Unit 7 Flashcards
Define Merger
Operation by which TWO or MORE commenrial companies are integrated into a single company, through the Transfer of their Equity (assets and liabilities) and the attribution to the members that are extinguished of shares/stakes of the resulting company which can be a new one or one of the merging companies
State and Describe the 2 Modes used for mergers
A. MERGER BY EXTINCION
Extinsion of all companies that want to merge and incorporation of a new one
[The new one will acquire by succession all the assets and liabilities of the pre-existing ones]
B.MERGER BY ABSORPTION
Absorption by an existing company, of another or others that are dissolved and extinguished.
[Acquiring first the rights and liabilities of the company therefore increasing its capital until the point in which all of the shares are owned by the Absorbing company]
What are the 3 phases in the merger process?
1.Preparatory Phase
2.Approval Phase
3.Execution Phase
Describe the steps involved in the first phase of a Merger
PREPARATORY PHASE
- “common” merger project (done by the directors of the entitites involved):
it’s a detailed design of the operation (who is the CEO…who is staying, who is no…)
!! Financial statements older than 6 months cannot be used !!
- Submission of the project to auditor verification. (If any of the participating companies is an SA)
- Publication of the project on the website or by deposit in the Registar
- Report of the directors explaining and justifying their project; special reference to the exchange rate: “EXCHANGE EQUATION”
[the exchange equation is what the members will receive in exchange for giving their equity away]
Describe the steps involved in the Second phase of a Merger
APPROVAL PHASE
- Approval by the general meeting or each of the companies involved
-announcement one month in advance, providing members with a variety of documents
-approval within maximum 6 months - Publicity of the agreement: BORME + newspaper or individually to members and creditors
- Right of opposition of creditors with unsecured credits
Describe the steps involved in the Third phase of a Merger
EXECUTION PHASE
- Granting of public deed
- Inscription at the registar
In what situations is possible to adopt a simplified regime when merging
- The absorbing company is the owner, directly, of 100%. of the capital of the company absorbent.
With this procedure the following things will be omitted:
- mentions of in the merger project: siplified project
-report from directors and independent experts
-capital increase
-approval by general meeting - Case assimilated to the absorption of fully owned companies
the thwo companies that want to merge are both owned by the same parent company
What are the three types of Division?
TOTAL DEMERGER
extinsion of a company with division of ALL it equity in 2 or more parts
PARTIAL DEMERGER
block transfer of one or more parts of the equity to one or more newly created companies therefore reducing the capital for the amount necessary
SEGREGATION
transfer of equity to >= 1 companies receiving in echange the segregated company shares or stakes
(BIG gives shares to small in exchange for ownership of small)
Define dissolution and describe the possible causes
Legal act by which the companies contract is dissolved
Causes:
a) end of the period established in the by-laws
b) impossibility of carrying out the corporate purpose (even due to the paralysis of the corporate body)
c) Due to losses such that E<50%K
d)by agreement of the general meeting, according to the quorum and majority system
What is the procedure for dissolution?
-convene general meeting
-verification of causes
-cessation of the managing body and appointment of a liquidator(s)
-granting of public deed of dissolution
-inscription registar
What are the consequences of dissolution?
-cessation of the position of directors and appointment of liquidators
-cessation in the exercise of the corporate purpose
-beginning of the liquidation period
-the company is renamed: “in liquidation”
-the company has not yet been extinguished: it maintains its legal personality
Describe and Define Liquidation
Distribution of the remaining assets among the members
During this period -> general meeting subsists however its functions are limited to matters relating to the liquidation or when appropriate reactivate the company
Describe and Define Extinsion
company is cancelled from the registrar
! with the registration of the deed of extinction, the legal personality of the company will cease !
