In a previous article, we examined the grounds that may lead to the annulment of a merger, as well as the consequences of the relevant court decision. Effectively challenging the validity of a merger requires compliance with specific procedural rules. The relevant framework regulates the nature of the proceedings, the persons entitled to bring an application, the applicable time limits and the procedure for filing the relevant application. It also regulates the publicity and effects of the court decision.<\/p>\n
These rules are not mere formal details. They determine whether the challenge will be admissible, timely, valid and, ultimately, effective. Here, we examine the principal procedural aspects of the annulment of a merger. We also examine how these aspects balance the protection of the persons concerned against transactional security.<\/p>\n
Annulment of a merger is sought by means of a special application subject to the rules of voluntary jurisdiction. More specifically, it constitutes a case of non-contentious proceedings of a contentious nature.<\/p>\n
The subject matter of the proceedings is a challenge to the validity of a merger that has already been registered. For this reason, invalidity cannot be raised incidentally or by way of defence. The special application for annulment must be filed. Choosing the wrong procedural route may result in the loss of protection, even where a substantive defect exists.<\/p>\n
The application is filed with the competent court, namely the Single-Member Court of First Instance of the registered office of the absorbing company or of any absorbed company. It must be filed within an exclusive period of three (3) months from registration of the merger with the G.E.MI.<\/p>\n
This time limit is critical. Failure to comply with it may definitively close the way to annulment, shifting protection towards claims for compensation.<\/p>\n
For the hearing to be admissible, the absorbing company must be summoned in accordance with the rules governing voluntary jurisdiction. Publication of the application with the G.E.MI. is also required.<\/p>\n
Failure to take these steps may result in inadmissibility or delay. For this reason, the relevant application must be structured from the outset with procedural precision.<\/p>\n
Shareholders or partners of the company in which the relevant defect arose are entitled to file the application.<\/p>\n
They must not have participated in adopting the approval decision or, at least, must have opposed it. Where invalidity is based on a decision that is subject to annulment, an additional participation requirement applies. The applicants must represent at least one-twentieth (1\/20) of the capital or voting rights.<\/p>\n
Standing must, in every case, be examined first.<\/p>\n
Where a corporate decision is absent, legally non-existent or null and void, the creditors of the particular company also have standing. A necessary condition is that they have a legal interest.<\/p>\n
By contrast, where the defect concerns the voidability of the resolution of the meeting, creditors may not seek annulment. The distinction has practical significance, as it determines who may take action and by what means.<\/p>\n
The law does not recognise a right to file the application on the part of members of the Board of Directors or managers of the participating companies.<\/p>\n
This choice is connected with the purpose of annulment. The procedure primarily protects the partners\/shareholders and creditors affected by the validity of the transformation. It is not an instrument for internal disputes within management.<\/p>\n
For management members, responsibility is primarily shifted towards the proper preparation, provision of information and documentation of the merger.<\/p>\n
A decision granting an application for annulment of a merger is constitutive in nature. It alters the legal situation created upon completion of the merger.<\/p>\n
For this reason, its constitutive effect and res judicata extend to all persons. In particular, they extend to all partners or shareholders of the companies that participated in the merger.<\/p>\n
By contrast, a decision dismissing the application operates, in principle, only between the parties to the proceedings.<\/p>\n
Proceedings for the annulment of a merger have particular characteristics, both because of their nature\u2014as non-contentious proceedings of a contentious nature\u2014and because of their consequences.<\/p>\n
The legislature seeks to limit the disruptive consequences of annulment where these are disproportionate. In cases involving a null and void or voidable decision, the court may refrain from declaring the merger invalid. This applies where it considers annulment to be disproportionate to the defect identified.<\/p>\n
In such a case, the applicant retains a claim for compensation against the absorbing company for the loss suffered. This solution requires careful balancing by judges, management and the legal\u2014and other\u2014advisers involved.<\/p>\n
It is also important that the identification of a defect in the procedure or in the decision of the competent corporate body approving the merger does not always result in annulment.<\/p>\n
If the defect is remedied in good time or if annulment is considered disproportionate, the court may avoid reversing the transformation. At the same time, it may adopt the measures necessary to protect the interests placed at risk.<\/p>\n
This parameter is of particular practical importance: it shifts the focus from merely invoking the defect to its timely, documented and effective management.<\/p>\n
A decision declaring the merger invalid produces its effects from the time it becomes final.<\/p>\n
The issuance of a final judgment at first instance is not sufficient. This departure from the general rule (Article 20 \u00a76) is justified by the consequences of reversing a transformation that has already been completed.<\/p>\n
It prevents the uncertainty that would arise from the possible reversal of the annulment decision on appeal.<\/p>\n
Until the decision becomes final, the persons involved must carefully manage new acts\/transactions, the provision of information to third parties and the company\u2019s internal operations.<\/p>\n
Both the application for annulment and the final decision declaring the merger invalid are published with the G.E.MI.<\/p>\n
Publication serves transactional security and the provision of information to third parties. It has declaratory effect but also substantial practical significance.<\/p>\n
Only the decision granting the application and declaring the merger invalid is published. A decision dismissing the application is not subject to publicity.<\/p>\n
Further consequences depend on publication, including the time limit for third-party opposition by third parties having a legal interest.<\/p>\n
The law provides for the possibility of filing a third-party opposition against the decision declaring the merger invalid.<\/p>\n
Persons having a legal interest who did not participate in the proceedings are entitled to file such an opposition. The same applies where they did not become parties through being summoned or through intervention.<\/p>\n
The third-party opposition must be filed within three (3) months from publication of the annulment decision with the G.E.MI. This time limit requires interested third parties to monitor publications closely.<\/p>\n
The practical significance of third-party opposition is, however, limited. Persons bound by res judicata may exercise it only subject to specific conditions (Article 586 \u00a72 of the Greek Code of Civil Procedure). In particular, fraud or collusion between the original parties is required.<\/p>\n
By contrast, an application for revocation or amendment of the decision pursuant to Article 758 of the Greek Code of Civil Procedure is not admissible.<\/p>\n
The distinction is not theoretical. It directly affects the strategy of persons who did not participate in the original proceedings but are affected by their outcome.<\/p>\n
The connection between annulment of a merger and defects in corporate decisions constitutes a critical issue.<\/p>\n
It must be clarified whether a prior judicial ruling is required in relation to the particular defect in the corporate decision in each case. The question concerns, in particular, cases of voidability. It has practical significance because it affects time, cost, strategy and the risk of multiple parallel proceedings.<\/p>\n
Although the issue is not expressly regulated, the preferable view appears to be that of a unified review.<\/p>\n
The court hearing the application for annulment should also examine the alleged defect in the corporate decision. This applies even where the issue concerns voidability.<\/p>\n
It would not be reasonable to require a prior, separate judicial ruling under the legislative provisions governing defective corporate decisions. This approach clearly serves effectiveness, avoids multiple parallel proceedings and reduces the risk of conflicting judgments.<\/p>\n
Viewed in this light, a challenge to the corporate decision before completion of the merger is not excluded.<\/p>\n
After completion of the merger, however, review of such defects is transferred to the special system governing annulment of the merger. Separate proceedings seeking annulment of the corporate decision no longer appear to constitute an appropriate means of protection.<\/p>\n
For the persons concerned, the timing of their reaction therefore proves decisive. It determines the available procedure, the subject matter of the proceedings and the possible consequences.<\/p>\n
The procedure for annulment of a merger demonstrates that the procedural framework cannot be regarded as\u2014and does not constitute\u2014a secondary issue. The time limit, standing, service, publicity and selection of the correct judicial route determine not only the speed but, above all, the effectiveness of protection.<\/p>\n
For management and advisers, the critical obligation is twofold. On the one hand, they must prevent defects in the merger procedure, the adoption of decisions and the relevant file that is created. On the other hand, they must react immediately when a challenge arises.<\/p>\n
Departure from what the law requires, whether at a substantive and\/or procedural level, may result in the loss of rights, delays and increased costs. It may also affect transactional security and the position and claims of third parties.<\/p>\n
In the next article of this series, we will examine a genuinely critical issue: the protection of partners and shareholders where the exchange ratio proves to be incorrect.<\/p>\n
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