double majority and review of the cases where unanimity may be required. The documents must be made available in a timely and provable manner. Deficiencies may require corrections during the preventive legality review and may delay registration or closing (Art. 17). Defective approval may, under the conditions of the law, lead to judicial annulment of the merger (Art. 20). A culpable breach of duties during the preparation or implementation of the merger may also establish managers’ liability towards the partners for the damage suffered (Art. 19). In the next article, we will examine the corresponding special rules for a merger involving the participation of a Private Company (IKE).
Managing Partner
Koumentakis and Associates Law Firm
Note: This article forms part of a broader series of articles by our Law Firm on corporate transformations. In this series, we attempt an article-by-article analysis, always from a business-view perspective, of the principal relevant law (Law 4601/2019).
Merger with Participation of an EPE, EPE, Limited Liability Company, Corporate Transformations, Corporate Mergers, Draft Merger Agreement, EPE Partners, Partner Majority, Information Rights, Law 4601/2019, Law 3190/1955