252 5 Equity and Shareholders’ Capital
The merger may require other permits such as competition law permits (Chap-
ter 14) and securities law permits (section 5.9.3). In addition, competent competi-
tion law authorities and authorities supervising capital markets may be able to re-
quire the parties to provide information concerning the parties themselves.
Protection of the interests of creditors. The merger can have an adverse effect
on the interests of creditors. If the borrower is loaded with debt after the merger,
credit quality changes for the worse. For this reason, creditors and bondholders
tend to insist on change of control covenants in their agreements (Volume II).
Creditors are also protected by the regulation of mergers in EU company law.
According to the Third Company Law Directive, Member States’ laws must pro-
vide for “an adequate system of protection of the interests of creditors of the merg-
ing companies whose claims antedate the publication of the draft terms of
merger”.^577
Protection of the interests of employees. EU merger law protects even the inter-
ests of employees.
Both domestic and cross-border mergers are covered by a legal regime for in-
forming and consulting employees. Rules on information and consultation can be
found not only in EU labour law^578 but also in EU company law and capital mar-
kets law. For example, the likely effects of the merger on employment will have to
be addressed in the draft terms of merger^579 and in the report of the management or
administrative organ submitted to the general meeting.^580 SEs are subject to a more
regulated employee involvement regime. Directive 2001/86/EC is designed to en-
sure that employees have a right of involvement in issues and decisions affecting
the life of their SE.^581 In public takeover bids, both the offeror and the offeree
must disclose information about the effects of the takeover on employment.^582
In cross-border mergers, employees’ participation rights raise further legal
questions, because the existing participation rights of employees can range from a
mandatory co-determination regime in Germany and the Netherlands to hardly any
participation rights in England. EU merger law has adopted a before-after princi-
ple, according to which existing participation rights should be preserved after the
merger.^583 For SEs, the before-after provisions are based on the provisions of Di-
(^577) Article 13 of Directive 78/855/EEC (Third Company Law Directive). See also Articles
14–16.
(^578) Recital 12 of Directive 2005/56/EC (Directive on cross-border mergers). See also recital
23 of Directive 2004/25/EC (Directive on takeover bids).
(^579) Article 5(d) of Directive 2005/56/EC (Directive on cross-border mergers); Article 32(2)
of Regulation 2157/2001 (SE Regulation).
(^580) Article 7 of Directive 2005/56/EC (Directive on cross-border mergers).
(^581) Directive 2001/86/EC supplementing the Statute for a European company with regard to
the involvement of employees. Recital 21 and Article 1(4) of Regulation 2157/2001 (SE
Regulation).
(^582) Articles 3(1)(b), 4(2)(e), 6(1), 6(2), 6(3)(i), 8(2), 9(5) and 14 of Directive 2004/25/EC
(Directive on takeover bids).
(^583) Recital 7 of Directive 2001/86/EC; recital 13 of Directive 2005/56/EC (Directive on
cross-border mergers).