7.4.6.3 Auditor's certificates

Additionally, a Dutch auditor needs to investigate the draft terras of the cross-border merger and, among other things, has to certify whether (not: that), in his opinion the proposed exchange ratio in view of the documents annexed to the draft terras of the cross-border merger is reasonable (Art. 2:328 DCC). The exchange ratio reflects the value of the shares in the disappearing BV in relation to the value of the shares in the other merging companies.1 Based on the exchange ratio, it can be determined how many shares the shareholders in the disappearing BV will receive in the acquiring Ltd upon the merger.

It should be noted that statute does not require the Dutch auditor to certify that the exchange ratio actually is reasonable. Even if the auditor has certified that the exchange ratio is unreasonable, the shareholders may resolve to effect a legal merger.2

Art. 2:325 paragraph 2 DCC provides that it is allowed to use payments in order to flexibly arrange the exchange ratio. The background of this rule is to solve difficulties as regards rounding errors or to provide a solution if, according to the exchange ratio, a shareholder has no right to receive shares in the acquiring company due to the small stake he has in the disappearing company. Art. 2:325 paragraph 2 DCC stipulates that these payments may not exceed 10% of the total nominal value of the shares that will be allocated by means of the merger. This general merger rule also applies in the context of a cross-border merger.

In addition, the Dutch auditor has to certify that the sum of the net assets of the BV ceasing to exist as of the date to which the annual accounts or the interim statement of assets and liabilities relate, on the basis of generally acceptable valuation methods at least corresponds to:

In the event of a national merger, this second certificate considers a prescription relating to the protestion of the capital of the acquiring company.3 According to the legislative history of Art. 2:333g DCC, this auditor's certificate intends to provide creditors and shareholders information with respect to the consequences of the appraisal right with respect the estate of the acquiring company.4 Amongst others, it would certify whether the shares are fully paid-up, as, according to the Minister of Justice, it is comparable to Art. 2:204b DCC.5 As appears from recent legislative history, it is acknowledged that the amount does not have to be exact, but has to determine a bandwidth.6

I fully agree with Verbrugh, Van Solinge and Van Boxel who highly doubt whether the Dutch legislator has to be concerned with the question whether shares in foreign companies are paid up and therefore plead for abolishment of this aspect of the auditor's certificate.7 The laws goveming the acquiring company have to address the question whether shares that will be issued upon the merger taking effect have been paid up. Van Solinge and Van Boxel also point to the fact that this requirement constitutes a considerable interference of the Dutch legislator in foreign law, which interference cannot be based on the Third and Tenth EC Directives.8

In addition, especially the third element has been highly criticized in legal literature. With respect to element (iii), it should be noted that at this stage of the cross-border merger process (i.e. the stage before the deposit), it will not be clear how many shareholders will eventually be entitled to the appraisal right. The resolution for a legal merger will be adopted after the deposition period (see § 7.4.5.6). In order to be on the safe side, the auditor could calculate how many shareholders could possibly oppose the cross-border merger, and then we are at the previously mentioned bandwidth.9

Moreover, as the shareholders that will use the appraisal right will not yet be known, it will be unclear on what amount of indemnification agreement will be reached between the company and the shareholders, or what amount of indemnification will be determined by the independent expert(s). The auditor could take the proposed indemnification as included in the draft terras of the cross-border merger, though he would not be certain whether this amount is correct. As will be mentioned later on, the indemnification not necessarily has to relate to the exchange ratio. Due to these uncertainties, it is imaginable that the Dutch auditor refuses to issue the certificate.10

Lastly, I remark that the auditor's certificate with respect to the reasonableness of the exchange ratio can be skipped if the shareholders of the merging companies approve thereof.11 As statute explicitly refers to shareholders, the consent of each shareholder is required.12