10.4 Mergers and Divisions 375to shareholders for breach of duty. In practice, the appraisal remedy is more im-
portant for shareholders in the company that will not survive the merger.
Prospectus Directive. A merger can trigger a duty to publish a prospectus under
the Prospectus Directive or a document equivalent to that of a prospectus.
The main rule under the Prospectus Directive is that (1) securities may not be
offered to the public without prior publication of a prospectus approved by the
competent authority of the home Member State^211 and that (2) any admission of
securities to trading on a regulated market within the Community is subject to the
publication of a prospectus.^212 However, there are exemptions from the obligation
to publish a prospectus under the Prospectus Directive.
The obligation to publish a prospectus under the Prospectus Directive does not
apply, if the securities are “offered, allotted or to be allotted in connection with a
merger, provided that a document is available containing information which is re-
garded by the competent authority as being equivalent to that of the prospectus,
taking into account the requirements of Community legislation”.^213
Neither does the obligation to publish a prospectus under the Prospectus Direc-
tive apply to admission to trading on a regulated market, if the securities are “se-
curities offered, allotted or to be allotted in connection with a merger, provided
that a document is available containing information which is regarded by the com-
petent authority as being equivalent to that of the prospectus, taking into account
the requirements of Community legislation.”^214
The relationship between the Third Directive and the Prospectus Directive can
be illustrated by the case of Mittal and ArcelorMittal. The merger of Mittal and
ArcelorMittal is also an example of a merger where the holdings of shareholders
in one company are converted into holdings in another company.
Case: Mittal Steel and ArcelorMittal. In 2007, Mittal Steel Company N.V., a
company incorporated under Dutch law, merged into ArcelorMittal S.A, its
wholly-owned non-operating subsidiary founded under the laws of Luxembourg,
in the first step of the two-step merger process between Mittal Steel and Arcelor.
The merger documentation comprised: a merger proposal; an explanatory memo-
randum; a European prospectus; as well as a US proxy statement and prospectus.
The merger proposal was required by Dutch and Luxembourg corporate law.
The provisions of those laws were based on the provisions of the Third Company
Law Directive that require the drawing up and publication of draft terms of
merger.^215 As both the Third Directive and the provisions of Dutch and Luxem-
bourg law were designed for domestic mergers, the participating companies relied
on the judgment of the ECJ in Sevic Systems.^216 (The deadline for the implementa-
tion of the provisions of the Directive on cross-border mergers was later.^217 )
(^211) Articles 3(1) and 13(1) of Directive 2003/71/EC (Prospectus Directive).
(^212) Article 3(3) of Directive 2003/71/EC (Prospectus Directive).
(^213) Article 4(1)(c) of Directive 2003/71/EC (Prospectus Directive).
(^214) Article 4(2)(d) of Directive 2003/71/EC (Prospectus Directive).
(^215) Articles 5(1) and 6 of Directive 78/855/EEC (Third Company Law Directive).
(^216) Case C-411/03 Sevic Systems [2005] ECR I-10805.
(^217) Article 19 of Directive 2005/56/EC (Directive on cross-border mergers).