Company Restructurings and Universal Transfers of Assets: A Proposal to deal
with the Conflict-of-Laws Problems
Francisco Garcimartín
Professor of Law, UAM
Of Counsel Linklaters SLP
1. Introduction
In times of economic recession, companies resort to restructuring as an efficient
tool to overcome financial difficulties. Changes of legal structure, such as
transformations, mergers, divisions and global or partial transfer of assets and liabilities
may offer a solution to re-balance the economic situation of a firm. One of the typical
consequences of such restructuring is the universal transfer of assets and liabilities, by
operation of law, from one legal entity to another. This may include assets located
abroad and liabilities governed by a foreign law. The purpose of this paper is to analyze
the conflict-of-laws problems caused by these types of operations and to suggest some
proposals -from a lege ferenda perspective- to solve them.
The paper is organized as follows. Section 2 looks at the differences between
universal transfers and individual transfers at the substantive-law level. Section 3
describes the conflict-of-laws problems that may arise when a universal transfer
encompasses assets and liabilities governed by a foreign law. Section 4 makes some
legislative proposals for solving these problems.
2. Individual vs universal transfer of assets
Most EU legal systems envisage the difference between individual and universal
transfers of assets.
(i) Individual transfers refer to transfers of a contract or an asset uti singuli.
These transfers entail a singular succession from the transferor to the transferee
(Einzelrechtsnachfolge), and are governed by general rules of civil and commercial law.
Thus, for example, according to the Spanish Civil Code, the assignment of liability
claims requires the consent of the counterparty. Since the features of a debtor, in
particular its financial solvency, may be a key element for its creditor, a change of the
former must not take place against the will of the latter. With regard to assets, an
individual transfer of a tangible asset requires a valid contract and the delivery of such
asset – or, in the case of immovable property, registration of the new owner at the land
registry. Until these requirements are met, the asset remains in the transferor´s
patrimony.
Example. If A has concluded a contract with B and wants to assign such contract (rights and liabilities) to
a third party, according to the Spanish Civil Code (CC), the consent of B is required (art. 1205 CC). This
is also the general rule in other legal systems. If A wants to transfer the property of a tangible asset to B,
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according to the Spanish Civil Code both a valid contract and the physical delivery of the asset (traditio)
are required (art. 609 CC). In other legal systems either a valid contract or the physical delivery (with an
agreement to transfer the property) may be sufficient.
(ii) Universal transfers, in turn, refer to a full assignment -i.e. “en bloc”- of all
assets, rights and liabilities uti universi. Such assignments entail a universal succession
by operation of law (Gesamtrechtsnachfolgen) and are governed by special rules that
depart from general rules for transfers of assets and liabilities. Under Spanish
Commercial Law, those universal transfers may occur as a result of certain (typified)
corporate reorganization proceedings such as changes in legal structure, mergers,
divisions, segregations or global/partial transfers.
In these transactions, the transfer of all assets and liabilities – or a portion
constituting an economic unit, e.g. a branch - takes place uno actu and by operation of
law (ope legis). If certain conditions are met, the assignment of contracts pending
fulfillment and liabilities takes place ope legis without the need for obtaining
counterparty consent. By the same token, the proprietary rights over a tangible asset are
automatically transferred without the need for an individual contract and/or delivery of
the asset or even registration of the new ownership.
Example. According to the Spanish Changes in Business Structures Act 2009 (Ley 3/2009, de 3 de abril,
sobre modificaciones estructurales de las sociedades mercantiles), a company A may carry out a global
transfer of all its assets, rights and liabilities to another company B. The assignment has to be approved
by the shareholders´ meeting of A. Furthermore, other conditions have to be met, e.g. a written report
from the managing body and from an independent expert. Once these conditions are met, the transfer is
made by operation of law. The contracts between A and third parties and the assets of A are transferred to
B ope legis. Thus, the individual consent of the counterparties is not required. For the same reason, the
transfer of ownership of tangible assets also takes place ope legis, even before physical delivery or
registration in the land register.
The Spanish Changes in Business Structures Act is strongly influenced by the German Umwandlungesetz
(UmwG) of 1 January 1995 which also includes mergers, divisions, transfers and transformations. The
EU law also envisages certain types of company restructurings which entail a universal succession, for
example, mergers (see, art 19 Directive 2011/35/EU of 5 April 2011: “a merger shall have the following
consequences ipso iure and simultaneously: (A) the transfer, both as between the company being
acquired and the acquiring company and as regards third parties, to the acquiring company of all the
assets and liabilities of the company being acquired” ), divisions (see art. 17, Directive 82/891/EEC of 17
December 1982) or full transfers (see, art. 31 Directive 2011/35/EU or art. 25 Directive 82/891/EEC). In
certain Member States, those corporate restructurings are subject to the supervision of a judicial authority.
This paper does not analyze the peculiarities that may arise in these legal systems, neither does it analyze
the labor-law dimension of the problem.
The rationale of such special regime is straightforward. The legislator
understands that in certain kinds of transactions, such as company restructurings, the
application of the common or general rules on individual assignments would make them
(i) excessively costly, since it would require obtaining the consent of all affected
creditors, (ii) and may give rise to hold-out strategies, since the transferor would need to
negotiate individually with each creditor. Even if the global transfer may be efficient in
aggregate terms, an individual creditor may be tempted to deny consent in the hope of
obtaining more beneficial treatment at the expense of other parties. The protection of the
collective interest justifies departing from general rules on individual transfers and
laying down special rules for the circulation of assets and liabilities uti universi.
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Nevertheless, in order to balance that sort of “expropriation” of the individual
consent and prevent opportunistic restructurings -i.e. those that benefit the shareholders
of the company at the expense of other stakeholders- the law usually lays down some
safeguards vis à vis third parties, in particular creditors, that may be affected by such
transactions. These safeguards include, for example, a right of the creditors to
participate in a meeting to decide upon the transaction, a right to obtain a guarantee or a
mechanism of several or joint and several liability of the transferor and the transferee,
depending on the particular case. Furthermore, the law may also require the completion
of certain formalities for the transfer of certain assets, rights and/or obligations to be
effective against third parties.
Examples. Under Spanish law, depending on the type of company restructuring (global transfers,
mergers or divisions), unsecured creditors may have a right to obtain a bank guarantee for their claims
and the transferor (or its shareholders) and other recipient companies may be personally liable for the
claims transferred. With regard to registered assets, a bona fide acquirer who relies on the information
supplied by the land registry (i.e. who acquires assets from the transferor before the new ownership has
been registered) may be protected. In general, EU Law envisages the need to provide for an adequate
system for protecting the interests of creditors (see e.g. art. 13 Directive 2011/35/EU or art. 12 Directive
82/891/EEC). Where the transaction is subject to the supervision of a judicial authority, the law may
require calling a meeting of creditors to decide upon the transaction (see art. 23 Directive 82/891/EC).
Furthermore, it also provides that Member States may require the completion of special formalities to
make the transfer effective against third parties (see e.g. art. 19.2 Directive 2011/35/EU and art. 17.3
Directive 82/891/EC).
Additionally, in most legal systems these transactions are subject to a principle
of legal definition (numerus clausus). Since universal assignments take place by
operation of law, this special regime is only applicable where it has been expressly
established by the legislator, for example in the context of legally determined corporate
restructurings (see e.g. § 1.2 UmwG). Otherwise, general rules on individual transfers
apply.
In short:
(i) In certain transactions, a transfer of all assets and liabilities uti universi may
take place by operation of law. Thus, the regime governing individual transfers is not
applicable: in particular, the consent of the counterparties, i.e. the creditors, is not
required.
(ii) In order to balance this “expropriation” of the
prevent opportunistic restructurings by the shareholders or
certain safeguards are adopted, e.g. those creditors may
guarantee for their claims. The transfer of certain assets
formalities to be effective against third parties.
individual consent and to
directors of the company,
have a right to obtain a
may also require special
(iii) In principle, since a transfer by operation of law is an exception to the
general rules on transfer of assets, most legal systems lay down a principle of legal
definition: universal transfers are conditional upon explicit recognition by the legislator.
In other words: general rules on individual transfers apply unless the legislator has
recognized the possibility of a universal transfer.
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3. Conflict of law problem
Although most legal systems establish the possibility of carrying out a universal
transfer by operation of law, the content of the rules may vary notably. The substantivelaw rules with regard to aspects such as (i) the types of corporate restructurings that
benefit from that special regime, (ii) the conditions for approval of those transactions,
(iii) the possible intervention of a public authority sanctioning them (iv) or the
safeguards vis à vis third parties vary from jurisdiction to jurisdiction. Even at EU level,
the degree of harmonization is not absolute. The Directives on mergers and divisions,
for example, envisage the need to provide an adequate system for protection to certain
creditors, but give Member States considerably leeway as regards the specific content of
such protection (see, e.g. art. 12 of Directive 82/891/EC). Thus, in a cross-border
context, the determination of the applicable law may be very relevant. In particular, a
problem of conflict of laws arises when the assets and liabilities affected by a universal
transfer ope legis includes assets located abroad, and/or liabilities and contracts
governed by a foreign law.
Example. Let us imagine a company incorporated in The Netherlands (DutchCo) which has assets in
Portugal, Spain and Italy, and also contracts with third parties governed by these three laws. The company
is subject to a restructuring process which entails a full transfer by operation of law of all –or a part which
constitutes a economic unit- of its assets and liabilities to a new company created under the laws of
Luxembourg (NewCo). In principle, for this transaction to be economically efficient, it should also
include the assets located abroad and the contracts and liabilities governed by a foreign law.
The Netherlands
Luxembourg
DutchCo
Portugal
Assets + Liabilities
+ Contracts
NewCo
Spain
Italy
Assets + Liabilities
+ Contracts
Assets + Liabilities
+ Contracts
The transfer of all assets, liabilities and contracts is a complex transaction that
may involve many parties in different jurisdictions. To analyze the problems of
applicable law that may arise, it may be useful to differentiate between:
(i) The internal or company-law issues
(ii) The relationships between the transferor and the transferee
(iii) The external or third party effectiveness
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(i)
Internal or company-law issues
The internal decision making process is a company-law issue and, therefore,
governed by the corresponding leges societarum. In the example, aspects such as, for
example, the capacity and decision to approve the transfer are governed by Dutch law
and by Luxembourg law respectively.
With regard to DutchCo, Dutch law determines the capacity to carry out a
universal transfer, i.e. whether a Dutch company may transfer by operation of law all its
assets and liabilities to NewCo. This law also determines the potential scope of the legal
transfer and, in particular, whether it is aimed at encompassing all assets and contracts,
including those assets located in a foreign country and those contracts governed by a
foreign law. Here, universal means capable of affecting all assets, liabilities and
contracts. Naturally, since Dutch law cannot guarantee the worldwide effectiveness of
its own law, the real or de facto effectiveness of that policy abroad depends on the laws
of the corresponding foreign States.
Example. Continuing with the example of the Spanish Changes in Business Structures Act, when it uses
the concept of “universal transfer”, it includes foreign assets and foreign contracts. This means that, from
the point of view of Spanish legislator and Spanish judges, the transfer is aimed at having cross-border
effectiveness. Universal transfers by operation of law have a worldwide extension. Naturally, the de facto
effectiveness may depend on whether the foreign States recognizes the Spanish rule when the question
arises before a foreign judge.
Finally, Dutch law also determines the requirements to take the decision, e.g. the
role of the board of directors, the information and reports that the board should provide,
whether an agreement of the general meeting of shareholders is required, the conditions
to obtain such agreement or even the sanctioning of the agreement by a public authority.
This law also governed the rights of dissenting shareholders.
Luxembourg law, in turn, governs the same issues with regard to the NewCo.
Thus, it will determine the capacity of the Luxembourg company to receive all the
assets and liabilities by operation of law and the company-law agreements and
requirements to carry out such transaction.
The same approach applies, mutatis mutandi, when the transfer of assets and
liabilities takes place in the context of a merger between DutchCo and NewCo or a
division of DutchCo in favor of NewCo.
(ii)
Relationships between the transferor and the transferee
The relationships between transferor and transferee may be of a different nature
depending on the types of transaction underlying the universal assignment: a merger, a
division or a global transfer. If, for example, the transaction is based on a contract
between the transferor and the transferee, the law applicable to such contract is
determined by the Rome I Regulation (Regulation 593/2008 of 17 June 2008). Such law
will govern the rights and obligations between these two parties, for example, the
liability of the transferor vis à vis the transferee.
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(iii)
The effectiveness of the universal transfer vis à vis third parties
Finally, the most difficult issues derives from the external aspects of the
transaction, i.e. the effectiveness of the full transfer vis à vis third parties and the
corresponding safeguards of the creditors when the transfer encompasses (i) assets
located abroad and/or (ii) contracts governed by a foreign law.
Traditional conflict rules are designed for individual transfers and, therefore, do
not offer a solution that suits the needs of a universal transfer. In most EU legal
systems, the transfer of a physical asset is governed by the lex rei sitae of the
corresponding asset (see, e.g. art. 10.1 Spanish CC), the transfer of intellectual property
is governed by the lex loci protectionis (see, e.g. art. 10.4 Spanish CC), and the transfer
or assignment of a contract is governed by the law applicable to that contract according
to the Rome I Regulation. The application of the lex rei sitae, the lex loci protectionis
and the lex contractus entails a territorial approach, i.e. splitting up the assets and
liabilities all transferred: the transfer of each group of assets and contracts is governed
by their own law. Thus, in the case at hand, three different laws are applicable, each of
them to the corresponding assets. The transfer of assets located in Spain and of contracts
governed by Spanish law is subject to Spanish rules; Portuguese assets and contracts, to
Portuguese rules; and Italian assets and contracts, to Italian rules.
Note that even if Spanish, Portuguese and Italian laws envisage the possibility of
a universal transfer by operation of law, the particular conditions and safeguards may be
different, and this may significantly increase the cost of the transaction.
Example. With regard to proprietary rights over tangible assets located in Spain, the reference to Spanish
law according to the lex rei sitae principle is a reference to the legal system as a whole and, in principle,
includes both the rules on individual transfers and the rules on universal transfers. Thus, if the
restructuring of DutchCo qualifies as equivalent to a restructuring of a Spanish company, it may benefit
from the application of the special rules for universal transfers established by Spanish law. This means
that a foreign transfer by operation of law, in this case, Dutch law, is recognized as equivalent to a
transfer by operation of Spanish law. The same holds for Italian and Portuguese law. That is, the rules on
universal transfer of each local jurisdiction may be applied and this would facilitate the transaction, since
it may be a simpler route than carrying out individual transfers of each asset and contract. Nevertheless,
(i) this option only works to the extent that those legal systems also recognize a universal transfer of all
assets and liabilities in that particular transaction; (ii) the particular requirements and rules may be
different; for example, the moment at which the transfer takes place or, in particular, the safeguards vis à
vis third parties and creditors may vary among Spanish, Italian and Portuguese law.
This splitting up the assets and liabilities all transferred increases the transaction
costs and may even force the parties to carry out a scheme of individual transfers, asset
by asset and contract by contract. This goes against the economic logic of corporate
restructurings. The treatment of assets and liabilities as a whole calls for a different
approach, i.e. a universal approach. This idea is elaborated upon in the following
paragraphs.
4. Special rules for universal transfers by operation of law
4.1.Starting point: the universal approach (“Statut der Vermögensgesamtheit”)
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In principle, those transactions, such as company restructurings, that affect the
assets of a company as a whole (uti universi) must be governed by only one law; i.e. the
universal approach must be the rule: “a patrimony, a unique connecting factor”1.
Furthermore, this connecting factor should be of a personal nature: it must be linked to
the person of the transferor. In particular, in the case of companies, two options are
feasible: either the lex societatis (i.e. the national law) or the Centre of Main Interest
(COMI) of the transferor. The former has the main advantage that the same law governs
both the corporate-law aspects (supra) and the patrimonial aspects of company
restructurings. The latter entails a depeçage of those two aspects, but the application of
the same law that would govern the insolvency of the company. Since most
restructurings take place outside an insolvency scenario, the option for the lex societatis
seems preferable. Hence, the lex societatis of a company law should apply to the issue
of whether and under what circumstances a company may carry out a transfer of its
assets and liabilities –i.e. its patrimony- by operation of law.
The rationale of a unique connecting factor is straightforward. The same reasons
that justify the option at the substantive-law level (supra) justify its extension at the
cross-border level. It goes against the economic logic of corporate restructurings that the
parties must meet all the laws of the countries where the transferor has assets and
liabilities. This would significantly increase the transaction costs and may give rise to
hold-out strategies. On the other hand, from the perspective of the counterparties -e.g.
the company’s creditors- the universal approach cannot be considered as an
unreasonable solution: the application of the lex societatis of the debtor is a controllable
risk and within the EU, at least in cases of mergers and divisions, the Directives ensure
a minimum degree of protection (art. 13 Directive 2011/35/EC, and art. 12 Directive
82/891/EC). The application of the lex societatis to universal transfers can be seen as an
implicit term of their contracts.
Example. In the example at hand, Dutch law is the lex societatis. This law would apply to the universal
transfer by operation of law with regard to assets and contracts governed by Spanish, Italian or
Portuguese law. Thus, even if a contract is governed by e.g. Spanish law, the transfer of such contract
may take place by operation of Dutch law as an element of the transferor’s assets and liabilities. This is
not unreasonable: Spanish counterparties should take this circumstance into account when they enter into
a contract with foreign companies. The transfer of the contract under Dutch law in cases of universal
transfer can be seen as a sort of “implicit term” of the contract: a person who deals with a foreign
company impliedly subject himself to the foreign law applying to the patrimony of the company as a
whole. Note that the same holds in an insolvency scenario: in principle, if the COMI of their debtor is
located in The Netherlands, Spanish counterparties should take into account the application of Dutch
insolvency law to their contracts (see art. 4.2 (e) of the EU Insolvency Regulation).
The scope of the lex societatis, as law applicable to the patrimonial status,
encompasses issues such as the possibility of a global transfer by operation of law, the
conditions and the moment at which that transfer takes place (which may entail a cross
reference to the lex societatis of the transferee, infra), and the safeguards. The
protection of creditors is linked to the conditions for the universal transfer2. Thus, the
same law that envisages the universal transfer of assets and liabilities as a consequence
1
See e.g. MünchKomm-Kindler, IntGesR, para. 672; U. Lennerz, Die international Verschmelzung und
Spaltung unter Beteiligung deutscher Gesellschaften, 2001, p. 246.
2
MünchKomm-Kindler, IntGesR Rd 886; Lennerz, loc.cit., pp. 236-237; already, G. Beitzke, “Les
conflits de lois en matière de fusion de socieétés”, Rev. crit.dr.int.privé, 1967, p. 1 et seq., p. 17.
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of certain company restructurings would apply to the measures for protection of
creditors.
Example. In the example at hand, Dutch law will determine (i) whether and under what conditions a
universal transfer by operation of law is possible (ii) and the guarantees vis à vis Spanish, Italian or
Portuguese creditors such as, for example, an opposition right and/or a shared liability between the
transferor –or even its shareholders- and the transferee. With regard to third countries, it cannot be ruled
out that, in extreme cases, the absence of any safeguard may be considered as a violation of the public
policy of the forum: the transaction might qualify as a sort of expropriation.
The universality principle is not laid down as such by EU law. There is no
general EU conflict-of-laws rule clearly stating that universal transfers of assets and
liabilities as a result of company restructurings are governed by the lex societatis of the
transferor, including safeguards of creditors. Nevertheless, it seems consistent with the
model implicitly followed by the Directive on cross-border mergers and the other
Directives on internal mergers and divisions. The Directive on cross-border mergers
(Directive 2005/56/EC) establishes the principle that a merger entails a transfer of all
assets and liabilities of the merging company (arts. 2.2 and in particular art. 14.1 (a):
from the relevant date “…all the assets and liabilities of the company being acquired
shall be transferred to the acquiring company”) and for measures for the protection of
creditors refers to the national law of the merging companies (art. 4.2, although it
envisages certain exceptions, see art. 14.3 infra). Other instruments follow a similar
approach (see e.g. art. 24 of the Regulation 2157/2001 on the SE). The Directives on
mergers and divisions, in turn, do not contain conflict-of-laws rules. They, however,
recognize that those corporate transactions have the consequence of an ipso jure transfer
of assets and liabilities (art. 19 (a) Directive 2011/35/EC, and 17 (a) Directive
82/891/EC) and require Member States to establish an adequate mechanism for the
protection of creditors (art. 13 Directive 2011/35/EC, and art. 12 Directive 82/891/EC).
Unfortunately, it is not absolutely clear whether these provisions have an international
dimension, i.e. whether they include foreign assets and liabilities, and this ambiguity
leads to legal uncertainty in the market3.
Accordingly, such legal uncertainty together with the fact that there are no other
special rules for other types of cross-border corporate restructurings (partial division,
full assignments or even changes in legal structure) make it advisable to introduce a
rule. A general provision should clarify at the level of EU law that:
(Proposition 1)
“In cases of company restructurings, the national law of the restructured
company would govern: (i) if and under what circumstances a transfer by operation of
law of all its assets and liabilities may take place; if the acquiring or beneficiary
company is incorporated in another Member State, the law of this Member State would
determine the date of the effectiveness of the transfer; and (ii), the system for protection
of creditors”.
Example 1. In a merger between a Dutch company (merging company) and a Lux company (acquiring
company), the transfer of all the assets and liabilities takes place uti universi and by operation of law,
regardless of whether those assets and liabilities are governed by Dutch law or by Spanish, Portuguese or
3
See MünchKomm-Kindler, Rd 887.
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Italian law. The protection of creditors of the Dutch company is also governed by Dutch law even if their
claims are governed by a foreign law. The date of effectiveness of the merger is determined in accordance
with Luxembourg law, as the law applicable to the receiving company.
Example 2. In a division of the Dutch company in favor of a new Lux company, the transfer of the assets
and liabilities allocated to the new company take place ipso jure and by operation of law, regardless of
whether those assets and liabilities are governed by Dutch law or by Spanish, Portuguese or Italian law.
The protection of the creditors of the Dutch company is also governed by Dutch law even if their claims
are governed by a foreign law.
Note that if the universality principle is enshrined as a harmonized conflict-of-laws rule within the EU, it
can be applied even if the local law does not envisage a universal transfer in the same circumstances or it
imposes additional conditions. Hence, as a starting point, the idea suggested by some authors that the
local rules on individual assets prevail (“Einzelstatut bricht Gesamtstatut”4) should be rejected (from a
lege ferenda standpoint only; de facto, and with regard to third countries, naturally not5). The general
conflict of laws rules (e.g. lex rei sitae or lex contractus) do not apply when the assets and liabilities are
envisaged as part of a whole. The rule should be “Gesamtstatut bricht Einzelstatut”6.
(ii) Exceptions
Once the starting point has been formulated, i.e. the universality principle, the
next question is whether certain exceptions to such principle may be justified. Since any
exception would involve increasing the cost of these transactions, they should be
established if, and only if, there is a particular interest deserving protection.
In principle, the mere fact that a contract is governed by a law (lex contractus)
different from the national law of their debtor (lex societatis) does not per se justify an
exception to the universality principle. The same holds with regard to assets: the mere
fact that an asset is located abroad does not justify an exception to the universality
principle.
Example. As previously discussed, Spanish creditors who enter into a contract with a Dutch company
even if the claim is governed by Spanish law do not have per se a legitimate expectation on the
application of the Spanish law in cases of an universal transfer. They should take into account the
application of the personal law of the debtor (Dutch law) as an “implicit element” of the contract. By the
same token, the fulfillment of the local requirements or formalities as a condition to the effectiveness of
the transfer of an asset is per se a disproportionate demand.
The only expectations that may qualify as legitimate and therefore worthy of
protection are those of third parties who “make an investment or a payment” relying on
the appearance of ownership kept by the transferor. Typically, (i) the bona fide acquirer
of individual assets under the local law and/or (ii) the bona fide debtor who pays to the
original creditor.
(i) In the first case, the rules on individual acquisitions a non domino justify the
protection of the bona fide acquirer of an asset under the local law (i.e. the lex rei sitae).
Hence, if once the universal succession has taken place, the transferor still appears
under the local law as owner of an asset and sells it to a bona fide third party, the
4
R. Zullig, Die international Fusion im schwizersichen Gesellschaftsrecht, 1975, pp. 20-21.
Within the EU, recognition of the universal transfer should be a guarantee; however, with regard to third
countries, recognition depends on the law of those countries. Hence, if the local law does not recognize it,
a singular transfer should be carried out.
6
See Lennerz, loc.cit., p. 256.
5
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expectations of this third party (acquirer) should be protected. Naturally, this may only
occur if the transferor remains in physical or formal possession of the asset.
Additionally, the transferor may be liable vis à vis the transferee.
Example. Let us imagine that DutchCo carries out a partial division in favor of NewCo. The assets and
liabilities located and governed by Spanish law are allocated to NewCo and, therefore, transferred by
operation of law to NewCo. Nevertheless, with regard to an immovable property, DutchCo still appears as
formal owner at the Spanish land registry. If a third party buys that asset from DutchCo relying on the
registry, such third party will be protected by the Spanish rules on acquisition a non domino. DutchCo,
naturally, will be liable vis à vis NewCo.
Note that the Directives refer in general to the formalities needed to make the transfer effective “against
third parties”. Thus, e.g., according to Article 14.3 of the Directive on cross-border mergers, “Where, in
the case of a cross-border merger of companies …, the laws of the Member states require the completion
of special formalities before the transfer of certain assets, rights and obligations by the merging
companies becomes effective against third parties, those formalities shall be carried out by the company
resulting from the cross-border merger”. The reference to the effectiveness against third parties is too
broad7. The exception should be clarified and limited to the bona fide acquirer.
(ii) In the second case, the protection is granted to a local creditor who honors an
obligation to the transferor ignoring that such obligation has been transferred by
operation of law to the transferee8.
Example. Let us imagine that DutchCo carries out a division in favor of LuxCo (recipient company).
The Spanish assets and liabilities located and governed by Spanish law are affected by such division and,
therefore, transferred by operation of law to LuxCo. However, a Spanish debtor pays to DutchCo ignoring
that its claim has been transferred to LuxCo. This party could invoke the protection granted by Spanish
law on discharge of debts.
Hence, an exception should be added in the sense that:
(Proposition 2):
“When an asset is governed by a foreign law, a third party acquiring that asset
may invoke such law to protect its ownership if it was unaware of the universal
transfer”
“When an obligation is governed by a foreign law, the obligor that has honored
the obligation for the benefit of the transferor may invoke such law to justify its
discharge if it was unaware of the universal transfer”.
Some particular issues may call for a deeper analysis. The effects of the
universal transfer on outstanding contracts are, in principle, also governed by the law of
the transferor. This would normally entail that the contracts are assigned ope legis.
Counterparty consent is not required. Nevertheless, a problem may arise with regard to
non-assignable assets according to the law applicable to such assets. The question is
which law determines the opposability of those clauses to the universal transfer, the lex
contractus or the lex societatis. The same issue arises, mutatis mutandi, with regard to
shares in companies whose legal regime (law and bylaws) establishes a non7
See MunchKomm-Kindler, 887.
Note that article 24 of the EU Insolvency Regulation contains a parallel provision, including a
presumption on the good or bad faith of the debtor.
8
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assignability rule even in the case of universal transfers, or even when the local law lays
down certain consequences of a universal transfer over a particular types of contracts
(e.g. in the case of property rentals, a rise in the rental price).
Example. § 21 UmwG envisages a rule on the conditions under which a contract may be terminated or
not in the context of a universal succession. The question is whether this issue (i) is governed by the lex
contractus, i.e. it applies to all contracts governed by German law even vis à vis foreign transfers, (ii) or is
governed by the law applicable to the universal transfer, i.e. it applies to all company restructuring
governed by German law, irrespective of the law applicable to the contract.
In principle, these kinds of rules are transaction-specific provisions and,
therefore, should be governed by the law applicable to the contract.
Thus, (Proposition 3):
“When a particular relationship, such as a contract or a company, is governed
by a foreign law, a party to that relationship may invoke the special rules of such
foreign law vis à vis the universal transfer if those are based on the specific nature of
the transaction”
5. Conclusion: Formal Proposal
33. By way of conclusion, the three main proposals of this paper can be
summarized as follows.
(Proposition 1)
“In cases of company restructurings, the national law of the restructured
company would govern: (i) if and under what circumstances a transfer by operation of
law of all its assets and liabilities takes place; if the acquiring company is incorporated
in another Member State, the law of this Member State would determine the date of the
effectiveness of the transfer; and (ii), the system for protection of creditors”.
(Proposition 2):
“When an asset is governed by a foreign law, a third party acquirer of that asset
may invoke such law to protect its ownership if it was unaware of the universal
transfer”
“When an obligation is governed by a foreign law, the obligor that has honored
the obligation for the benefit of the transferor may invoke such law to justify its
discharge if it was unaware of the universal transfer”.
(Proposition 3):
“When a particular relationship, such as a contract or a company, is governed
by a foreign law, a party to that relationship may invoke the special rules of such
foreign law vis à vis the universal transfer if those are based on the specific nature of
the transaction”
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