Commission staff working document
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4: CROSS-BORDER MERGERSMany transnational companies are created as a result of cross-border mergers, and these can have complicated provisions regulating the information, consultation and participation of workers. This section looks at issues surrounding cross-border mergers. Since 15 December 2007 (the date by which Member States should have adopted the national implementing legislation), cross-border mergers have been facilitated by European legislation. Directive 2005/56/EC of 26 October 2005 on cross-border mergers of limited liability companies sets out the conditions and procedures for these restructuring operations, building on the national requirements for domestic mergers. The Directive responded to strong demand from businesses to facilitate cross-border mergers in the European Union, which had previously been impossible or very difficult and expensive. It aimed to reduce costs and guarantee legal certainty for companies taking part in these procedures. The rules apply to limited-liability companies which were formed in accordance with the law of a Member State and have their registered office, central administration or principal place of business within the Community. The merging companies need to be governed by the laws of at least two Member States. The procedure of carrying out a cross-border merger is developed to protect the rights and interests of shareholders, creditors and employees. The participating companies must draw up and publish common draft terms of mergers that set out, inter alia, the ratio applicable to the exchange of shares, the terms of the allotment of the shares of the resulting company and information on the evaluation of the assets and liabilities which are transferred to this company (the acquiring company or a new company). The draft terms must also describe the likely repercussions of the cross-border merger on employment and, where appropriate, information on the procedures by which arrangements for the involvement of employees in determining their participation rights in the resulting company. The management of the merging companies must draw up a report to explain and justify not only the legal and economic aspects of the merger but also the implications for shareholders, creditors and employees. The report must be made available to the shareholders, as well as to the representatives of the employees or the employees themselves, one month before the general meeting that decides on the merger. If the management receives an opinion from the employees in good time, it has to be attached to the report. 4.1: EMPLOYEE PARTICIPATION IN CROSS-BORDER MERGERSAs a general rule, employees’ participation rights in the board of the company resulting from the cross-border merger are governed by national law. However, there are three exceptions:
In these cases, the merging companies must start negotiations with the employees (or their representatives) in order to find an agreement on the exercise of participation rights in the board of the resulting company. The detailed rules of the negotiation follow the requirements of Directive 2001/86/EC that govern the involvement of employees in a European Company (SE). The Directive also makes sure that Member States protect employee participation rights, in the event of subsequent domestic mergers, for a period of three years after the cross-border merger has taken effect. 4.2: EUROPEAN COMPANIES (SEs)Council Regulation (EC) No 2157/2001128 establishes a Statute for a European Company with a view to creating a uniform legal framework enabling companies from different Member States to plan and carry out the reorganisation of their business on a Community scale. Council Directive 2001/86/EC129 supplements the Regulation as far as the involvement of employees130 is concerned, with the aim of ensuring that the establishment of an SE does not entail the reduction of practices of employee involvement existing within the companies participating in the creation of the SE. The fundamental principle and stated aim of the Directive is to secure employees’ rights as regards involvement in company decisions. Employee rights in force before the establishment of SEs should provide the basis for employee rights of involvement in the SE (the ‘before and after’ principle). This aim is sought primarily by means of an agreement negotiated between the management of the companies concerned and the employees’ representatives. In the absence of agreement within a six-month period (which can be extended to up to 12 months by agreement), the Directive establishes a set of standard rules. Furthermore, employees’ representatives may decide not to open negotiations or to terminate negotiations already opened, and simply rely on the rules on information and consultation of employees in force in the Member States where the SE has employees. According to the SE Regulation (Article 12(2)), an SE cannot be registered unless one of these conditions is met (ie an agreement on employee involvement is reached, or standard rules, or national information and consultation rules, apply). In 2008, the European Commission commissioned an external study on the operation and impact of the SE Statute.131 The study, which was published in March 2010, was based on questionnaires and interviews with stakeholders. In May 2010, the Commission launched a consultation on the results of the study in order to test the study’s results with a wider audience and provide the Commission with stakeholders’ views on issues relevant in assessing the SE Statute. In November 2010, the Commission issued a report on the application of the SE Statute,132 accompanied by a Staff Working Document, which, among other things, makes an inventory of the existing SEs, presents trends on SEs’ distribution throughout the EU, and analyses the main problems encountered when setting up and running an SE.133 As to the current state of play as regards agreements on worker involvement in SEs, the European Trade Union Institute (ETUI) reports that by November 2010, 67 agreements on worker involvement could be identified from the 658 SEs established.134 The agreements of the larger SEs, in particular, are generally in line with good ‘EWC practice’ and, on certain points, go beyond the provisions of the SE Directive. In 32 SEs the rights enshrined in the agreement include board-level participation, thereby adding an important dimension for workers’ voice in company decision-making. At present, more than 90 employee board members represent the interests of the workforce on SE supervisory or administrative boards. A fundamental innovation introduced by the SE legislation is the transnational component of participation at board level. In a number of SEs (eg Allianz SE, BASF SE and MAN Diesel SE) employee representatives from several countries sit on the board and represent the interests of the European workforce as a whole. SE employee board-level representatives today come from 10 different countries (AU, BE, DK, FR, DE, IT, NL, NO, PL, UK). For more information, see box 4.8.
At least 67 SEs have arrangements on information and consultation at transnational level. 32 SEs have board-level representation (participation):
Source: ETUI November 2010. Box 4.9: Examples of worker involvement in SEs MAN Diesel SE, Germany MAN affiliate MAN Diesel SE, founded in August 2006, made history as the first SE. As a result of this, German co-determination was spread to other EU member states: on the SE supervisory board the German workforce representatives now share the 50 % of the seats formerly reserved for them in accordance with German co-determination law with their colleagues from Denmark. No less important, the SE works council is now much more European than the previous European Works Council. This Europeanisation of interest representation to the highest achievable extent is well in line with the objectives of the European Metal Workers Federation (EMF). MAN Diesel SE was set up by a national conversion, and is registered in Augsburg, Germany. According to the SE statute, the management decided to retain the existing two-tier corporate structure and, consequently, the German form of co-determination, giving the workers 50 % of the seats on the supervisory board. At the same time, the management used the founding of the SE to reduce the size of the supervisory board from 12 to 10 members. This was not considered a reduction of participation at this level by IG Metall, however: only the employee seat reserved for the management staff representative was lost (according to German co-determination law this person is considered as being on the employees’ side). At the time of SE establishment MAN B&W Diesel — mainly the result of a German–Danish merger of heavy diesel machinery production in 1980 — the company employed 6 423 people, mainly in Germany (2 875) and in Denmark (2 362), but also in France, the UK and the Czech Republic, with some service departments in Greece, Norway and Sweden. The transformation of MAN B&W Diesel into an SE may be seen as only a first step against a broader background of reorganising the company’s whole machinery and truck branch in Europe, making it a bigger, globally more competitive player. Meanwhile, negotiations have commenced with the workers as the company has decided to convert into an SE wholesale (Oct 2008). Although the outcome was received positively by the workers’ national representatives, in the course of the negotiations a number of difficulties arose, caused by the different standpoints and backgrounds of the employee representatives. These difficulties concerned the character and consequences of the particular form of foundation and the location of the company’s registered seat in Germany, and the understanding of board-level participation, particularly between representatives of the two strong legal systems involved, the German and the Danish. Elcoteq, Finland Finnish-owned Elcoteq opened a new chapter of high company mobility and flexibility in Europe by taking advantage of the SE legislation. But its employees are dependent on cross-border information and consultation only somewhat above the standard provisions. No board-level representation has been introduced by negotiating workers’ involvement in Elcoteq SE. Elcoteq SE was set up by a conversion of the parent company effective from 1 October 2005 and registered in Helsinki/FI. At the time of establishment c. 7 500 employees from five EU member states were represented by the special negotiating body: c. 860 from Finland, c. 3 340 from Estonia, c. 2 700 from Hungary, c. 550 from Germany and 7 from Sweden. Elcoteq is an electrical manufacturing services company supplying customers such as Nokia and Ericsson. Worldwide Elcoteq has c. 20 000 employees and operates in 15 countries. According to management the foundation of an SE was motivated by the desire to adopt a European identity. Since Elcoteq publicly announced it would move its headquarters from Helsinki to Luxembourg, however, other considerations have emerged as important motives for using this new opportunity to increase company mobility throughout Europe, probably including tax savings. The negotiations between management and employee representatives were used to set up a cross-border interest representation body — the SE works council — for the first time. Because of a peculiarity of Finnish law on worker participation no board-level presentation had been established in the previous parent company. Accordingly, no board-level representation could be introduced (on the basis of the standard rules) in the administrative board of Elcoteq SE. Given the fundamental resistance of management to the board-level representation of employees and the heterogeneous composition of the special negotiating body, however — particularly the weak interest representation of the Estonian workforce (only 100 trade union members out of 3 340 employees) — the make-up of the transnational interest representation agreed upon can be regarded a remarkable success. The SE works council obtained rights somewhat above the standard provisions: in addition to its information and consultation rights it has the right to be informed about and to discuss, both in advance and afterwards, the agenda of meetings of the administrative board. This could be perceived as a kind of ‘informal participation’. The negotiation process was characterised by the important role of the external expert working for the Finnish trade unions, serving as facilitator, legal adviser and educator at the same time. Cultural differences and lack of language competence turned out to be particular obstacles to achieving a common understanding and a mutually agreeable outcome. Not surprisingly, the agreement also contains provisions and days off for taking language courses (English). Finally, all parties involved were by and large content with the agreement. Case study source: ETUI. 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