Mergers and Spin-offs: A Comprehensive Guide

Posted on Sep 15, 2024 in Law & Jurisprudence

Fusion

a) Concept and Types of Fusion

Fusion, a structural modification leading to the concentration of companies, represents total economic integration. It involves the merging of corporate assets, entities, and their partners. Legally, fusion is a procedure where two or more companies pool their wealth and partners into a single company. This occurs after the eradication of all existing companies (merger by formation of a new society) or all but one (merger by absorption). Companies of the same or different natures can merge (mixed mergers).

b) Requirements of the Merger

The LSA has outlined four conditions:

  1. Dissolution of Involved Companies: This involves the extinction of all dissolving companies. All dissolve when the merger creates a new society. All but one dissolve when one absorbs the others.
  2. Transfer of Assets: The merger aims to transfer all assets (assets and liabilities) of each dissolving company to the newly created or acquiring company.
  3. No Settlement of Dissolved Societies: The merger necessitates dissolution, expiry, and transfer of assets, resulting in a single entity.
  4. Grouping of Partners: All partners are grouped into the single company resulting from the merger. This company receives the assets of dissolved companies and delivers shares representing the capital or capital increase to shareholders of each dissolved company.

c) Legal Process of Merger

  1. Proposed Transaction: Initiated by administrators, who draft a joint merger project (new standards impose stricter content requirements).
  2. Advertising the Proposed Merger: Administrators must submit a copy of the draft terms to the commercial register for each company involved. After deposit and registrar rating, the registrar transmits it to the central commercial for publication in the Official Gazette of the Mercantile Registry.
  3. Report of the Directors: Administrators from each company explain and justify the draft terms’ legal and economic aspects in a detailed report. When the resulting company is anonymous or limited by shares, administrators must apply to the registered office’s trade register for the appointment of independent experts to issue separate reports on the merger.
  4. Adoption of Merger Agreement: The merger agreement must be adopted by each company’s board of directors. This requires convening the board a month in advance and providing shareholders, bondholders, special rights holders, and worker representatives with the following documents: draft terms, managers’ reports, and independent expert reports.
  5. Approval of Merger Balance: Approval by general meetings of the companies involved.
  6. Publication of Merger Agreement:
  7. Execution of the Merger:
  8. Grant Writing and Publication of the Merger:

Excision (Spin-off)

a) Concept and Types of Excision

Excision is a complex structural modification. A registered corporation’s excision can occur in the following ways:

  1. Total Excision: A company’s heritage is divided into two or more parts, each forming one or several new or existing companies. This involves a devolution of the whole business into parts, integrating them into new or existing entities (business division).
  2. Partial Excision: The dividing company survives, but part of its assets is segregated. The segregated economic unit is absorbed by one or more new or existing entities.
  3. Segregation: This involves the transfer of one or more parts of a company’s heritage (each forming an economic unit) to one or more companies. In return, the segregated society receives shares, units, or quotas of the recipient companies.

b) Requirements

For excision to occur:

  • The company must secrete and contribute all or part of its assets and liabilities to one or more companies.
  • Shares or quotas of the recipient company/companies must be allotted to the shareholders of the dividing company, who become shareholders or members of the beneficiary company in the corresponding proportion.

c) Procedure

The process is similar to fusion, with some differences:

  1. Draft Terms of Division: Prepared by managers of the involved companies.
  2. Project Report: Drafted by directors of the participating companies.
  3. Adoption of Excision Agreement:
  4. Approval of the Merger Balance:
  5. Publication of Agreement and Registration:
  6. Creditor Protection: Achieved through a right of objection.
  7. Grant Writing and Publication of the Split: