Estonia Commercial Code - Merger

Part IX MERGER, DIVISION AND TRANSFORMATION  

Chapter 31 MERGER  

Division 1 General Provisions  

§ 391. Methods of merger

 (1) A company (company being acquired) may merge with another company (acquiring company). The company being acquired shall be deemed to be dissolved.

 (2) Companies may also merge such that they form a new company. In this case, the merging companies shall be deemed to be dissolved.

 (3) Merger shall be effected without a liquidation proceeding.

 (4) The assets of a company being acquired, including its obligations, shall transfer to the acquiring company upon merger. Upon foundation of a new company, the assets of the merging companies, including their obligations, shall transfer to it.

 (5) The partners or shareholders of a company being acquired shall become partners or shareholders of the acquiring company upon merger. Upon foundation of a new company, the partners or shareholders of the merging companies shall become its partners or shareholders.

 (6) Merging companies may be of the same class or of different classes of companies entered in the commercial register in Estonia unless otherwise provided by law.

§ 392. Merger agreement

 (1) In order to merge, the management boards of or the partners entitled to represent the companies shall conclude a merger agreement. Rights and obligations shall arise from the merger agreement after approval of the agreement pursuant to the procedure provided for in § 397 of this Code. A merger agreement shall set out:
 1) the business names and registered offices of the companies;
 11) an agreement to transfer all the assets of the company being acquired to the acquiring company in exchange for a transfer of shares of the acquiring company;
 2) the share exchange ratio for the companies and the amount of additional payments if additional payments are made;
 3) the terms and conditions of transfer of the shares of the acquiring company;
 4) the date as of which the transferred shares shall grant the right to a share of profit of the acquiring company and the special conditions affecting this right;
 5) the rights which the acquiring company will grant to the partners or shareholders of the company being acquired, including the holders of preferred shares and convertible bonds of a public limited company;
 6) the consequences of merger for the employees of the company being acquired;
 7) the date as of which the transactions of the company being acquired shall be deemed to be undertaken by the acquiring company (merger balance sheet date);
 8) the remuneration paid to the auditor who audits the merger agreement and the advantages granted in connection with the merger to the members of the management boards and supervisory boards of the companies or the partners entitled to represent the companies.

 (2) The sum of additional payments prescribed in the merger agreement which are to be paid by an acquiring private limited company or public limited company to the partners or shareholders of the company being acquired shall not exceed one-tenth of the sum of the nominal values or book values of their exchanged shares.

 (3) If all shares of a company being acquired are held by the acquiring company, the merger agreement need not indicate the information specified in clauses (1) 2)–4) of this section.

 (4) A merger agreement shall be notarised.

 (5) If an approved merger agreement is conditional and a condition is not met within five years after conclusion of the agreement, a company may terminate the agreement by giving at least six months’ advance notice of termination unless the merger agreement prescribes a shorter term for advance notice.

§ 393. Merger report

 (1) The management boards of or the partners entitled to represent the merging companies shall prepare a written report (merger report) which shall explain and justify legally and economically the merger and merger agreement, including the share exchange ratio and amount of additional payments if additional payments are to be made. Difficulties relating to valuation shall be referred to separately in the report.

 (2) A merger report need not be prepared if the only share or all the shares of the company being acquired are held by the acquiring company, or if this is agreed to by all the partners of the merging company or all the shareholders of the merging public limited companies.

 (3) Merging companies may prepare a joint merger report.

 (4) If the acquiring company belongs to a group, the merger report shall also set out information necessary for the merger concerning the other companies belonging to the group.

 (5) A merger report need not set out information, publication of which may result in significant damage to a company being acquired or a company belonging to the same group with such company. In such case, the reason for failure to submit the information shall be set out in the report.

§ 394. Audit

 (1) An auditor shall audit a merger agreement in the cases provided by law.

 (2) An auditor need not audit a merger agreement if all shares of the company being acquired are held by the acquiring company, or if all the partners of the merging company or all the shareholders of the merging public limited companies agree that an auditor need not audit the merger agreement.

§ 395. Appointment of auditor

  An auditor shall be appointed by the management board or the managing partners of the merging company. One auditor may be appointed for some or all of the merging companies.

§ 396. Report and liability of auditor

 (1) The auditor shall prepare a written report concerning the results of the audit of a merger agreement. The auditors who audit a merger agreement may prepare a joint report for the companies.

 (2) A report shall indicate whether the share exchange ratio and additional payments indicated in the merger agreement are appropriate consideration for the partners or shareholders of the company being acquired, and whether the merger may bring about damage to the interests of the creditors of the company.

 (21) Additionally, the auditor's report shall set out the method which was used upon determination of the exchange ratio of shares of the companies, the difficulties relating to determination of the exchange ratio, whether the used method is appropriate for determination of the exchange ratio and other methods for determination of the exchange ratio. If different methods are used upon determination of the exchange ratio, the exchange ratio in each method and the importance of results obtained on the basis of each method upon determination of the exchange ratio shall be set out.

 (22) An auditor's report need not set out information, publication of which may result in significant damage to a company being acquired or a company belonging to the same group with such company. In such case, the reason for failure to submit the information shall be set out in the report.

 (3) An auditor shall be liable, in the same manner as upon auditing an annual report, for the damage caused by inaccurate auditing of the merger contract to the company, its shareholders or creditors.

 (4) An auditor has the same rights and obligations upon auditing a merger contract as upon auditing an annual report. An auditor also has the right to obtain information necessary for auditing from other companies which belong to the same group with the company being acquired.

§ 397. Merger resolution

 (1) Rights and obligations shall arise from a merger agreement if the merger agreement is approved by all merging companies. A merger resolution shall be in writing.

 (2) The partners or shareholders shall be provided with the opportunity to examine the merger agreement, merger report and auditor’s report at least two weeks before deciding on approval of the merger agreement unless otherwise provided by law.

 (3) A partner or shareholder may demand a copy of the merger agreement or resolution.

 (4) The management boards of or the partners entitled to represent the merging companies, prior to deciding on the approval of the merger agreement, shall notify the partners or the general meeting of all material changes in the assets of the company which occur in the interim between the entry into the merger agreement and deciding on the approval of the merger agreement. The management boards of or the partners entitled to represent the merging companies shall notify of the changes specified in the previous sentence also the management boards of or the partners entitled to represent the other merging companies, who shall notify of the above changes the partners or the general meeting of their companies.

 (5) The obligations specified in subsection (4) of this section need not be performed if the only share or all the shares of the company being acquired are held by the acquiring company, or if this is agreed to by all the partners or shareholders of the merging company.

§ 398. Contestation of merger resolution and compensation for damage

 (1) On the petition of a partner, shareholder or member of the management board or supervisory board, a court may declare invalid a merger resolution which is in conflict with the law, the partnership agreement or the articles of association if the request is submitted within one month after the resolution is made.

 (2) The merger resolution of a company being acquired shall not be declared invalid on the basis that the share exchange ratio is fixed too low.

 (3) If the share exchange ratio is fixed too low, a partner or shareholder may demand a refund from the acquiring company which may exceed the amount specified in subsection 392 (2) of this Code.

 (4) The acquiring company shall pay a fine for delay on an unpaid refund in the amount provided by law as of entry of the merger in the register of the registered office of the acquiring company. The above does not preclude or restrict the right to file a claim for compensation of damages exceeding the amount of the fine for delay.

§ 399. Protection of creditors

 (1) Immediately after a merger has been entered in the commercial register of the registered office of the acquiring company, the acquiring company shall publish a merger notice to the creditors of the acquired companies in the publication Ametlikud Teadaanded, informing them of the possibility to submit, within six months after the publication of the notice, their claims to the acquiring company in order to receive a security.

 (2) The acquiring company shall secure the claims submitted by the creditors of the companies being acquired within six months after the publication of the notice specified in subsection (1) of this section, if the creditors have no possibility to demand satisfaction of the claims and they prove that the merger may endanger the fulfilment of the claims.

§ 400. Submission of petition to commercial register

 (1) The management board of or the partners entitled to represent a merging company shall submit, nor earlier than after one month of the approval of the merger resolution, a petition for entry of the merger in the commercial register. The following shall be appended to the petition:
 1) a notarised copy of the merger agreement;
 2) the merger resolution;
 3) the minutes of the meeting of the partners or shareholders if the merger resolution is made at a meeting;
 4) the permission for merger, if required;
 5) the merger report or the agreements not to prepare one;
 6) the auditor's report, if required, or the agreements not to prepare one;
 7) the final balance sheet of the company being acquired if the company being acquired submits the petition;

 (8)
 9) decision of the Competition Board to grant permission for a concentration if the obligation to request such permission arises from the Competition Act;
 10) if the shares of a merging company are registered in the Estonian Central Register of Securities, the confirmation of the registrar of the Estonian Central Register of Securities that the management board of the merging company has informed the registrar of the merger;
[RT I 2006, 55, 407 - entry into force 01.01.2007]
 11) the interim balance sheet or the agreements not to prepare one.

 (2) A registrar may enter a merger in the register only if the final balance sheet of the company being acquired is prepared as at a date not earlier than eight months before submission of the petition to the commercial register. The final balance sheet is prepared pursuant to the requirements established for the balance sheet that constitutes part of the annual report, and the approval of the final balance sheet and conducting the audit thereof is governed by the provisions concerning the approval of the annual report and conducting an audit. The final balance sheet shall be prepared using the same accounting policies and presentation which were used in the preparation of the balance sheet that constitutes part of the last annual report. The final balance sheet shall be prepared as at the day preceding the merger balance sheet date.

 (3) In a petition, the members of the management board of or the partners entitled to represent the company shall confirm the merger resolution is not contested, or that a corresponding petition has been denied, or that the adoption of the merger resolution was not required.

 (4) The members of the management board of or the partners entitled to represent the acquiring company may also submit a petition for entry of the company being acquired in the commercial register.

§ 401. Business name of acquiring company

 (1) An acquiring company may continue activities under the business name of the company being acquired.

 (2) If a partner or shareholder of the company being acquired is a natural person who no longer participates in the acquiring company, the acquiring company may continue to use his or her name in the business name only with the written consent of him or her, or of his or her successors.

§ 402. Merger entry

 (1) A merger shall be entered in the commercial register of the registered office of the acquiring company if it is entered in the commercial registers of the registered offices of all companies being acquired. Entries in the commercial registers of the registered offices of the companies being acquired shall indicate that the merger shall be deemed to be effected as of entry in the commercial register of the registered office of the acquiring company.

 (2) The petitions related to merger shall be joined in one proceeding, which shall be processed by one registrar. If necessary, the registrar of the other registered office shall make the necessary documents available to the registrar processing the petitions.

 (3) If the shares of a company being acquired are registered with the Estonian Central Register of Securities, the registrar of the commercial register shall promptly notify the registrar of the Estonian Central Register of Securities of the merger.

§ 403. Legal effect of entry and compensation for damage caused by merger

 (1) The assets of a company being acquired shall transfer to the acquiring company as of entry of the merger in the commercial register of the registered office of the acquiring company. After entry of the merger in the commercial register of the registered office of the acquiring company, entries regarding the transfer of assets shall be made in the registers on the petition of the acquiring company.

 (2) A company being acquired shall be deemed to be dissolved as of entry of the merger in the commercial register of the registered office of the acquiring company. The registrar shall delete the company being acquired from the commercial register.

 (3) The partners or shareholders of the company being acquired shall become partners or shareholders of the acquiring company as of entry of the merger in the commercial register of the registered office of the acquiring company, and their shares shall be exchanged for shares of the acquiring company. The rights of third persons with regard to the exchanged shares shall remain valid with regard to the shares of the acquiring company.

 (4) The shares of a company being acquired which are held by the acquiring company or by the company being acquired itself, or by a person acting in his or her own name but at the expense of the company shall not be exchanged and shall become invalid.

 (5) A merger shall not be contested after its entry in the commercial register of the registered office of the acquiring company.

 (6) The members of the management board and supervisory board, or the managing partners of a merging company shall be solidarily liable to the company, the partners or shareholders, or the creditors of the company for any damage wrongfully caused by the merger.

 (7) The limitation period for a claim specified in subsection (6) of this section shall be five years from entry of the merger in the commercial register of the registered office of the acquiring company.

§ 404. Compensation upon merger of different classes of companies

 (1) Upon merger of companies of different classes, a partner or shareholder of the company being acquired who opposes the merger resolution may, within two months after entry of the merger in the commercial register of the registered office of the acquiring company, demand that the acquiring company acquire the exchanged share or shares of the partner or shareholder for monetary compensation. The monetary compensation shall be equal to the sum of money which the partner or shareholder would have received from the distribution of remaining assets upon liquidation of the company if the company had been liquidated at the time the merger resolution was made.

 (2) The provisions of clauses 162 (2) 11) and 283 (2) 2) of this Code shall not apply to acquisition of shares by a company on the bases specified in subsection (1) of this section.

 (3) The names of partners or shareholders who oppose the merger resolution and who wish to exercise the rights specified in this section shall be appended to the merger resolution. Opposition to the merger resolution shall be confirmed by each partner or shareholder by the signature of the partner or shareholder.

 (4) If the acquiring company is a general partnership or limited partnership, the compensation specified in subsection (1) of this section may be demanded by a partner who departs from the company.

 (5) An acquiring company shall pay a fine for delay on compensation in the amount provided by law as of entry of the merger in the commercial register of the registered office of the acquiring company.

 (6) If a partner or shareholder who opposes the merger resolution does not demand the compensation specified in this section, the partner or shareholder may transfer a share or shares within two months regardless of the restrictions on disposal provided by law or prescribed by the articles of association.

§ 405. Merger whereby new company founded

 (1) The provisions of this chapter together with amendments prescribed by law shall apply to a merger whereby a new company is founded.

 (2) The provisions regarding a company being acquired shall apply to the merging companies, and the provisions regarding an acquiring company shall apply to the company being founded. The companies shall be deemed to be merged as of entry of the new company in the register.

 (3) In the foundation of a new company, the foundation provisions for the class of company shall apply unless the provisions of this chapter provide otherwise. The founders shall be the merging companies.

 (4) In addition to the provisions of subsection 392 (1) of this Code, the merger agreement shall set out the business name and registered office of the new company. The articles of association or partnership agreement of the company being founded, which shall be approved by the merger resolution, shall be appended to the merger agreement.

 (5) The management board of or the partners entitled to represent a merging company shall submit a petition for entry of the merger in the commercial register.

 (6) The management boards of or the partners entitled to represent the merging companies shall submit a joint petition for entry of the new company in the commercial register of its registered office.

Division 2 General Partnership or Limited Partnership as Merging Company  

§ 406. Meaning of contribution

  For the purposes of this chapter, the contribution of a partner of a general partnership or limited partnership shall be deemed to be a share.

§ 407. Content of merger agreement

 (1) If the acquiring company is a general partnership or limited partnership, the merger agreement shall, in addition to subsection 392 (1) of this Code, set out with regard to each partner or shareholder of the company being acquired whether the partner or shareholder will become a general partner or limited partner of the acquiring company and the amount of the contribution of the partner or shareholder.

 (2) A limited partner of a limited partnership, a shareholder of a private limited company or a shareholder of a public limited company being acquired who opposes the merger resolution shall become a limited partner of the acquiring company.

§ 408. Merger report

  A merger report need not be prepared if the partners of a merging general partnership or limited partnership are managing partners of the company.

§ 409. Merger resolution

 (1) A merger resolution shall be adopted if all the partners vote in favour.

 (2) A partnership agreement may prescribe that the merger resolution shall be adopted if more than two-thirds of the partners vote in favour. If a partner of a general partnership or a general partner of a limited partnership being acquired opposes the merger resolution, the partner or general partner shall become a limited partner of the acquiring company.

 (3) If a merger resolution may be made by a majority vote pursuant to the partnership agreement, a partner may demand an audit of the merger agreement at the expense of the company.

§ 410. Liability of partners

 (1) If a general partnership or limited partnership merges with a limited partnership, private limited company or public limited company, a general partner shall be liable for the obligations of the company being acquired for which the due date for performance has arrived or will arrive within five years after entry of the merger in the commercial register of the registered office of the acquiring company.

 (2) If a general partnership or limited partnership merges with a limited partnership in which a general partner of the company being acquired is to become a general partner, the liability restriction prescribed in subsection (1) of this section shall not apply with regard to the general partner.

Division 3 Private Limited Company as Merging Company  

§ 411. Audit of merger agreement

  A shareholder of a merging private limited company may demand an audit of the merger agreement at the expense of the private limited company. The corresponding written request shall be submitted within ten days as of providing the opportunity to examine the documents specified in subsection 397 (2) of this Code.

§ 412. Merger resolution

 (1) A merger resolution shall be adopted if at least two-thirds of the votes represented at the meeting of shareholders are in favour, and the articles of association do not prescribe a greater majority requirement.

 (2) If a merger resolution is made pursuant to the procedure provided for in subsection 173 (2) of this Code, the resolution shall be adopted if at least two-thirds of the votes of the shareholders are in favour unless the articles of association prescribe a greater majority requirement.

 (21) If the special rights of a shareholder in managing a company are damaged or restricted by a merger, the consent of such shareholder is necessary for adopting the merger resolution.

 (22) If the acquiring company is a private limited company, the contribution for which shares has not been completely paid, the consent of all the partners or shareholders of the company being acquired is necessary for the adoption of the merger resolution. If the company being acquired is a private limited company, the contribution for which shares has not been completely paid, the consent of all the partners or shareholders of the acquiring company is necessary for the adoption of the merger resolution.

 (3) If at least nine-tenths of the share capital of a private limited company or of the share capital of a public limited company being acquired is held by the acquiring private limited company, approval of the merger agreement by a merger resolution of the acquiring private limited company shall not be required for merger. The own shares of the company being acquired shall not be taken into account in the determination of representation. The acquiring private limited company at least two weeks before deciding on the approval of the merger agreement by the company being acquired or, if the merger agreement need not be approved at the meeting of shareholders or the general meeting of the company being acquired, at least two weeks before the creation of the rights and obligations arising from the merger agreement shall perform the disclosure obligations specified in subsection 397 (2) of this Code. A merger resolution is necessary if this is demanded within the term specified in the previous sentence by shareholders of the acquiring private limited company whose shares represent at least one-twentieth of the share capital and unless the articles of association prescribe a lower representation requirement.

 (4) If the only share of the private limited company being acquired is held by the acquiring private limited company or public limited company, the approval of the merger agreement by the merger resolution of the private limited company being acquired is not required for the merger. The own share of the private limited company being acquired shall not be taken into account in the determination of representation.

§ 413. Increase of share capital of acquiring company

 (1) Upon an increase of share capital of an acquiring private limited company in connection with merger, other shareholders shall not have the pre-emptive right to the acquisition of shares (§ 193).

 (2) In addition to the documents specified in subsection 196 (1) of this Code, notarised copies of the merger agreement and the merger resolutions of the merging companies shall be appended to the petition for entry of the increase of share capital in the commercial register.

 (3) In case of the increase of the share capital of the acquiring private limited company, the merger shall not be entered in the register of the registered office of the acquiring private limited company before the increase of the share capital has been entered in the commercial register.

 (4) The acquiring private limited company shall not increase the share capital for conducting the merger to the extent to which the shares of the company being acquired are held by the acquiring private limited company or by the company being acquired itself, or by a person acting in his or her own name but at the expense of the company.

§ 414. Transfer of shares upon merger

 (1) An acquiring private limited company shall first transfer its own share of the acquiring private limited company to the partners or shareholders of the company being acquired in the exchange of their shares.

 (2) If the own share of an acquiring private limited company is transferred to the partners or shareholders of the company being acquired, it may be divided without observing the restrictions on transfer provided by law and the articles of association and without taking account of the minimum permitted nominal value of a share.

§ 415. [Repealed - RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 416. Valuation of assets to be transferred

 (1) If the acquiring company is a private limited company whose share capital is to be increased in connection with the merger or if a new private limited company is to be founded upon merger, the procedure prescribed for valuation of a non-monetary contribution of a private limited company (§ 143) shall be used to assess whether the assets of the companies being acquired are sufficient for the increase of share capital or for the share capital of the private limited company being founded. Documents certifying the valuation of the assets shall be submitted to the commercial register together with the merger petition.

 (2) The provisions of subsection (1) of this section shall not apply if the merger agreement is audited by an auditor. In auditing the merger agreement, the auditor shall also provide the assessment of the fact whether the assets of the merging companies are sufficient for increasing the share capital or for the share capital of a private limited company being founded.

§ 417. Merger whereby new private limited company founded

 (1) The provisions of § 138 shall not apply to a merger of companies whereby a new private limited company is founded.

 (2) Upon a merger whereby a new private limited company is founded, the merger agreement shall, in addition to the provisions of subsections 392 (1) and 405 (4) of this Code, set out the amount of share capital and the members of the management board of the private limited company being founded. If a supervisory board is to be formed, the members of the supervisory board shall also be set out.

Division 4 Public Limited Company as Merging Company  

§ 418. Audit

  Upon merger of a public limited company, an auditor shall audit the merger agreement.

§ 419. Preparation of general meeting

 (1) At least one month before the general meeting to decide on merger, the management board shall present the following to the shareholders for examination at the registered office of the public limited company:
 1) the merger agreement;
 2) the three preceding annual reports of the merging companies;
 3) merger reports of merging companies;
 4) sworn auditor's reports of merging companies.

 (2) At the request of a shareholder, he or she shall be immediately provided free of charge either complete or partial copy, based on the shareholder's wish, of the documents specified in subsections (1) and (3) of this section. Upon the shareholder's consent, the copy may be sent to his or her e-mail address.

 (21) If a public limited company pursuant to § 63 of this Code has provided to the registrar its homepage address, to fulfil the requirements specified in subsections (1) and (2) of this section it may publish the documents on its homepage in a way which provides the opportunity for saving and printing these. The documents shall be available on the homepage of the public limited company within one month prior to the general meeting and until the end of the general meeting.

 (3) If the last annual report of a merging public limited company is prepared in respect to financial year, which ended earlier than six months prior to the entry into the merger agreement, the balance sheet (interim balance sheet) compliant with the requirements established for the balance sheet that constitutes part of the annual report shall be prepared as at no earlier than the first day of the third month preceding the entry into the merger agreement. The interim balance sheet shall be prepared using the same accounting policies and presentation which were used in the preparation of the balance sheet that constitutes part of the last annual report. The interim balance sheet shall be submitted to shareholders for examination pursuant to the procedure specified in subsections (1)–(21) of this section. The interim balance sheet need not be prepared if all the shareholders of the merging public limited companies agree thereto. Instead of the interim balance sheet, the half-yearly report disclosed pursuant to § 18411 of the Securities Market Act may be submitted to shareholders for examination.

 (4) At least one month prior to the general meeting deciding on the merger, the management board shall submit the merger agreement to the registrar of the commercial register or disclose it on the homepage of the public limited company. Upon the disclosure of the merger agreement on the homepage of the public limited company, it shall be available to the public free of charge until the end of the general meeting. In addition, the management board shall publish in the official publication Ametlikud Teadaanded a notice concerning the entry into the merger agreement. The notice shall indicate where or at which homepage address it is possible to examine the merger agreement and other documents specified in subsection (1) of this section and receive copies of these documents. Upon the disclosure of the merger agreement on the homepage of the public limited company, the notice shall also indicate the disclosure date of the merger agreement.

 (5) If the public limited company is required to make public the regulated information in the central recording system for information specified in subsection 1846 (5) of the Securities Market Act, the merger agreement may be disclosed in such system instead of the homepage of the public limited company. In the remaining part, subsection (4) of this section shall apply.

§ 420. Organisation of general meeting

 (1) At the general meeting, the management board shall explain the legal and economic consequences of the merger, including the exchange of shares.

 (2) At the general meeting, the supervisory board shall present its opinion concerning the merger.

 (3) At the general meeting, information concerning circumstances related to other merging companies shall also be given to a shareholder on the demand of the shareholder.

§ 421. Merger resolution

 (1) A merger resolution shall be adopted if at least two-thirds of the votes represented at the general meeting are in favour, and the articles of association do not prescribe a greater majority requirement.

 (2) If a public limited company has several classes of shares, the merger resolution shall be adopted if, in addition to the provisions of subsection (1) of this section, at least two-thirds of the holders of each class of shares vote in favour of the resolution, and the articles of association do not prescribe a greater majority requirement. If a resolution is made pursuant to the procedure provided for in subsection 297 (2), at least two-thirds of the votes represented of each class of shares at the general meeting must vote in favour of the resolution unless the articles of association prescribe a greater majority requirement.

 (3) If the acquiring company is not a public limited company, the holders of preferred shares and convertible bonds of the public limited company being acquired shall participate in the determination of representation and in voting on the same bases as the shareholders.

 (4) If at least nine-tenths of the share capital of a private limited company or of the share capital of a public limited company being acquired is held by the acquiring public limited company, approval of the merger agreement by a merger resolution of the acquiring public limited company shall not be required for merger. The own shares of the company being acquired shall not be taken into account in the determination of representation. The acquiring public limited company at least one month before deciding on the approval of the merger agreement by the company being acquired or, if the merger agreement need not be approved at the meeting of shareholders or the general meeting of the company being acquired, at least one month before the creation of the rights and obligations arising from the merger agreement shall perform the disclosure obligations specified in § 419 of this Code. A merger resolution is necessary if this is demanded within the term specified in the previous sentence by shareholders of the acquiring public limited company whose shares represent at least one-twentieth of the share capital and unless the articles of association prescribe a lower representation requirement.

 (5) If all the shares of the public limited company being acquired are held by the acquiring private limited company or public limited company, the approval of the merger agreement by the merger resolution of the public limited company being acquired is not required for the merger. The own shares of the public limited company being acquired shall not be taken into account in the determination of representation. The public limited company being acquired shall at least one month before the creation of the rights and obligations arising from the merger agreement perform the disclosure obligations specified in subsections 419 (4) and (5) of this Code.

§ 4211. Takeover of shares for conducting merger

 (1) If the acquiring public limited company holds at least nine-tenths of the share capital of the public limited company being acquired, the general meeting of the public limited company being acquired, on the application of the majority shareholder, may decide within three months as of the entry into the merger agreement on the takeover of the shares held by the minority shareholders of the public limited company being acquired by the majority shareholder pursuant to the procedure specified in §§ 3631–36310 of this Code taking into account the peculiarities provided for in this section.

 (2) In the determining the amount of the share capital represented by the majority shareholder's shares, the second sentence of subsection 3631 (2) of this Code shall not apply.

 (3) A resolution on the takeover of shares belonging to minority shareholders shall be adopted if at least nine-tenths of the votes represented at the general meeting by shares are in favour.

 (4) The merger agreement shall state that due to the merger the takeover of the shares held by the minority shareholders of the public limited company being acquired is taking place.

 (5) The merger agreement shall be submitted to shareholders for examination pursuant to the procedure specified in § 3635 of this Code.

 (6) A notarised copy of the merger agreement shall be enclosed to the notice specified in § 36310 of this Code.

§ 422. Increase of share capital of acquiring public limited company

 (1) Upon an increase of share capital of an acquiring public limited company in connection with a merger, other shareholders shall not have the pre-emptive right to the acquisition of shares (§ 345).

 (2) In addition to the documents specified in subsection 343 (1) of this Code, notarised copies of the merger agreement and the merger resolutions of the merging companies shall be appended to the petition for entry of the increase of share capital in the register.

 (3) In case of the increase of the share capital of the acquiring public limited company, the merger shall not be entered in the register of the registered office of the acquiring public limited company before the increase of the share capital has been entered in the commercial register.

 (4) The acquiring public limited company shall not increase the share capital for conducting the merger to the extent to which the shares of the company being acquired are held by the acquiring public limited company or by the company being acquired itself, or by a person acting in his or her own name but at the expense of the company.

§ 423. Transfer of shares upon merger

  An acquiring public limited company shall first transfer its own shares of the acquiring public limited company to the partners or shareholders of the company being acquired in the exchange of their shares.

§ 424. Valuation of assets to be transferred

 (1) If the acquiring company is a public limited company whose share capital is to be increased in connection with the merger or if a new public limited company is to be founded upon merger, the procedure prescribed for valuation of a non-monetary contribution of a public limited company (§ 249) shall be used to assess whether the assets of the companies being acquired are sufficient for the increase of share capital or for the share capital of the public limited company being founded. Documents certifying the valuation of the assets shall be submitted to the commercial register together with the merger petition.

 (2) The provisions of subsection (1) of this section shall not apply if the merger agreement is audited by an auditor. In auditing the merger agreement, the auditor shall also provide the assessment of the fact whether the assets of the merging companies are sufficient for increasing the share capital or for the share capital of a public limited company being founded.

§ 425. [Repealed - RT I 2000, 57, 373 - entry into force 01.01.2001]

§ 426. Protection of holders of preferred shares or convertible bonds

 (1) The rights of holders of preferred shares or convertible bonds of a public limited company being acquired which they had in the public limited company being acquired shall be retained in the acquiring public limited company.

 (2) If the acquiring company is not a public limited company, the holders of preferred shares or convertible bonds shall acquire shares of the acquiring company on the same bases as the shareholders of the public limited company being acquired. Upon opposition to the merger agreement, they may claim compensation pursuant to § 404 of this Code.

§ 427. Merger whereby new public limited company founded

 (1) The provisions of §§ 243 of this Code shall not apply to a merger of companies whereby a new public limited company is founded.

 (2) Upon a merger whereby a new public limited company is founded, the merger agreement shall, in addition to the provisions of subsections 392 (1) and 405 (4) of this Code, set out the amount of share capital and the members of the management board and supervisory board of the public limited company being founded.

Division 5 Commercial association as merging company  

§ 428. Commercial association as merging company

  A commercial association may only merge with a commercial association.

§ 429. Contribution and membership

 (1) For the purposes of this chapter, a contribution to a commercial association shall be deemed to be a share.

 (2) For the purposes of this chapter, a member of a commercial association shall be deemed to be a shareholder.

§ 430. Audit of merger agreement

  A member of a merging commercial association may demand an audit of the merger agreement at the expense of the commercial association. The corresponding written request shall be submitted within ten days as of providing the opportunity to examine the documents specified in subsection 397 (2) of this Code.

§ 431. Merger resolution

  A merger resolution shall be adopted if at least two-thirds of the members who participate in the meeting vote in favour, and the articles of association do not prescribe a greater majority requirement.

§ 432. Valuation of assets to be transferred

  The assets to be transferred of a commercial association being acquired shall be valuated pursuant to the procedure prescribed for valuation of a non-monetary contribution of an association. Documents certifying the valuation of the assets shall be submitted to the commercial register.
[RT I 2007, 67, 413 - entry into force 28.12.2007]

§ 433. Merger whereby new commercial association founded

  Upon a merger whereby a new commercial association is founded, the merger agreement shall, in addition to the provisions of subsections 392 (1) and 405 (4) of this Code, set out the members of the management board of the association being founded. If a supervisory board is to be formed, the members of the supervisory board shall also be set out.

Division 6 Cross-border merger  
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4331. Cross-border merger

 (1) A public limited company or private limited company registered in the Estonian commercial register may merge with another limited liability company founded on the basis of the law of another State which is a Contracting Party to the EEA Agreement (hereinafter Contracting State) which conforms to the requirements provided in Article 2.1 of the Directive 2005/56/EC of the European Parliament and of the Council of on cross-border mergers of limited liability companies (OJ L 310, 25.11.2005, pp 1–9) and whose registered office, location of the management board or principal place of business is in a Contracting State (hereinafter cross-border merger).

 (2) The provisions of this Chapter apply to the participation in a cross-border merger of companies registered or subject to registration in the Estonian commercial register unless otherwise provided by law concerning the cross-border merger.

 (3) Commercial associations are prohibited to participate in a cross-border merger as the company being acquired or the acquiring company.

 (4) In the cases and pursuant to the procedure provided in § 412 of the Community-scale Involvement of Employees Act, the employees of the acquiring company shall be involved to participate in the management of the acquiring company.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4332. Merger agreement

 (1) In addition to the provisions on subsection 392 (1) of this Code, the merger agreement shall set forth:
 1) the type of the company being acquired and the acquiring company;
 2) in the case of the right to receive a share of the profit, the specifics for performance of such right;
 3) information concerning the evaluation of the assets to be transferred to the acquiring company;
 4) the dates of the financial statements used for determining the terms and conditions for the merger;
 5) in the case provided by law, the data concerning the participation by the employees in the management of the company.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (2) If all the shares granting voting rights of the company being acquired belong to the acquiring company, the data specified in clauses 392 (1) 2)-4) of this Code and clause (1) 2) of this section need not be set forth in the merger agreement.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (3) The articles of association of the acquiring company shall also be annexed to the merger agreement.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (4) The sum of additional payments prescribed in the merger agreement which are to be paid by the acquiring company to the partners or shareholders of the company being acquired may exceed one-tenth of the sum of the nominal values or book values of the shares of the acquiring company if permitted by the law of the Contracting State applicable to the acquiring company participating in the cross-border merger.

 (5) Subsections 419 (4) and (5) of this Code apply to the disclosure of the merger agreement. A notice published in Ametlikud Teadaanded shall set forth the following:
 1) the type, business name and registered office of each merging company;
 2) the register in which the merger of each merging company has been registered and the number of the register entry;
 3) a reference that the merger agreement contains information concerning the protection of minority partners or shareholders and creditors.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (6) In case of cross-border merger pursuant to subsection 4338 (1) of this Code, the merger agreement upon the disclosure thereof on the company's homepage or in the central recording system for information specified in subsection 1846 (5) of the Securities Market Act shall be available to the public free of charge for at least two months as of the disclosure of the notice in the official publication Ametlikud Teadaanded.

§ 4333. Merger report

 (1) In the case of cross-border merger, the merger report shall also set out the effect of the merger on the employees and creditors of the public limited company or the private limited company. The report shall also include, as an annex, the opinion of the representative of the employees or the trade union if such opinion was provided at least one month prior to the meeting or general meeting which passed the resolution on the merger.

 (2) Subsection 393 (2) does not apply to the merger report.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4334. Audit

 (1) Upon cross-border merger, an auditor shall audit the merger agreement.

 (2) Upon cross-border merger, one or several common auditors may be appointed to several or all of the companies being acquired. A common auditor or auditors shall be appointed only by or with permission of a court or administrative agency of the Contracting State under whose jurisdiction one of companies being acquired or the acquiring company falls.

 (3) Based on the request of the merging companies, an Estonian court shall appoint the auditor or auditors specified in subsection (2) of this section who shall have the expertise and skills necessary for auditing a cross-border merger. The court shall also specify the procedure for and amount of remuneration for the auditor or auditors it appoints.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4335. Merger resolution

 (1) At least one month before the meeting or general meeting which decides on the merger, the partners or shareholders shall be granted an opportunity to examine the merger agreement, merger report and auditor's opinion. The merger report shall be made available to the representative of the employees or trade union of the company or, in the absence thereof, to the employees of the company at least one month prior to the meeting or general meeting which decides on the merger.

 (2) If all the shares of the company being acquired granting voting rights belong to the acquiring company, the meeting or general meeting of the company being acquired which decides on the merger need not approve of the merger agreement.

 (3) Instead of subsection 421 (3) of this Code, subsection 421 (4) thereto applies to private limited companies entered in the Estonian commercial register which participate in a cross-border merger.

 (4) The meeting or general meeting of the company being acquired may set, as a condition for approval of the merger resolution, that the acquiring company has expressly approved of the procedure for participation by the employees of the acquiring company in the management of the company.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4336. Share exchange ratio

 (1) If, based on the law of the other Contracting State under whose jurisdiction a company participating in the merger falls, the partners or shareholders have no right to demand a refund within the meaning of subsection 398 (3) of this Code, then a partner or shareholder of a company registered in the Estonian commercial register has the right to demand such refund only if a company participating in the merger who falls under the jurisdiction of the other Contracting State recognises, in its merger agreement, the right to demand such refund.

 (2) Upon cross-border merger, subsections 398 (3) and (4) also apply, if a participant in the merger is a company who falls under the law of another Contracting State which grants partners and shareholders the right to demand refund in the case of a low share exchange ratio, and if the matter falls under the jurisdiction of the Estonian court.

 (3) In the cases not specified in subsections (1) and (2) of this section and if the acquiring company falls under the jurisdiction of another Contracting State, the merger resolution of a company being acquired registered in the Estonian commercial register may also be declared invalid for the reason that the share exchange ratio established is too low.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4337. Compensation upon cross-border merger

  If the acquiring company falls under the jurisdiction of another Contracting State, the partner or shareholder of a company being acquired entered in the Estonian commercial register who does not agree to the merger resolution has the right, pursuant to the procedure provided in § 404 of this Code, to transfer the shares thereof or to demand that the acquiring company acquire the exchanged share or shares of the partner or shareholder for monetary compensation.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4338. Protection of creditors

 (1) The provisions of § 399 of this Code do not apply to a cross-border merger of a company registered in the commercial register of Estonia where the acquiring company falls under the jurisdiction of another Contracting State.

 (2) In the case of a cross-border merger of a company registered in the commercial register of Estonia where the acquiring company falls under the jurisdiction of another Contracting State, the creditors of the public limited company or private limited company have the right, within two months after receiving the notice specified in subsection 419 (4) of this Code, to submit a claim to receive a security.

 (3) Only a creditor who is not able to demand satisfaction of claims and who provides proof that the merger is likely to endanger the fulfilment of the claims thereof has the right to receive the security provided in subsection (2) of this section.

 (4) Based on subsections (2) and (3) of this section, a creditor has the right to demand a security for claims which arise before or within fifteen days after the publication of the notice specified in subsection 419 (4) of this Code.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

§ 4339. Merger entry and merger certificate

 (1) Section 400 of this Code applies to the application submitted to the commercial register by an acquiring company or company being acquired registered or to be registered in the Estonian commercial register. In addition to the above, the members of the management board shall confirm, in the application, that the creditors of the company have been given a security pursuant to § 4338 of this Code.

 (2) If a company registered in the Estonian commercial register participates in a cross-border merger as the company being acquired, the registrar shall issue a certificate to the company which confirms that the company being acquired has performed the required pre-merger acts and the merger has been entered in the commercial register. The certificate shall set out the date of the entry and also shall make reference, if relevant, to the court proceeding performed to check the exchange ratio provided in subsections 4336 (1) and (2) of this Code.

 (3) The Minister of Justice shall establish the procedure for preparing and issuing of the certificate on cross-border merger specified in subsection (2) of this section.

 (4) If a company registered in the Estonian commercial register participates in a cross-border merger as the company being acquired, an entry is made in the commercial register of the company being acquired stating that the merger is deemed to have taken place pursuant to the law of the Contracting State under whose jurisdiction the acquiring company falls. After receiving a notice concerning the merger having taken place from a court, notary or other competent authority of the Contracting State under whose jurisdiction the acquiring company falls, the registrar shall make an entry in the commercial register concerning the date on which, according to the received notice, the merger took place, and if the shares of the company being acquired are registered in the Estonian Central Register of Securities, shall also inform the registrar of the Estonian Central Register of Securities thereof.

 (5) After performing the acts specified in subsection (4) of this section, the registrar shall forward all the documents which have been submitted to it concerning the company being acquired by electronic means to the court, notary or other competent authority of the Contracting State under whose law the acquiring company falls.

 (6) If a company registered or to be registered in the Estonian commercial register participates in a cross-border merger as the acquiring company, the company being acquired which falls under the jurisdiction of a Contracting State shall submit the registrar an application by the court, notary or other competent authority of the corresponding Contracting State stating that the requirements for merger have been fulfilled and pre-merger acts have been concluded with respect to the company being acquired which falls under the jurisdiction of such Contracting State, and submit the merger agreement. The certificate shall be submitted within six months after its issue. The merger entry shall be made even if it is evident based on the certificate that a court proceeding for checking the share exchange ratio within the meaning of subsection 398 (3) of this Code has been initiated with respect to the company being acquired.

 (7) If a company registered or to be registered in the Estonian commercial register participates in a cross-border merger as the acquiring company, the registrar of the registered office of the company shall immediately give notice of the merger entry to a court, notary or other competent authority of the Contracting State under whose jurisdiction the company being acquired falls and, if the shares of the acquiring company are registered in the Estonian Central Register of Securities, shall also inform the registrar of the Estonian Central Register of Securities thereof.

 (8) If the share capital is increased in the course of cross-border merger, the managing board of the acquiring company shall submit an application for the entry of the increase of the share capital within one year after the resolution to increase the share capital was passed.

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