Is it possible to pay the consideration mentioned in Article 40 (4) of Directive 2014/59/EU (BRRD) in shares of a bridge institution? Is the same possible in case the asset separation tool has been applied?
Article 40 (4) of Directive 2014/59/EU (BRRD) states that: “Subject to Article 37(7), any consideration paid by the bridge institution shall benefit: (a) the owners of the shares or instruments of ownership, where the transfer to the bridge institution has been effected by transferring shares or instruments of ownership issued by the institution under resolution from the holders of those shares or instruments to the bridge institution; (b) the institution under resolution, where the transfer to the bridge institution has been effected by transferring some or all of the assets or liabilities of the institution under resolution to the bridge institution.”
It is not clarified if the consideration paid by the bridge institution can also be paid in shares of a bridge institution. The same question applies to the asset separation tool.
The language in Articles 40(4) and 37(7) BRRD provides no grounds to exclude that the consideration mentioned in Article 40(4) BRRD may consist of shares of the bridge institution. Whilst legally feasible, such course of action should be carefully considered, so as to avoid, e.g., to reserve a better treatment to the failing institution’s shareholders compared to the non-transferred creditors.
The same holds true in case the asset separation tool has been applied.
The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.