Transformation of Companies

Other notable provisions:

• “public M&A” Law 3401/2005 on the prospectus to be issued in a case of public offer of= securities (implementation of Directive 2003/71/EC – to be repealed by Regulation (EU) 2017/1129 as of 21.07.2019, except for a few provisions already repealed);
• “public M&A” Law 3461/2006 on optional and mandatory public takeovers (implementation of Directive 2004/25/EC);
• “public M&A” Athens Exchange Rulebook (codified version 2018); ƒƒ Law 3049/2002 on privatisations; and
• “merger control” Law 3959/2011 (replaced Law 703/1977), on Greek merger control provisions.

This presentation will focus on the NTL and the most important tax incentives and crossborder regulations of general application, i.e. Law 2166/1993, Legislative decree 1297/1972, Law 4172/2013, Law 2578/1998 and Law 3777/2009.

Which are the common types of transformations?

• Merger: one or more companies that transfer all their assets and liabilities to an existing company, or to a newly formed company, in exchange for shares, cash, or a combination of both. Thereafter, the absorbed company or companies cease to exist.
• Division: when a company is dissolved without following liquidation procedures, and transfers to other existing companies or to a newly formed company the total of its property. The division, under the new regime, also includes the partial division and the spin-off.
• Conversion: a company of a certain form (e.g. limited liability company) is converted to a different company form (e.g. société anonyme).

Presentation of the NTL1

(a) Procedure
The procedure includes the following steps:

• drawing up a merger or division draft by the board of directors or managers of the companies involved;
• registration and publication of the draft at the General Commercial Registry (G.E.MI.), at least one (1) month before the resolution, with the option, instead, of uploading the draft at the company’s website;
• drawing up a detailed report on the merger or division draft and the proposed exchange ratio or the imminent shareholders’ or partners’ resolution on the conversion, made by the board of directors or managers of the companies involved or the company under conversion;
• submission of the above reports to the general meeting of shareholders or the partners unless all shareholders or partners agree in writing that the report shall not be produced and/or submitted;
• review of the merger or division draft by experts, which is not required if all shareholders or partners agree in writing not to review it;
• final resolution by the general meeting of shareholders or the partners on the merger, division or conversion;
• drawing up a merger or division agreement in the form of a private document, except for sociétés anonymes, limited liability companies, European companies, civil associations and European cooperative companies, in which cases a notarial deed is required, or if otherwise provided by law;
• review of legality, and publicity of the merger, division or conversion;
• occurrence of the effects of the merger, division or conversion.

(b) Protection of the shareholders
Given the different nature of conversion as a transformation act, the safety measures for the shareholders are greater in the case of mergers and divisions. In addition to the above basic steps for the protection of minority shareholders, it is also important that the NTL requires a minimum mandatory content for the drafts of the merger and division agreement and the conversion report, as well as the availability of the relevant documents (including the report of the board of directors, the managers and the experts) during the specific, depending on the company type, period until the final resolution on the transformation (for
example, 1 month before the general meeting of shareholders for sociétés anonymes). The type of documents varies depending on whether there is merger/division or conversion (in the latter case, only the availability of the conversion report and the annual financial statements, and maybe an evaluation report, is required, while in the case of mergers and divisions, apart from the drafts of the merger or division agreement, the availability of the reports of the board of directors or of the managers and the experts’ report, is required, as well as the balance sheet, if the last annual financial statements refer to a year that has expired at least 6 months before the date of the draft of merger or division agreement). It should be noted that in all cases the exemption from the obligation to make these documents available is possible, provided that they are available on the company’s website.

(c) Protection of the creditors
It is particularly provided that within 30 days after the completion of the publicity formalities of the draft of merger or division agreement or of the resolution for conversion, the creditors of the companies or company (in the case of conversion), whose claims arose before that date, have the right to request appropriate guarantees from the companies or company, if they prove that it is necessary, based on their financial condition as a result of the transformation, to provide such guarantees and if they have not already received such guarantees. Any dispute arising out of the request for these guarantees will be settled by the single member Court of First Instance of the registered headquarters of any of the companies involved in the merger or division or the company in its new legal form in case of a conversion.

(d) Liability of managers and members of the board of directors
The members of the board of directors or the managers of the companies involved in the transformation are liable to their shareholders or partners for any fault of theirs in the preparation and implementation of the transformation. A special representative may be appointed for such claims. Such liability may lead to compensation for the direct loss suffered by the shareholders or partners as a result of the transformation, which liability does not affect the liability of the same people for damage to third parties under the general provisions (in particular, article 914 of the Greek Civil Code) or the special provisions of the Greek Bankruptcy Code (article 98 of Law 3588/2007), neither their (internal) liability vis-à-vis the legal entity under the specific provisions for each company type.

(e) Nullity
The transformation may be declared null and void by a judicial decision if its approval by a resolution of the general meeting of shareholders or the partners (in the case of mergers or divisions) of one of the companies involved is omitted or one of these resolutions is void or voidable (in any case). Mechanisms to rescue the validity of the transformation are provided, namely: (a) if the defect is eliminated or remedied in any way until the court hearing of the application for declaration of invalidity, the merger, division or transformation shall not be declared void, (b) the court shall grant a deadline for the removal of the defect if such removal is possible, with the possibility of a temporary settlement of corporate cases in this case, (c) in the event of voidness or voidability, the court may refrain from declaring void the merger, division or conversion if it considers that it is disproportionate to the defect of the resolution, by allowing the applicant to file for compensation of the damage caused by the defect, (d) if the absorbing or the absorbed company is listed on a regulated market, no nullity due to void or voidable resolution can be declared, but the above claim for compensation is provided. In any case, the judicial decision declaring the merger, division or transformation null and void shall not affect the validity of those transactions of the absorbing, the absorbed or the company resulting from the conversion, which took place after the registration of the transformation and before the publication of the decision for nullity at the G.E.MI.

(f) Contract form
On the matter of the form of the merger or division agreement, the form of certified private document is established as standard, except for the case of participation of sociétés anonymes, limited liability companies, European companies, civil associations and European associated companies, for which the valid contract form in effect is the notarial deed form. In case of a partnership conversion to a société anonyme or a limited liability company or a private capital company, according to the second paragraph of the provision 49 of Law 4072/2012, and in any other case indicated by law, the valid contract form for the decision of the partners is the notarial deed form.

(g) Legality review
After the review of legality is completed, the transformation is submitted to the publicity of the G.E.MI., pursuant to the provisions of Law 3419/2005. The review of legality is limited to the compliance with the provisions of the NTL, the relevant corporate law, the articles of association of the companies involved and Law 3419/2005. In case that a société anonyme or a European company is involved or created in the merger or division or transformation taking place, an approval is required apart from the legality review, granted by the Regional Director of the second degree Regional Authority in the region of which the headquarters of the absorbing company (in the case of a merger), the benefitting company or companies (in the case of a division) or the company under conversion (in case of conversion) is/are located. In transformations involving other corporate forms, the publication takes place only after the review of legality by G.E.MI., without a prior approval decision. Finally, an approval decision by the Minister of Economy and Development is required in case of participation in mergers or divisions by companies provided by law, such as listed companies and/or companies regulated by the Hellenic Capital Markets Commission.

(h) Transformations effects

• The effects of the transformation come in effect after the registration in G.E.MI. of the merger agreement regarding the absorbing company, the division agreement regarding the benefitting companies and the resolution of the general meeting of shareholders or the partners regarding the conversion.
• In the case of a merger or a division, these effects include:
• the universal succession, independently if it is a common division or a partial division or a spin-off. However, in the case of a common division, the universal succession concerns all of the assets, in the case of a partial division and a spin-off, the universal succession concerns the branch of activity included in the division agreement
• the transfer of the shareholding or partnership to the absorbing (or new) company in the case of a merger or to the benefitting companies, according to the distribution ratio provided by the agreement, in the case of a division or partial division. In the case of a spin-off, the demerging company itself becomes shareholder or partner of the benefitting company and not its shareholders or partners
• the termination of the absorbed company or the demerging company (only in the case of a common division, whereas in the case of partial division and spin-off, the demerging company under division continues to exist)
• the automatic ex officio continuation of pending trials by the absorbing company or benefiting companies.

(iii) In case of conversion;

• the converted company keeps its legal personality and continues its operation in its new legal form without any transfer of property under a special or universal succession
• the licenses issued in favor of the converted company continue to be valid
• the shareholders or partners of the converted company participate in the company in its new legal form
• the rights of third parties in the shareholdings of the converted company are retained in the shareholdings in the new legal form
• the pending trials continue in the name of the company in its new legal form.

Presentation of the tax benefits provided by Laws 2166/1993, 1297/1972, 4172/2013 and 2578/1998

Cross-border transactions – Law 3777/2009

Greek Law had not specifically regulated cross-border mergers, from a company law perspective, till the implementation of Directive 2005/56/EC by Law 3777/2009, though mergers between Greek companies and branches of foreign companies established in Greece
were (and still are) permitted according to Law 2166/1993.

In the past, EU and national legislation did not permit the merger of companies from different member states. Societas Europeae (European Company) was the solution for companies wishing to combine their activities through a merger across national boundaries. Nevertheless, in 2009 Greece implemented Directive 2005/56/EC with Law 3777/2009, providing a stable and definitive legal framework for such cross-border mergers. The Directive was aimed at making cross-border merger an attractive form of collaboration and has admittedly succeeded in doing so.

Regarding the procedure: the participating companies file a common draft agreement which must be publicized by each merging company in the appropriate national public register, protecting the interests of members (shareholders). The merging companies jointly may hire one or more independent experts to draw the common report of the merging companies, in order to reduce the overall cost. Finally, in order to facilitate cross-border merger, the Law provides for the monitoring of the merger procedure by the national authorities of the Home Member State of each participating company (for Greece, currently the Directorate of Sociétés Anonymes and Credit of the General Secretariat of Commerce and Consumer Protection). Moreover, Law 3777/2009 contains several provisions regarding the protection of employees, as well as minority shareholders and creditors of the company, following the respective provisions of the Directive.

Conclusion

The NTL, upon entry into force, will complement not only the very recent reform of the law of sociétés anonymes by Law 4548/2018, which also enters in force as of 01.01.2019, but also the recent amendment of the law of limited liability companies (Law 3190/1955) by Law 4541/2018, the systematization of the law of the partnerships by Law 4072/2012 and the introduction of the corporate type of the private capital company also by Law 4072/2012. Greek corporate legislation is improving and forming consistency, in order to reflect the urgent need, as well as the strong will of the Greek market and entrepreneurship to attract investments and facilitate synergies.

1. The presentation is based on the draft law available at http://www.opengov.gr/ypoian/?p=9461