Cross border merger - implementation of Directive 2005/56/EC under Greek law
Law 3777/2009 was passed in compliance with Directive 2005/56/EC issued by the European Parliament and the Council of the European Union with regards to cross-border mergers of capital companies (i.e. SA companies, limited liability companies, etc) between different member-states.
According to article 2 par. 2 of Law 3777/2009, a merger is, inter alia, the practice of a resident company which is dissolved without a liquidation phase having taken place, transferring the totality of its property (assets and liabilities) to a company resident of another member-state, which holds all securities or shares of the former one. It is a practice which particularly favors the quick absorption of a subsidiary company by its mother company.
For each one of the merging companies, the respective legislative provisions as they stand in their member-states apply.
1. Common cross-border merger plan
The administrative and management bodies of each company that merges draft (in duplicate) a “common cross-border merger plan”.
This common cross-border merger plan that is drafted by the management bodies of the resident company must include at least the following:
a) company type, company name, registered offices of the merging companies and the company created by the merger,
3. Board of directors report to the partners
The report is made available to the partners and employees at least one (1) month before the day set for the General Assembly meeting, remains available at least until the conclusion of said meeting and is registered to the General Electronic Commercial Registry. The employees’ opinion is included to the report as long as it has been made known to the board of directors in due time.
4. Creditor’s protection
5. Completion of the cross-border merger
The resident competent authority issues a certificate prior to the merger, by which it certifies the correct implementation of the actions necessary for the merger. The resident company submits this certificate within six (6) months from the day of its issuance to the competent authority of the other member-state alongside with the common cross-border merger plan. The removal of the company being acquired from the General Electronic Commercial Registry is commenced by the SA Companies and Fidelity Directorate of the General Secretariat of the Ministry of Development, Competitiveness and Shipping, right after the notification of the registration of the merger approval decision.
1. The totality of the assets and liabilities of the acquired company is transferred to the acquiring company.
According to article 54 ITC, a “merger” is every action by which a company (from now on “the transferring company”) that is being dissolved without it being set under a liquidation procedure, transfers all its assets and liabilities to another already existing company (from now on: the “receiving company”) with the exchange of the issuance or transfer of securities (i.e. shares) from the capital of the receiving company to the shareholders of the transferring company.
What is more, in the case of a merger, an additional payment by the receiving company may take place, provided that this payment does not exceed the ten per cent (10%) of the nominal value, or, if there is no nominal value, the ten per cent (10%) of the book value of the shares.
According to article 42 par. 7 ITC, as far as the goodwill deriving from the merger in application of article 54 is concerned, the special provisions about goodwill from securities transfer apply.
In particular, any income deriving from goodwill from securities transfer is considered income from transfer of capital and is subject to an income tax with a tax rate of fifteen per cent (15%), without the need for a tax return statement at the year that the merger takes place, due to the fact that the corresponding income will be included in the yearly tax return statement of the fiscal year that the merger took place (Circ. No. 1032/2015).
-By analogous implementation of the above article, the following apply:
a) “goodwill” means the difference between the market value of the assets and liabilities being transferred and their taxable value.
If the transferring company has its residency for taxation purposes in Greece and the receiving company is a resident of another member-state of the EU, to the extent that the merger results in a transfer of industry branch which constitutes a permanent establishment in another EU member-state, the transferring company is not exempted from goodwill taxation but is entitled to a credit against the sum of the tax that is a result of the merger, in relation to any tax that would apply in the EU member-state which the permanent establishment lies at due to the merger.
-After the merger, the receiving company:
a) amortizes its assets according to the regulations that would apply for the transferring company if the merger would not have taken place.
-The following apply in relation to the shareholder who, due to the merger, exchanges securities of the transferring company with securities of the receiving company, provided that he is a resident for tax purposes of Greece or retains a permanent residence in Greece:
a) he is not subject to taxation for the goodwill he acquires due to the merger, with the exemption of what corresponds to a payment he might have received from the receiving company.
According to article 56 ITC, the benefits laid down in the above mentioned articles are lifted in whole or partially, when any action of those mentioned in these articles has tax avoidance or tax evasion as its main aim or as one of its main aims.
The fact that the action is not performed for economically legitimate reasons, such as the restructuring or the rationalization of the activities of the companies taking part in the relevant action, may constitute a presumption that tax avoidance or tax evasion is the main aim or one of the main aims of the action.
Publication date: 19/7/2016
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