4.4.3.1 Introduction

On the 19^th of April 2007, the Tenth EC Directive of 2005 on cross-border mergers has been implemented into the Reorganization Act.1 As appears from § 122b UmwG, a cross-border merger is only available in the situation that a corporation, id est a GmbH, AG or KGaA, merges with a corporation governed by the laws of another EU or EEA Member State.2 In the following, the focus will be on cross-border mergers involving a disappearing GmbH. It is this situation in which an appraisal right arises.

The procedure of a cross-border merger differs to a certain extent from that of a national merger. In order to initiate a cross-border merger, the management boards of the merging companies have to prepare draft terras of the cross-border merger. The draft terras of the cross-border merger have to be included in a notarial deed.3 These draft terras must contain specific information, such as information on the legal forms, names and seats of the merging companies and the prospective date as of which the acts of the disappearing GmbH are for the risk and account of the acquiring company. The draft terms also have to include the exchange ratio with respect to the shares in the disappearing GmbH.4If the merger involves a newly established entity, the draft terras of the cross-border merger also have to include its articles of association.5 Moreover, the draft terras must contain an offer for the purchase of the shares of dissenting shareholders by the disappearing GmbH.6 In this respect, the rules differ from that of the national merger, which prescribe an offer for the shares by the acquiring entity.7

Additionally, the management boards of the merging companies have to draft a cross-border merger report.8 In addition to the requirements applying to the report of a national merger, the cross-border merger report also has to include the consequences of the merger for the creditors and employees.9

At least one month prior to the general meeting in which the approval of draft terras of the cross-border merger will be dealt with, these draft terras have to be deposited with the trade register.10 Moreover, the cross-border report needs to be deposited with the offices of the merging companies for inspection by shareholders and works council. At the same time, the cross-border merger is announced by the court.

The draft terras of the cross-border merger have to be investigated by one or more independent auditors appointed by the court.11 The auditors have to prepare an auditors' report that, amongst other things, must indicate whether the exchange ratio and possible additional payment in cash is appropriate.12 The auditors' report has to be available at least one month before the aforementioned general meeting.

Subsequently, it is up to the general meetings of shareholders of all companies involved to approve the draft terras of the cross-border merger. The resolution for approval requires a three-quarters majority of the votes cast.13 Upon approval of the draft terras of the cross-border merger, the merger contract becomes valid. The resolution approving the merger contract has to be included in a notarial deed.14 The draft merger contract has to be annexed to the resolution of the general meeting of shareholders.

After the general meeting of shareholders approves the draft terras of the cross-border merger, the management boards of the merging companies can resolve for the cross-border merger. Similar to the resolution of the general meetings of shareholders, the merger has to be included in a notarial deed.15

According to German law, the court of the trade register is the designated authority to scrutinize the legality of the cross-border merger. Before the cross-border merger can be effectuated, this court must deliver a pre-merger certificate.16 The merger enters into effect on the date that follows from the laws that govern the acquiring company.