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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.
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:
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.
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