With the implementation of the Mobility Directive (EU) 2019/2121, Liechtenstein company law is being comprehensively modernised in the area of cross-border restructuring. The reform is being carried out through amendments of the Persons and Companies Act (PGR) and a total revision of the Merge Co-Determination Act (FMG), the scope of which has been extended and the title of which has been changed to the Restructuring and Co-determination Act (UMG).
The new provisions will enter into force at the same time as the decision of the Joint European Economic Area (EEA) Committee on the incorporation of Directive (EU) 2019/2121 into the EEA Agreement.
Key Takeaways
- Implementation of the EU Mobility Directive (EU) 2019/2121 through amendments to the PGR and a complete revision of the FMG, extending its scope to cross-border restructuring.
- Introduction of a harmonised EEA-wide procedure for cross-border transfers of registered offices.
- Comprehensive revision of the existing provisions on cross-border mergers.
- Harmonisation of certain cross-border divisions within the EEA.
- Enhanced protection for shareholders, creditors and employees.
- Strengthened ex ante regulatory scrutiny, including checks for abuse.
- Legal certainty for ongoing proceedings through transitional provisions.
Good to know
The reform does not introduce most cross-border restructuring measures for the first time. Cross-border mergers were already regulated by law, and transfers of registered offices were already possible under the existing legal framework and case law. The key innovation lies in the introduction of a harmonised EEA-wide procedural system with uniform requirements regarding planning, disclosure, protection of rights, registration and regulatory scrutiny. This makes cross-border restructuring within the EEA more transparent, easier to plan and more certain from a legal perspective.
Cross-border transfers of registered offices
The possibility of transferring a company’s registered office abroad without dissolution or liquidation, whilst maintaining the company’s legal personality, already existed under previous law and on the basis of the case law of the European Court of Justice.
For the first time, a detailed and harmonised procedure is being introduced for companies within the EEA. In particular, the following are envisaged: (i) a plan for the transfer of the registered office, (ii) reports for shareholders and employees, (iii) disclosure requirements, (iv) a prior review by the authorities, and (v) a coordinated exchange of information between the relevant registration authorities.
The company remains the same; only the company law applicable to it changes.
Cross-border mergers
Cross-border mergers have been enshrined in Liechtenstein law for many years. The Mobility Directive therefore does not create a new instrument, but rather modernises the existing provisions.
The most significant changes include (i) extended information and disclosure obligations, (ii) additional reporting and audit requirements, and (iii) enhanced protection for minority shareholders and creditors. At the same time, the procedures are being brought more closely into line with those for transfers of registered offices and demergers.
The merger itself remains unchanged as an instrument under company law; the main new features are the procedural requirements and protective mechanisms.
Cross-border divisions
The Directive introduces, for the first time, a harmonised European legal framework for certain cross-border divisions.
In particular, it covers (i) demergers, (ii) spin-offs and (iii) spin-offs for the purpose of establishing a new company. Cross-border demergers for the purpose of incorporation, however, in which assets are transferred to existing companies, are not harmonised.
The new regulations open up additional opportunities for group restructuring, the organisational separation of individual business divisions and succession planning within the EEA.
Strengthening of Protective Rights
A key focus of the reform is the strengthening of protection for shareholders, creditors and employees.
Shareholders are granted extended rights to information as well as additional avenues of legal protection. In particular, shareholders who have voted against a reorganisation may, under certain conditions, withdraw from the company in return for an appropriate cash settlement and have the adequacy of the settlement reviewed by a court.
Creditor protection is also being strengthened. In future, company creditors may, within three months of the publication of the reorganisation plan, demand further security, provided they can demonstrate that the satisfaction of their existing claims is at risk as a result of the planned reorganisation and that no adequate security has been offered.
The FMG and Employee Co-determination
Until now, the FMG has governed employee co-determination in cross-border mergers of limited companies. Its scope was therefore limited to cases where a cross-border merger was carried out and existing employee co-determination rights could be affected.
With the transposition of the Mobility Directive, the European legal framework was extended to cover cross-border transfers of registered offices and demergers. This meant that adjustments were also required in the area of employee co-determination.
As part of the implementation process, the FMG has been completely revised. In future, the co-determination provisions will no longer apply solely to cross-border mergers, but also to cross-border transfers of registered offices and demergers. At the same time, employees’ rights to information and consultation are being strengthened, and existing co-determination rights are being protected against circumvention through cross-border structural measures.
Preliminary official review and abuse control
Official review mechanisms in connection with cross-border structural measures already existed under previous law. However, the reform significantly expands these and integrates them into a harmonised European registration procedure.
In future, the Office of Justice will check whether all legal requirements have been met and whether the protective rights of the affected stakeholders have been safeguarded. If the outcome is positive, a preliminary certificate will be issued, which will be transmitted via the European register interconnection system to the competent authorities of the participating EEA states.
A mechanism to prevent abuse is also now expressly provided for. This is intended to prevent cross-border restructuring from being used to circumvent labour, company, insolvency or other mandatory provisions.
Transitional provisions
To ensure legal certainty, the reform includes transitional provisions.
Relocations of registered offices that have already been approved, as well as certain cross-border mergers that have already been initiated, will continue to be treated in accordance with the previous law. This prevents ongoing transactions from having to switch to a new legal system whilst the process is underway.
Implications for practice
The reform strengthens Liechtenstein’s position as an attractive location for international holding, investment and group structures and creates a modern legal framework for cross-border restructuring within the EEA.
At the same time, the requirements for the planning, documentation and legal support of such transactions are increasing. In particular, the new procedural steps, disclosure requirements and safeguards make an early analysis of corporate law structuring essential.
For corporate groups, holding structures, M&A transactions and succession planning, the reform opens up additional structuring options, whilst at the same time increasing the requirements for legally compliant implementation.
We would be pleased to assist you with the legal analysis, structuring and implementation of cross-border restructuring projects.