Companies that carry out cross-border mergers, divisions, and conversions will be subject to revised European Union (EU) rules from 2022 under a new directive on company law that includes employee participation and consultation requirements.

The directive is one of two published by the European Commission that aim to modernize EU company law. The other — on the use of digital tools and processes (Directive (EU) 2019/1151) — was finalized in June 2019 and member states must implement it into national laws by August 2021. 

Highlights

The consultation and participation provisions will enable employee representatives to assess the implications of proposed business changes on the workforce, and assure consultation and participation rights in the resulting organization, where required.

Report to employees prior to a cross-border operation. In most cases, the company carrying out the cross-border operation should prepare a report “to explain and justify” the legal and economic aspects of the proposed cross-border operation and the anticipated implications for employees. Specifically, the report should set out:

• The implications of the cross-border operation for the company’s future business, including its subsidiaries
• An explanation of the proposed cross-border operation on the employment situation and any material changes that would be made to employment conditions, collective agreements or to transnational company agreements
• Remedies available to employees, especially information about their right to exit the company
• Likely changes to work, wages and salaries, location of specific jobs and expected consequences for the employees occupying those roles, company-level social dialogue, arrangements for board-level employee representation (where applicable), and the impact on any company subsidiaries

Employee representation. The rights of employees to be represented on information and consultation bodies (for example, works councils) and in employee participation arrangements (for example, supervisory boards) in the converted company.

Impact on employee consultation and participation rights. The directive requires the commission to evaluate the directive, including its impact on employee participation and consultation rights, by 2026. 

Related resources

• Press Release and Text of Directive (Council of the European Union, 18 Nov 2019)
• Directive Relating to Certain Aspects of Company Law (EurLex, 30 Jun 2017)
• Background Information on Company Law and Corporate  Governance (European Union)