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Cross-border mergers

The Romanian government recently adopted the Emergency Ordinance 52/2008 chiefly referring to the implementation of the provisions of Directive 2005/56/EC of the European Parliament and of the Council on cross-border mergers (CBMs) of limited liability companies.

According to the provisions of this act, a typical cross-border merger comprises the following steps: the drafting of the common draft terms (CDT); the endorsement of CDT by the judge delegated by the Romanian trade registry office; the publication of CDT with the Official Gazette of Romania; the drafting of the management and independent expert explanatory reports; the approval of CDT by a general meeting of shareholders of each merging company; and the registration of CBM with the competent trade registry offices.

The board of administration (in the case of companies with unitary board structures) or the management board (in the case of companies with two-tier board structures) of each merging company is required to draft a CDT focusing on particulars related to, inter alia, principles of the allotment of securities representing the share capital of the company resulting from the CBM, the date from which the holding of securities that entitle the holders to share in profits, the evaluation of the assets and liabilities that are conveyed to the company resulting from the CBM, and the likely repercussions of the CBM on the employees.

In order to be endorsed by the delegated judge, the CDT must be deposited with the Romanian trade registry office. However, when several Romanian companies that fall under the competency of different Romanian trade registry offices are involved in the CBM, the law does not explicitly state whether only one delegated judge is competent to perform the endorsement or whether the endorsement must be fulfilled by the delegated judges of each trade registry office.

Once properly endorsed, CDTs are to be published with the Official Gazette of Romania at least 30 days before the general meetings of each merging company for deciding on the CBM. As a means of protection, any creditor of any of the merging companies with a claim established before the publication date and not due on the publication date, may file an opposition to the CBM with the competent court of law within 30 days of the publication date. By virtue of law, the opposition triggers a stay of execution of the CBM until a final and binding decision is ruled by the competent court of law, unless the debtor proves the proper payment of the respective claim, creates securities to the satisfaction of the creditors or enters into a settlement agreement with a view to paying the outstanding debts.

Within the same 30-day term as the publication date, explanatory reports must be made available in writing at each company's registered seat to the shareholders of the merging companies and the representatives of the employees, as the case may be. Separate reports must be drafted by the management of each merging company, as well as by one or more independent experts appointed by the competent delegated judge. The independent expert reports may be waived by a unanimous vote of all shareholders of the merging companies.

In order to take effect, the CBM must eventually be resolved on by the general meeting of shareholders of each merging company, within no more than two months of the lapse of the opposition term (that is, no longer than 90 days as of CDT publication date), in compliance with all quorum and voting requirements set for the amendment of the by-laws. Should the CBM result increase the liabilities of shareholders of any of the merging companies, the resolutions of the general meeting of shareholders must be adopted with a unanimous vote.

The CMB shall take effect on the date the new company is properly registered with the competent trade registry office (for the case of a merger resulting in the formation of a new company) or on the date the addendum to the by-laws of the acquiring company is properly registered with the competent trade registry office (in a merger by absorption), unless the parties mutually agree on a different date in compliance with the legal requirements.

Radu Simion

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