Title IX

Question 1

What is a merger

Answer 1

Merger is one where the corporation absorbs another corporation, where the absorber remains in existence while the absorbed is dissolved.

Question 2

What is a consolidation

Answer 2

Consolidation is one where a new corporation is created, and the consolidating corporations are extinguished

Question 3

When does merger or consolidation take effect

Answer 3

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.

Question 4

Can Foreign corporations merge with domestic corporations?

Answer 4

Yes, provided that the foreign corporation can prove that there is a similar authorizing law in its home jurisdiction.

Question 5

What are the economic reasons why merger or consolidation happens

Answer 5

• 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

Question 6

What are the effects of merger and consolidation provided in section 79

Answer 6

• 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

Question 7

What is the effect on the employees in merger or consolidation of a corporation

Answer 7

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

Question 8

Can religious corporations merge with other religious corporation?

Answer 8

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.

Question 9

Discuss what is meant by De Facto Merger and Consolidation

Answer 9

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.

Question 10

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.

Answer 10

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.

Question 11

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.

Answer 11

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.