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Mergers and Acquisitions

Mergers. Application of the UE common Tax regime

According to the Judgment of the EU Court (First Chamber) of 8 March 2017, for the application of the common system of taxation of mergers and acquisitions, EU law allows the state members to establish a process of prior approval under which, in order to obtain that approval, the taxpayer must show that the operation concerned is justified for commercial reasons, that it does not have as its principal objective, or as one of its principal objectives, tax evasion or tax avoidance.

However, the state members cannot exclude the application of such tax regime for mere non-compliance with formal requirements such as the communication of the merger to the local tax authorities.

A business transfer does not in itself justify a change to working conditions.

Sentence no. 130/2014 of 14 July from Spain’s National High Court.

Council Directive 77/187/EEC is intended to guarantee the safeguarding of employees’ rights in the event of a change of business owner, allowing them to remain at the service of the new owner under the same conditions agreed on with the assignor.

Starting from the inexorable rule that a business transfer (sale of a branch of activity, merger, etc.) can never in itself justify changing the contractual and conventional conditions the assigned employees enjoyed, the only interpretation that can be given to art. 44.9 of Spain’s Statute on Workers’ Rights (Estatuto de Trabajadores), like art. 7 of the Directive, is that the provisions contained therein refer to the duty to inform and negotiate any possible modifications which, due to a transfer, could affect the employees of the assignor or the assignee, other than the group of assigned workers; i.e., those who, pertaining to the assignor and as a result of the transfer of part of the business, could for this reason face changes to their working conditions as they no longer perform the assigned part of the business activity and those who, pertaining to the assignor and as a result of the transfer could also face changes to their conditions due to taking on a new business activity and the incorporation of assigned personnel.

Acquisition of a branch of activity from companies subject to insolvency proceedings

The Spanish Insolvency Act has recently been complemented with guarantees for the purchaser of a branch of activity.

  1. Companies, and even public entities, that maintain relations with the insolvent company (the assignor) must maintain relations with the new holder of the branch of activity, thereby assuring its continuity.
  2. The administrative permits and licenses covering the branch of activity shall be deemed as being validly granted.
  3. The subrogation of the buyer shall not entail the obligation to pay outstanding debts stemming from the assignor (insolvent) company.

Moreover, in order to guarantee the continuity of the activity:

  1. The presiding judge of the arrangement with creditors may exclude the buyer’s subrogation from the obligation to pay compensation to employees dismissed prior to the assignment.
  2. The buyer and employees may sign agreements to substantially change work relations.


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