The transferee company shall also be liable for damages incurred after the demerger
'Liabilities' include clean-up costs resulting from wrongful conduct by the demerged company prior to the demerger
3' min read
3' min read
If a demerger is effected, and it is subsequently ascertained that the demerged company has, prior to the demerger, engaged in unlawful conduct (the pollution of the land where it carries on business), both the demerged company and the recipient company are jointly and severally liable for the related debt, which is not mentioned in the demerger plan among the liabilities assigned to the recipient company.
More generally, when Article 2506-bis(3) of the Civil Code states that "the elements of the liabilities, the destination of which cannot be deduced from the plan, are jointly and severally liable ... the demerged company and the beneficiary companies', the notion of 'elements of the liabilities' must be understood to include, in addition to the liabilities already determined, 'also liabilities of an indefinite nature, such as the costs of reclamation and environmental damage that have been ascertained, assessed or defined after the demerger, provided that they derive from conduct of the demerged company prior to the demerger operation'.
This is the decision in Case C-713/22, taken on 29 July 2024, by the Court of Justice of the European Union in the Grand Chamber (with 15 judges), i.e. in its most authoritative composition (apart from the exceptional cases in which it sits in plenary session), given the considered particular importance of the subject matter.
The Story
The EU Court's decision stems from a referral by the Italian Supreme Court, which was called upon to rule on a demerger transaction, concluded in 2003, whereby Snia Spa had split off part of its assets into Sorin Spa (now Livanova). Following the demerger, the Ministry of the Environment had brought a claim against Snia for the environmental damage it had caused at three industrial sites (Brescia, Torviscosa and Colleferro) and Snia then sued Sorin/Livanova.
The Court of Milan in 2016 had rejected the claim for compensation, but in 2019, the Court of Appeal of Milan recognised the causal link between the industrial activities carried out by Snia prior to the demerger and the 'extremely serious consequences' that resulted 'in terms of pollution'. The Court of Appeal therefore recognised Livanova's joint and several liability (sentencing it to compensation of over €450 million), on the grounds that the debts resulting from the clean-up costs and environmental damage had to be considered as elements of Snia's liabilities, the destination of which could not be deduced from the demerger plan.
