Merger & Transparency: Availability of Documents
Following our previous article on the role of experts in a merger, we address here a practical—but by no means insignificant—issue. It concerns the availability of the critical merger documents to the shareholders or partners of each merging company. The relevant statutory provision (Article 11 of Law 4601/2019) does not operate as a mere formal obligation. On the contrary, it constitutes a fundamental mechanism of transparency, scrutiny and corporate accountability prior to approval of the transformation.
Purpose of Making the Documents Available
The obligation to make the documents available introduces a specific individual right to information in favour of the shareholders or partners of the merging companies. This right precedes the adoption of the decision and is intended to enable a substantive assessment of the proposed merger and its terms. The shareholder or partner is not merely called upon to approve a plan that has already been formulated. They are called upon to assess the financial, legal and operational impact of the merger with sufficient knowledge of all the relevant information.
The provision primarily serves the protection of minority shareholders or partners, without being limited to that purpose. It strengthens confidence in the procedure and limits the risk of surprise at the stage of the meeting of shareholders or partners. At the same time, it requires management to organise the merger file in a timely, complete and consistent manner. For business owners and senior executives, the proper preparation of the file is a matter of corporate governance and transactional security.
Information to Be Provided
Information is provided by making specific documents available to the persons entitled to access them. These documents must be available at the registered office of the merging companies or by electronic means. Access includes the possibility of reviewing them and obtaining complete copies or extracts.
At the core of the file is the draft merger agreement, which sets out the principal terms of the merger. The annual financial statements and management reports for the previous three years are also included. Particular importance attaches to the report of the management bodies, where such a report is prepared, as well as to the experts’ report. These documents enable an assessment of the exchange ratio, the corporate consequences and the critical assumptions.
The statutory list should not be approached mechanically. If an additional document proves material or important for the formation of an informed opinion in a particular case, making it available may become necessary. Such a case may arise where there are significant interim transactions or material changes in financing. The same applies where the transformation is connected with a new loan agreement or a group restructuring.
Up-to-Date Accounting Statement
A central place in the merger file and among the available documents is occupied by the accounting statement, where such a statement is required. Its function is to update the financial picture of the companies before the decision is taken. It must include, at a minimum, a balance sheet, an income statement and a summary of the accounting methods used. In this way, the persons entitled to information obtain a picture that is closer in time to the merger.
The preparation of an accounting statement is required where the latest annual financial statements relate to a financial year that ended at least six months before the draft merger agreement. The relevant point in time is the date of the draft merger agreement and not the subsequent approval decision. Moreover, the need for updated information may arise even before the six-month period has elapsed. This is the case where a material change in the company’s accounting position has occurred in the meantime.
The reference date may not be more than three months before the date of the draft. This requirement prevents the use of outdated financial information in a transaction of major corporate significance. For management, the accounting statement is not merely an annex to the file. It constitutes a critical documentation tool, particularly where the merger is assessed by banks, investors or advisers.
The law provides for two principal exceptions to the obligation to prepare an accounting statement. The first concerns companies that publish a half-yearly financial report because securities are admitted to trading on a regulated market or a Multilateral Trading Facility. The second requires the agreement of all shareholders or partners and holders of securities carrying voting rights. Such waiver must be clear.
Method of Access to Information
The information mechanism is based on easy, free and practically usable access. The documents are made available at the registered office of each merging company for the prescribed period. Each shareholder or partner may request copies or extracts by simple application. These are provided free of charge, a feature that reinforces the protective nature of the provision.
Electronic transmission is of particular practical value in groups or companies with a broad shareholder base. Where consent has been given for the use of electronic means, copies may be sent by email. Alternatively, the company may upload the documents to its website for the corresponding period. The upload must permit downloading and printing, so that access is not merely nominal.
The technical organisation of access requires care. The company must ensure the integrity of the files, the stability of the links and the identification of the version of each document. A practical solution is the creation of an electronic file with an index and date of upload. This solution limits disputes as to what was actually available and when it became genuinely accessible.
In practice, maintaining an internal checklist by management and/or the company’s advisers is also useful. The checklist may include the type of each document, its completion date and the manner and time at which it was made available. It may also record who approved the upload and who handled requests for copies. This organisation is not expressly imposed as a formal requirement, but it strengthens the company’s evidentiary position—if proof should become necessary. During periods of increased transactional pressure, such a tool reduces the risk of omissions.
Duration of the Right of Access
The duration of access to the above documents differs according to the company type. In partnerships, the right is exercised for a period beginning at least ten days before the decision on the merger. In Sociétés Anonymes, access begins at least one month before the general meeting of shareholders convened for this specific purpose. In Limited Liability Companies and Private Companies, the period begins at least ten days before the meeting of their partners.
These time limits should be calculated conservatively and without borderline choices. For management, compliance is not exhausted on the final day of the deadline. Continuous availability is required throughout the prescribed period and until completion of the approval procedure. In transactions of increased complexity, timely availability also operates as a means of preventing objections and judicial disputes.
Legal Consequences of Breach
A breach of the obligation to make the documents available may establish liability on the part of members of management or managers. Such liability requires damage and a causal link with the inadequate information provided. Not every minor procedural defect is sufficient to overturn the transformation. Where access remained substantively possible, a balancing exercise is required between protection of the right and transactional security.
The practical significance of the provision is also highlighted during the preventive legality review. If the infringement remains unremedied at the time of the review, the competent authority may refuse to proceed with the required publicity. The company must therefore retain evidence of availability, requests, transmissions and uploads. Maintaining a clear audit trail protects both management and the validity of the merger.
Particular attention is required where a shareholder or partner claims that the information provided was fragmented. Each merging company must be able to demonstrate not only that the documents existed, but also that they were genuinely accessible. For this reason, evidence of access is of importance comparable to the content of the documents themselves. Failure to document access may turn a remediable defect into a serious procedural dispute.
The availability of documents within the merger procedure does not merely constitute an ancillary stage. It is the point at which corporate information is transformed into a real possibility of scrutiny for those who do not have unlimited or primary access to it.
The clearer, more structured and more complete the relevant file proves to be, the lower the risk of disputes, liability and litigation. For this reason, the organisation of access should be treated as part of the merger strategy itself.
All of the above, of course, concerns shareholders and partners. But what happens with employees and their protection? This will be addressed in our next article.
Managing Partner
Koumentakis and Associates Law Firm
Note: This article forms part of a broader series published by our Law Firm on corporate transformations. In this series, we attempt an article-by-article analysis—always from a business-oriented perspective—of the principal relevant legislation, Law 4601/2019.