5.11 Shares as a Means of Payment 255ber State is permitted only in exceptional cases, that is, where their use is justi-
fied.^602
This means that each company participating in a cross-border merger is gov-
erned by the law of the Member State to which it is subject. The law of one coun-
try will address one side of a cross-border merger (say, that of the entity that will
not survive the merger), and the law of another country the other side of the
merger (that of the entity that will survive the merger).
According to the SE Regulation, the formation of an SE by merger is primarily
governed by the provisions of the SE Regulation. As regards aspects that are not
covered by the SE Regulation, each company involved in the formation of an SE
by merger is governed by “the provisions of the law of the Member State to which
it is subject that apply to mergers of public limited-liability companies in accor-
dance with Directive 78/855/EEC”.^603 The same principle has been applied in the
SCE Regulation.^604
The Directive on cross-border mergers provides that “a company taking part in
a cross-border merger shall comply with the provisions and formalities of the na-
tional law to which it is subject”.^605
Those rules are complemented by the scrutiny of mergers by competent au-
thorities and an opposition procedure.
Review by competent authorities. There is a screening and monitoring mecha-
nism for the legality of the merger.
The Directive on cross-border mergers provides for a pre-merger scrutiny of
compliance with national law and a pre-merger certificate attesting to the proper
completion of the pre-merger acts and formalities.^606 A competent authority will
also scrutinise the legality of the formation of a new company resulting from the
cross-border merger.^607 There are special provisions on the scrutiny of the share
exchange ratio.^608
Like the Directive on cross-border mergers, the SE Regulation^609 and the SCE
Regulation require the scrutiny of mergers by competent authorities.^610
Opposition by competent authorities. In addition, the Directive on cross-border
mergers, the SE Regulation and the SCE Regulation enable the competent authori-
ties of a Member State to oppose the merger.
According to the SE Regulation,^611 the laws of a Member State may provide
that a company governed by the law of that Member State may not take part in the
formation of an SE by merger if any of that Member State’s competent authorities
(^602) C-167/01 Inspire Art [2003] ECR I-10155, paragraph 138.
(^603) Article 19 of Regulation 2157/2001 (SE Regulation).
(^604) Article 20 of Regulation 1435/2003 (SCE Regulation).
(^605) Article 4(1)(b) of Directive 2005/56/EC (Directive on cross-border mergers).
(^606) Article 10 of Directive 2005/56/EC (Directive on cross-border mergers).
(^607) Article 11 of Directive 2005/56/EC (Directive on cross-border mergers).
(^608) Article 10(3) of Directive 2005/56/EC (Directive on cross-border mergers).
(^609) Articles 8(7), 8(8) and 25 of Regulation 2157/2001 (SE Regulation).
(^610) Article 29 and 30 of Regulation 1435/2003 (SCE Regulation).
(^611) Articles 8(14) and 19 of Regulation 2157/2001 (SE Regulation).