For more than a decade, the Baltic countries have enjoyed quite a dynamic cross-border company mobility within the EU and EEA through cross-border mergers. From 31 January 2023, companies in the Baltics will have a clear framework for three types of cross-border mobility: merger, conversion and division.

The story so far

The wave of cross-border mergers began back in 2007–2008 after the implementation deadline of the EU Directive[1] allowing companies established in different jurisdictions within the EU and EEA to merge cross-border. To express the idea of a cross-border merger in very simple terms: as a result of a cross-border merger, all the assets, rights and liabilities of the merging companies are transferred and become part of the acquiring company in another jurisdiction, based on so-called universal succession and in basically the same way as if they had all been established in the same country. In the majority of cases, the acquiring company continues operating in the countries of the merging companies through branches.

As an illustration, recent research by Maastricht University (in the report Cross-Border Corporate Mobility in the EU: Empirical Findings 2021[2]) shows that, from 2007–2008 to 2020, 142 companies from Estonia, 133 companies from Latvia and 116 companies from Lithuania were involved in a cross-border merger process. Comparatively, Lithuania (85 out of 116) and Latvia (74 out of 133) recorded more “exit cases”, where the majority of companies were merging with or into a foreign company. Estonia, for its part, recorded more incoming mergers (92 out of 142), where companies from other jurisdictions were merged with and into an Estonian company.

Having a legal framework in place allowed many companies in the Baltics, and all over the EU and EEA, to consolidate their business in the region, and thus also to simplify corporate governance to some extent, save on administrative costs and benefit from a broader transaction experience when participating in tenders, to name just some of the driving forces behind cross-border mergers. For companies operating in the financial services sector, merging group companies cross-border made it easier to meet capital requirements; other advantages from the regulatory point of view could be found as well.

Reflecting on more than a decade of helping businesses like If P&C Insurance AS, Siemens, Ergo, Aon, Vienna Insurance Group, Nasdaq CSD SE, Heidelberg, Alpiq with cross-border mergers and SE formation, we can say that the overall process has become more coherent. While challenges never stop, from a legal point of view the implementation of cross-border mergers is now much smoother from the perspective of all parties involved than it was in 2008, when we began work on the first cross-border merger in the Baltics (If P&C Insurance AS) and had to align the local merger regulations for the cross- border project and discuss practicalities with the local authorities. In some projects it also required helping clients to formulate the necessary changes to legal acts, and contribute to dialogue with the public authorities with the overall aim being to achieve a clear framework for complex cross-border merger projects and make the project implementation as seamless as possible, so as not to disrupt business operations.

For us as a firm, the cross-border merger projects turned out to be a place where we tested in practice and truly enjoyed the benefits of being a single integrated firm operating  in different jurisdictions, as this enabled us to help our clients in the most effective way.

Expanding the range of (existing) options

Cross-border corporate mobility is expected to become more attractive for businesses starting from 31 January 2023, which is the transposition deadline for Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (Cross-border Corporate Mobility Directive).

In essence, the Cross-border Corporate Mobility Directive finetunes the cross-border merger process and introduces two new cross-border mobility mechanisms: cross-border conversion (i.e. change of the corporate form) and cross-border division.

Cross-border conversion and also cross-border division has already been theoretically possible for a few years based on case law.[3] According to the research from Maastricht University, Latvia and Estonia have each had one cross-border conversion case. From time to time, we have seen interest from businesses in cross-border conversion. However, the lack of a clear legal framework and the consequent increased transaction costs have been the main reasons holding businesses back from this route, even though case law guaranteed the rights for cross-border mobility.

For this reason, we are looking forward to Latvian, Lithuanian and Estonian legislators implementing the Cross-border Corporate Mobility Directive.

Application of the Cross-border Corporate Mobility Directive

The framework of the Cross-border Corporate Mobility Directive applies to EU member states and Liechtenstein, Luxembourg and Iceland (hereinafter Member States). Among other restrictions, the Cross-border Corporate Mobility Directive will not apply to companies whose assets are being distributed during the liquidation process and to companies subject to the resolution tools, powers and mechanisms which are provided in Title IV of the so-called Bank Recovery and Resolution Directive 2014/59/EU[4]. It remains to be seen whether the national legislators will narrow the scope of the Cross-border Corporate Mobility Directive even more by, for example, opting to also exclude companies undergoing other types of liquidation proceedings, insolvency proceedings, or preventive restructuring frameworks.

Company types in the Baltics that are allowed to participate in the cross-border mobility, not counting the SE (Societas Europaea), which is in essence similar to an AS/AB type company:

Latvia: SIA and AS

Lithuania: UAB and AB

Estonia: OÜ and AS

Briefly about the available types of cross-border mobility

Cross-border merger is a process whereby a company (or several companies) registered in one Member State transfers all of its assets, rights and liabilities to a company registered in another Member State.

The merging companies cease to exist, without a liquidation process taking place, and the acquiring company takes over all the assets, rights and obligations of the merging companies as a result of the merger. The cross-border merger may be carried out by merging companies cross-border: (a) into an already existing company; or, (b) into a new company that is formed as a result of the cross-border merger. Shareholders who held shares in the merging companies have the right to receive shares in the acquiring company according to the share exchange ratio that is agreed between the companies participating in the merger.

Cross-border merger is typically used by group companies carrying out “side-step mergers” (i.e. merging several sister companies) or an “up-stream merger” where the subsidiary companies are merged upwards into their direct parent company. However, it is also possible to merge a parent company into a subsidiary company – a so-called “down-stream merger”. What kind of cross-border merger is chosen usually depends on the shareholding and capital structure, business size and specifics (for example, licences, permits, registered assets), and tax considerations.

Cross-border conversion is a process whereby a company registered in one Member State transforms its legal form into one specified in another Member State. For example, a company registered in Latvia as an SIA, or in Lithuania as a UAB changes its legal form and as a result of the cross-border conversion becomes and continues its operations as a private limited liability company registered in Estonia as an OÜ.

As a result of the cross-border conversion, the company (a) relocates at least its registered office to the new Member State, and (b) keeps its status as a legal entity.

Continuation as a legal personality is an important aspect of this type of corporate mobility because a company undergoing cross-border conversion does not lose its legal personality, or its assets, rights or liabilities.

Cross-border division is a process whereby a company registered in one Member State transfers all (full division) or part (partial division) of its assets, rights and liabilities to a company or several companies established in another Member State as a result of the division process.

An important aspect of cross-border division is that the receiving company may only be a new company established as a result of the cross-border division process. By comparison, national laws governing the division process in Latvia and Estonia (but not in Lithuania) also allow the division of the assets, rights and liabilities between already existing companies, which will not be available in cross-border divisions.


We will update you on the progress of the implementation of the Cross-border Mobility Directive and write in more detail about the process and timeline of cross-border mobility.

One aspect to note is that while the Cross-border Mobility Directive makes it possible for businesses to move and operate cross-border much more easily, the process also takes into account the interests of the relevant employees, creditors and shareholders. For example, the terms of the cross-border merger/conversion/division will have to contain comparatively more detailed information on its impact on employees, the safeguards offered to creditors etc. The management boards of the companies participating in the cross-border mobility process might be asked under the national laws to issue a solvency declaration in which the management board declares that they are not aware of any reason why the company or companies resulting from the cross-border mobility process would not be able to meet their liabilities.

With this in mind, we are especially keen to see how local laws will be amended to implement the Cross-border Merger Directive.


[1] Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies.

[2] Cross-Border Corporate Mobility in the EU: Empirical Findings 2021 (viewed on 27 September 2022)

[3] Cases such as: C-210/06 Cartesio, C-378/10 Vale and C-106/16 Polbud

[4] Directive 2014/59/EU of 15 May 2014 establishing a framework for recovery and resolution of credit institutions and investment firms.