Title IX Flashcards
What is a merger?
Merger is one where the corporation absorbs another corporation, where the absorber remains in existence while the absorbed is dissolved.
What is consolidation?
Consolidation is one where a new corporation is created, and the consolidating corporations are extinguished
When does merger or consolidation take effect?
Section 78 of the RCCP provides that the merger or consolidation shall be effective upon the issuance by the SEC of a certificate of merger or consolidation.
However, it was also opined by the SEC that Section 78 of the RCCP does not prevent the parties from agreeing on the effective date of the merger. In other words, the parties may stipulate the effective date of merger.
What is a Triangular merger?
A triangular merger is a type of merger and acquisition where a subsidiary acquires a target company, and the target becomes a subsidiary of the acquirer. The acquirer is not directly involved in the merger, and the subsidiary assumes the target’s assets and liabilities. The main benefit of a triangular merger is that the acquirer doesn’t have to take on the target’s liabilities.
Can Foreign corporations merge with domestic corporations?
Yes, provided that the foreign corporation can prove that there is a similar authorizing law in its home jurisdiction.
What are the economic reasons why merger or consolidation happens
- Economies of scale, meaning a combination of two production units enlarges the production output over which the fixed cost of production is spread, thereby reducing the average fixed cost per unit of the output
- Economies of scope, meaning the costs and even management talent are spread across a broader range of related activities
- Costs are reduced through vertical integration, meaning there is a merger with a supplier or a customer
Distinguish merger or consolidation from transfer of property.
A simple sale of property by one corporation to another is not a merger or consolidation. Unless there is an evident intention a mere purchase or acquisition of another corporation’s assets or property does not constitute merger or consolidation even though it is advertised as such by the parties or there is an assumption liability on the part of the purchasing corporation especially where the selling corporations still retains its franchise.
Distinguish merger and consolidation from combinations.
Combination is used to designate an alliance of confederation or sale or other transaction between two or more corporations, by virtue of which will not necessarily result in the loss of the separate existence of the corporations. This may include stock acquisition, execution of a voting trust agreement, formation of a holding company, or even transfer of the assets from on corporation to another, In a broad sense, combination include merger and consolidation.
Enumerate the effects of merger and consolidation of a corporation under the RCCP.
- The constituent corporations shall become a single corporation
- The separate existence of the constituents shall cease, except that of the surviving corporation in merger or the consolidated corporation in consolidation
- The surviving or the consolidated corporation shall posses all the rights, privileges, immunities and powers and shall be the subject to all duties and liabilities of a corporation
- The surviving or the consolidated corporation shall possess all rights, privileges, immunities and franchises of each constituent and properties shall be deemed transferred to the surviving or the consolidated corporation
- All liabilities of the constituent shall pertain to the surviving or the consolidated corporation
What is the effect on the employees in merger or consolidation of a corporation
The surviving corporation in the case of merger shall absorb the employees of the constituent / absorbed corporation/s;
The employees of the constituent corporations shall become the employees of the new corporation in consolidation
Give the outline of procedure of merger and consolidation prescribed under the RCCP.
Layers of protection
What is the effect of Philippines Competition Act on merger and consolidations of corporations?
Section 20 of the law provides that “merger or acquisition agreements that substantially prevent, restrict, or lessen competition in the relevant market or in the market for good or services as may be determined by the Commission [referring to the Philippine Competition Commission shall be prohibited.
What does it mean if the merger or consolidation is horizontal?
In cases of merger or consolidation of competitors.
What does it mean if the merger or consolidation is vertical?
In cases of merger or consolidation of client and customer.
Notice and review in the Philippine Competition Act.
Rationale of the notice and review in the Philippine Competition Act
Explain what is the “Size of Entity Test”
Explain what is the “Size of Transaction Test”
Can religious corporations merge with other religious corporation?
Yes, This may involve a religious society and a corporation sole. However, for practical reasons, the merged corporation must belong to the same religious denomination, sect or church.
Discuss what is meant by De Facto Merger and Consolidation
De facto merger or consolidation is taken to mean a reorganization in involving at least two corporations which has the effect the merger or consolidation and which entitles the dissenting stockholders to an appraisal right.
Two corporations agreed to merge. Then they executed an agreement specifying the surviving corporation and the absorbed corporation. Under the agreement of merger date November 5, 1998, the surviving corporation acquired all the right, properties and liabilities of the absorbed corporation.
What would happen to the absorbed corporation? Must the absorbed corporation undertake dissolution and winding up procedures? Explain your answer.
No, It is not necessary for the absorbed corporation to undertake dissolution and winding up procedure, Once the merger is approved by the SEC, the absorbed corporation is automatically dissolved and its assets and liabilities are acquired and assumed by the surviving corporation.
Two corporations agreed to merge. Then they executed an agreement specifying the surviving corporation and the absorbed corporation. Under the agreement of merger date November 5, 1998, the surviving corporation acquired all the right, properties and liabilities of the absorbed corporation.
Pending the approval of the merger by the SEC, may the surviving corporation already institute suits to collect all receivables due to the absorbed corporation from its customers? Explain your answer.
No. The approval of the SEC is the operative act that makes the merger effective. Before the approval by the SEC of the merger, the two corporations involved in the merger are still separate and distinct from each other.
