Albanian legislation recognises only mergers between companies with their principal place of business in Albania.
However, in light of Albania's obligation to bring into line with EU law, the Ministry of Economy, Trade and Energy recently introduced for discussion a draft law on cross-border mergers. The draft law focuses on the EU Cross-Border Mergers Directive (2005/56/EC).
The draft law aims to establish the terms, procedures and legal effects of a cross-border merger between at least one Albanian company (a limited liability company or a joint stock company) and a company with its principal place of business in an EU member state and a legal form set out in the directive.
Albanian companies that carry out activities in the collective investment sector are excluded from the scope of the draft law. Pursuant to the Law on Collective Investment Enterprises (10198/2009), such activities comprise the investment of funds in securities and other assets, and the distribution to shareholders of profits resulting from the administration of these funds.
The draft law also reflects the employment matters that generally arise in such transactions. In particular, it sets down provisions safeguarding the employee participation level of the country which is home to the merging company, and the position of creditors in the merging companies. It also provides that a cross-border merger may not be registered if unresolved creditor claims remain.
The draft law provides for three types of cross-border merger:
- merger by transfer of assets and liabilities from one or more companies to an existing company;
- merger by transfer of assets and liabilities from two or more companies to a newly established company; and
- merger by transfer of assets and liabilities from one company to another company which holds all securities or share capital of the transferring company.
In each case the transferring company or companies shall be dissolved without undergoing a liquidation procedure.
Regarding the actual merger process, the legal representatives of the companies shall prepare a draft agreement and a report detailing:
- the legal basis and economic grounds for the merger;
- its effects on the shareholders, creditors and employees of the participating companies; and
- the exchange ratio of the shares.
Following this, the legal representatives of both companies shall appoint an expert to assess the common grounds of the merger and prepare a report on whether the exchange ratio of the shares is fair and reasonable. However, no shares in the acquiring company shall be exchanged for shares in the target held by either:
- the acquiring company or a person acting in his or her own name but on the acquiring company's behalf; or
- the target or a person acting in his or her own name but on the target's behalf.
Once the cross-border merger has entered into effect, it cannot be declared null and void.
According to the draft law, the merger may be subject to regulatory approval from the Competition Authority, as well as from other regulatory authorities such as the Bank of Albania, the Authority of Financial Supervision (if insurance companies are involved) and other bodies, depending on the sector.
Even though a draft law is in place, merger approval remains uncertain. The main concern raised is the lack of reciprocity between Albanian companies, which, based on the draft law, can transact with European companies, and European companies, which, under the directive, cannot transact with companies from non-EU member states for the purpose of cross-border mergers.
For further information please contact Blerina Fani at Boga & Associates by telephone (+355 4225 1050), fax (+355 4225 1055) or email ([email protected]).