New rules for cross-border mobility within the EU

New rules on intra-EU company mobility are proposed to enter into force on 31 January 2023. The proposal amends the rules on cross-border mergers, and introduces rules on cross-border demerger and cross-border conversion.

The Government proposes to amend the rules on cross-border mergers within the EU, and to introduce new rules on cross-border demerger and cross-border conversion. The proposals will, inter alia, make checks by government authorities stricter in order to deter criminal activity. The occasion for the proposals is an EU directive that aims to facilitate cross-border company mobility within the EU and the European Economic Area (EEA).

Increased regulatory control

In order to counteract the use of cross-border procedures for criminal or improper purposes, leading to or aimed at circumvention of EU or Swedish law, it is proposed to make checks by government authorities stricter. The Swedish Companies Registration Office will have a central role in such checks, and will consult with other public authorities that may have information relevant to the Swedish Companies Registration Office's examination of applications in a cross-border procedure.

Limited companies can cross borders in three ways

The new regulations will allow limited companies to move across national borders within the EU and EEA through cross-border merger, cross-border demerger or cross-border conversion. Several of the proposals also apply to economic associations and financial companies.

Cross-border merger

A cross-border merger involves a Swedish limited company merging with one or more equivalent legal entities in another Member State. In a cross-border merger, the transferee company assumes all the assets and liabilities of the transferor company. The transferor company is dissolved with the merger.

Consequences for mergers initiated before 31 January 2023

The proposal does not contain any provisional regulations. This means that a cross-border merger initiated under the current rules, and underway when the new rules enter into force, on 31 January 2023, may need to be re-done from scratch to comply with the new regulations.

Cross-border demerger

Cross-border demerger is a new procedure whereby a limited company is fully or partially divided into several new companies created by the demerger. Cross-border demerger takes place through a complete demerger, partial demerger or demerger by separation. The assets and liabilities of the transferor company are transferred in whole or in part to the transferee company at the time of the demerger.

Complete demerger

In a complete demerger, two or more transferee companies assume all the assets and liabilities of the transferor company. The demerger dissolves the transferor company, and its shareholders receive shares in the transferee company, or a combination of shares and cash.

Partial demerger

A partial demerger means that part of the assets and liabilities of the transferor company are assumed by one or more transferee companies. The transferor company lives on, and the shareholders of the company receive shares in the transferee company, or a combination of shares and cash.

Demerger by separation

In a demerger by separation, part of the assets and liabilities of the transferor company are transferred to one or more transferee companies. The transferor company lives on, and it is the transferor company that receives the shares in the transferee company.

Cross-border conversion

A cross-border conversion is a new procedure whereby a limited company, resident in one Member State, can be converted into an equivalent legal entity in another Member State. After the conversation, the company is subject to the legislation of the receiving Member State. A conversion does not require the company to move its head office or business activities to the new Member State.

Read more about the rules

Government bill:
Cross-border mobility of companies within the EU – Regeringen.se. External link.

EU Directive:
Directive of the European Parliament and the Council (EU) 2019/2121 External link.