10.4 Mergers and Divisions 381As a rule, there must be equivalent treatment of shareholders in the same posi-
tion. In Community law, the principle of equivalent treatment can be based on the
Second Company Law Directive and the Takeover Directive as well Member
States’ company laws. The Sixth Company Law Directive does not require
equivalent treatment as such.^253
The Third Company Law Directive and the Sixth Company Law Directive pro-
vide that one one consequence of a division (or a merger) is that shareholders of
the company being divided (or the company that will not survive the merger)
automatically become shareholders of the recipient companies (or the company
that will survive the merger). In practice, this may not always be the case in so-
called “trilateral divisions” (or “trilateral mergers”). In a trilateral division (or a
trilateral merger), consideration may in practice consist of shares in a third com-
pany. In 2002, the EFTA Surveillance Authority asked Norway to comply with
those two Company Law Directives. In the Authority’s view, the Norwegian legis-
lative provisions on “trilateral mergers” and “trilateral divisions” did not ensure a
proper protection of shareholders.^254
Allocation of assets. Consideration depends on the allocation of assets and li-
abilities. Draft terms of merger must also specify: the precise description and allo-
cation of the assets and liabilities to be transferred to each of the recipient compa-
nies; and the allocation to the shareholders of the company being divided of shares
in the recipient companies and the criterion upon which such allocation is based.^255
Valuation. The Sixth Company Law Directive does not set out how shares and
assets should be valued. In any case, the written report drawn up by the admini-
stration or management bodies of the participating companies must explain the
draft terms of division and set out the legal and economic grounds for them, in
particular the share exchange ratio and the criterion determining the allocation of
shares. The report must also describe any special valuation difficulties which have
arisen.^256 Valuation questions will also be discussed in the report drawn up by in-
dependent experts.^257
Remedies for dissenting shareholders. Like in mergers, a mix of remedies is
available to shareholders depending on the jurisdiction.
First, shareholders can vote against the division. As the decision to approve of a
division requires a qualified majority, a large block of minority shareholders may
be able to block the division.^258
Second, they can, at least in some jurisdictions, contest the resolution of the
general meeting approving of the division. Such proceedings can result in the nul-
lity of the division. The Sixth Company Law Directive permits Member States to
adopt such rules but restricts their use. It is the purpose of the Sixth Directive to
(^253) See Article 5(2) of Directive 82/891/EEC (Sixth Company Law Directive).
(^254) The EFTA Surveillance Authority, Press Release PR(02)16.
(^255) Article 3(2) of Directive 82/891/EEC (Sixth Company Law Directive).
(^256) Article 7 of Directive 82/891/EEC (Sixth Company Law Directive).
(^257) Article 8 of Directive 82/891/EEC (Sixth Company Law Directive).
(^258) Article 5(1) of Directive 82/891/EEC (Sixth Company Law Directive) and Article 7 of
Directive 78/855/EEC (Third Company Law Directive). See also Article 20 of Directive
82/891/EEC (Sixth Company Law Directive).