Merger Code 2015: Overview of the Main Changes

Below the main changes:

1. Scope
   The revised version of the Merger Code interprets the term ‘business and industry’ more broadly. To come under this term, organisations must (1) operate on the market and (2) be organised commercially. With this broadened interpretation, which took effect on 1 October 2015, the Merger Code now applies also to the government, non-profit organisations and free professions. Before that date the Merger Code applied to business and industry only. The Committee “Revision Merger Code” has chosen to interpret the term ‘business and industry’ more broadly without modifying the status of the Merger Code or the SER’s terms of reference.
2. Modification Explanatory Notes on Term Merger
   Merger as defined in the Merger Code means the acquisition or transfer of the control of a company or part thereof on a permanent basis. The explanatory notes on the term ‘merger’ have been adjusted, in particular with regard to the share transfer. In the old version a transfer of 50% or more of the shares resulted in the irrefutable presumption of transfer of control. The new version says that the transfer of 50% or more of the shares gives rise to a refutable presumption of the transfer of shares. This change does justice to the actual control structures in capital companies, as there might be non-voting shares and holders of majority interests are not necessarily capable of exercising control.
3. Public Offers
   The former Article 5 of the Merger Code was not compatible with Directive on takeover bids¹ as the Directive cancelled out the prohibition on making an offer without prior notice². As the former Article 5 stipulated that offerors had to inform the management of the target company fifteen days in advance of the offer, offers were not without prior notice. Effective from 1 October 2015 management needs no longer be informed fifteen days in advance. According to the new article offerors intending to effect mergers by means of public offers, and not by agreement, must follow the notification procedure contained in the Merger Code where possible. The notification procedure is not applicable, in principle, as no merger meetings have been held, hence the words ‘where possible’.
4. Extension of Confidentiality
   The confidentiality provisions of Article 7 of the former Merger Code just referred to the notification procedure of Article 4, and not to the notification procedure of Article 3. Following amendment, the confidentiality provisions apply to Article 3 as well. The amendment followed the Disputes Committee that in its case law already assumed that the confidentiality provisions would extend to this article. In addition, the duration of the duty of confidentiality has been specified. Confidentiality about notification lasts until the merger becomes public, unless the parties agree otherwise.
5. Ranking of Unions and Works Council
   The notification procedure in Article 4 Merger Code dictates that the works council should be given the opportunity to take note of the opinion of employees’ associations. This opinion must be considered by the works council when issuing advice under Article 25 Works Council Act. This article has now been extended to include an explanatory note confirming that the works council, before issuing its advice, must have been given the opportunity to take note of the viewpoints of the union(s) concerned. It is explicitly stated that this provision may be deviated from if the works council indicates it does not require those viewpoints. It is also possible for both procedures to be followed side by side as long as in the end phase the order of the notification procedure and of Article 4.7 in particular has been observed.
6. Disputes Committee: Objectively Determinable Time and Mediation
   It is clearly stated when the complaint term under Article 19 Merger Code commences. An objectively determinable time has been chosen: the date of publication whether or not the merger goes through. Publication is possible by means of a press release, a notice to the employees and/or a notice to the unions. In the absence of a public notice, the complaint term ends one month after the employees’ associations could have learned of the merger by other means. The article also provides for the possibility to submit proposals for mediation to the Disputes Committee, or for the Disputes Committee to mediate, as an alternative to legal proceedings.

The most important of the above changes are the extended scope and the possibility of mediation as an alternative to legal proceedings. In addition, several minor changes have been implemented. Please do not hesitate to contact us if you would like more information.

Pernette Wubbenhorst
wubbenhorst@slangen-advocaten.nl
12 January 2016

Pernette is a legal assistant with Slangen Advocaten, in the final phase of the master’s programme in employment law at VU University Amsterdam.

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¹ Directive 2004/25/EC
² Offers without prior notice are public offers made without prior consultation between the offerors and the management of the target companies, that is without the offerors giving the management of the target companies that opportunity.