ECJ decision


On August 28 2014 the Austrian Supreme Court submitted a request to the European Court of Justice (ECJ) (6 Ob 137/13 k) for a preliminary ruling on the interpretation of EU law regarding cross-border mergers.

A Cypriot subsidiary of an Austrian stock company issued subordinated loans to another Austrian stock company. The form and content of the notes and all rights and obligations of the holders and issuer were to be governed by German law. Subsequently, the Austrian stock company was nationalised and the core business was demerged into another stock company. As the transferring company, the Cypriot subsidiary was then merged into the remaining stock company as the assuming company.

AnchorECJ decision

The ECJ stated (C-483/14, April 7 2016) that in cases of merger by acquisition, all contracts entered into by the transferor company pass to the acquiring company without novation. For this reason, the law that applied to the contracts before the merger also applied to the underlying contracts after the merger.

Further, the ECJ ruled that EU member states must comply with the relevant protection of creditors provisions for cross-border mergers under Articles 13 to 15 of EU Directive 78/855/EEC. Thus, the national legislation governing the company continues to apply.

Article 15 of Directive 78/855/EEC aims to safeguard the interests of holders of securities, other than shares, to which special rights are attached. The ECJ has ruled that such special rights refer, in particular, to:

  • debentures exchangeable for shares;
  • debentures conferring a right of pre-emption over share capital to be issued; and
  • profit-sharing debentures and rights to be issued shares.

Ultimately, securities which grant their holders rights that are broader than the mere reimbursement of debts and stipulated interest constitute such special rights.

Article 15 of EU Directive 78/855/EEC was implemented in Austria by Section 226(3) of the Stock Corporation Act, which entitles the issuer of such securities to:

  • unilaterally terminate their legal relationship with the holders of the securities; and
  • pay the holders off.

The ECJ considers that Section 226(3) of the Stock Corporation Act – if interpreted as granting the issuer a right to terminate special rights – would not constitute an implementation of Article 15 of EU Directive 78/855/EEC, as neither the wording nor the purpose of the article grant an issuer the authority to terminate such special rights. In fact, Article 15 authorises the holder of the securities, not the issuer.


In the author's view, Article 15 of EU Directive 78/855/EEC does not grant any rights to the issuer, but imposes duties to protect creditors. These duties are inversely expressed through granting creditors a right of equal value in the acquiring company, but there is no provision which primarily entitles the issuer of such securities to unilaterally terminate its legal relationship with the holders of those securities. Section 226(3) of the Stock Corporation Act should be interpreted in accordance with Article 15 of EU Directive 78/855/EEC – namely, that holders of securities to which special rights are attached are entitled to have the securities repurchased by the acquiring company, but nothing more.

For further information on this topic please contact Fabian Kacic or Marco Thorbauer at Schoenherr by telephone (+43 1 5343 70) or email ([email protected] or m.thorbauer@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.