10.4 Mergers and Divisions 373on the merger. Usually, a merger must be sanctioned by the court.^196 This also
means that there would be hardly any room for the application of the provisions of
the Directive on takeover bids where a participating company that will not survive
the merger has issued shares admitted to trading on a regulated market.
Although the Directive on takeover bids does not explicitly exclude mergers
from its scope, the wording of that Directive implies that it does not apply where
the offeree company ceases to exist as a legal entity as a result of the transaction
of which the offer is part.^197
On the other hand, it would, in practice, be possible to apply the general princi-
ples set out in the Directive on takeover bids even in the context of mergers,^198 as
well as to require the disclosure of information according to the principles that ap-
ply to offer documents under the Directive.^199 Such provisions might therefore in-
fluence the interpretation of board duties under the Third Company Law Directive
in the context of a merger. This is supported by the principle that provisions of
Community law should not be given a meaning that frustrates the application of
other provisions of Community law.
Valuation. Rules on the valuation of shares and the exchange ratio are impor-
tant, because a shareholder cannot choose whether to sell his shares or not in the
event that a sufficient majority has voted for the merger. The main rules on the
valuation of shares and the exchange ratio under EU merger law are disclosure
rules.
The draft terms of merger must specify the share exchange ratio and the amount
of any cash payment.^200 The written report drawn up by the administration or
management bodies of each of the merging companies must set the share ex-
change ratio and describe any special valuation difficulties which have arisen.^201
In their own report, independent experts must state whether in their opinion the
share exchange ratio is fair and reasonable. Their statement must at least: (a) indi-
cate the method or methods used to arrive at the share exchange ratio proposed;
(b) state whether such method or methods are adequate in the case in question, in-
dicate the values arrived at using each such method and give an opinion on the
relative importance attributed to such methods in arriving at the value decided on.
The report must also describe any special valuation difficulties which have
arisen.^202
Remedies for dissenting shareholders. In addition to disclosure, a mix of reme-
dies is available to shareholders depending on the jurisdiction.
First, shareholders can vote against the merger.
Second, they may, at least in some jurisdictions, have a right to contest the
resolution of the general meeting on certain grounds. Such proceedings can result
(^196) Articles 13 and 16 of Directive 78/855/EEC (Third Company Law Directive).
(^197) See Article 2(1)(a) of Directive 2004/25/EC (Directive on takeover bids).
(^198) See Article 3 of Directive 2004/25/EC (Directive on takeover bids).
(^199) See Articles 6(2) and 6(3) of Directive 2004/25/EC (Directive on takeover bids).
(^200) Article 5(2)(b) of Directive 78/855/EEC (Third Company Law Directive).
(^201) Article 9 of Directive 78/855/EEC (Third Company Law Directive).
(^202) Article 10(2) of Directive 78/855/EEC (Third Company Law Directive).