Law 5110 Study Guide - Quiz Guide: Legal Personality
Extraordinary Transactions
Mergers
• Dealt with Third company directive – 1978
• With asset and share mergers, shareholders can be compensated in either cash or shares
• Asset mergers
o The assets of the other company are bought by the acquiring company
o The Advantage is that the acquiring company can cherry pick what kind of assets
they need
o The disadvantage is that the process can be laborious as each asset needs to be
transferred individually which in terms of some property regimes can be complex
• Share mergers
o This is when the majority of shares are obtained
o The Advantage is that the process itself is mechanically simple, the company
simply acquires the majority of the shares
o The disadvantage is that there is no possibility to cherry pick: all assets and
liabilities are obtained
• Legal mergers - Third company law directive 2011/35
o Scope: public limited liability companies because:
▪ The shareholders are anonymous in character and there is a need to have
trust in the markets
o Normally, if you want to merge public and private, you have to convert private
into public
o However, in Article 2:310(1) DCC – it states that you can only convert legal
person of the same type – which for the sake of the article, private and public are
regarded as the same type
o Types of merger
▪ Article 3 - Merger by acquisition of one/multiple companies by
another company – the acquired disappears
▪ Merger by the formation of a new company – both of the old companies
disappears
o Draft terms
▪ Art. 5 – BoD of merging companies produce draft terms
▪ Art. 6 – the raft terms need to be published at least 1 month before
deciding AGM
o Detailed written report
▪ Art. 9 – BoD produce report explaining draft terms as well as legal and
economic terms
▪ Article 10 – an accountant examines the draft terms
o Protection of third parties
▪ Article 12 – protection of employees
▪ Article 13 – protection of creditors
o Decision to merge
▪ Article 11 – all shareholders must inspect documents
