In a previous article, we examined the publicity formalities and the preventive legality review that precede completion of the merger. Upon completion of the publicity formalities relating to the merger agreement, its legal effects arise. These effects concern both the participating companies and third parties dealing with them. Here, we focus on the principal consequences of the merger. In particular, we examine the universal succession of the absorbing company. The latter automatically succeeds to all the rights, obligations and legal relationships of the absorbed company.<\/p>\n
Under Article 18 of Law 4601\/2019, the merger is completed upon registration of the agreement with the G.E.MI. of the absorbing company. Its legal effects also arise from that same point in time. Although Article 18 refers to a merger by absorption, its provisions apply by analogy to other cases as well. More specifically, they apply to a merger by formation of a new company and also to an acquisition.<\/p>\n
As regards the effects of publicity, the general framework governing publicity with the G.E.MI., as currently in force, applies supplementarily. Under this framework, the legal effects arise upon registration and publication of the relevant documents and information. From that point onwards, the absorbing company automatically succeeds to all the rights, obligations and legal relationships of the absorbed company. At the same time, the absorbed company ceases to exist, without entering into liquidation. Its shareholders or partners acquire the status of shareholder or partner of the absorbing company. Thus, the business activity is continued by the company resulting from the merger.<\/p>\n
The effects of the merger arise even if the other acts have not been published in respect of each participating company. They also arise even before the absorbed company is deleted from the G.E.MI. Publication of the remaining acts continues to be mandatory. It does not, however, constitute a prerequisite for the effects of the transformation to arise.<\/p>\n
The critical prerequisite is the registration and publication of the merger agreement with the G.E.MI. of the absorbing company. This registration has constitutive effect. Upon it, the merger is completed and its legal consequences arise automatically.<\/p>\n
Finally, the time at which the effects of the merger arise does not always coincide with the individual dates provided for in the draft merger agreement. It may precede or follow the date on which rights to participate in the profits of the absorbing company are acquired. It may also differ from the date from which the transactions of the absorbed company are attributed, for accounting purposes, to the absorbing company. The same applies to the time at which the exchange of old and new corporate participations is completed.<\/p>\n
The central legal consequence of the merger is the universal succession of the absorbing company. Upon completion of the merger, the assets and liabilities of the absorbed company are transferred to the absorbing company as a single whole. This whole includes rights, obligations and legal relationships. No separate transfer act is required for each individual item of assets or liabilities.<\/p>\n
These elements pass to the absorbing company in the condition in which they are at the time the merger is completed. As a rule, no additional formalities or conditions are required.<\/p>\n
There is, however, an important practical exception. Where the law provides for specific formalities for a particular asset, those formalities must be complied with. Such a case may concern, indicatively, immovable property or a trademark.<\/p>\n
Universal succession extends to contractual and proprietary legal relationships. It also extends to other contractual relationships, administrative licences, pending litigation and all other legal relationships of the absorbed company.<\/p>\n
In relation to contracts, particular attention must be paid to clauses linking the merger or a change of control to a right of termination. The same applies to clauses permitting amendment of the contract. Their validity and activation must be assessed on a case-by-case basis.<\/p>\n
Universal succession also includes corporate participations held by the absorbed company in third companies. Their transfer takes place automatically upon completion of the merger.<\/p>\n
In capital companies, the absorbing company is entitled to assert its status vis-\u00e0-vis the company concerned upon the relevant registration, where such registration is required. Indicatively, registration may be made in the register of shareholders or partners.<\/p>\n
In partnerships and civil-law companies without legal personality, the partnership agreement is critical. It may impose specific conditions on the transfer of the participation.<\/p>\n
Universal succession also extends, in principle, to the administrative licences of the absorbed company.<\/p>\n
Whether a licence is transferable depends on its characteristics and on the regulatory framework governing it. Transfer is not always permitted. Indicatively, it may be excluded where the law requires a specific corporate form as a condition for granting the licence.<\/p>\n
For this reason, licences must be reviewed separately\u2014both before and after the merger.<\/p>\n
Universal succession also extends to pending litigation involving the absorbed company.<\/p>\n
Upon completion of the merger, the absorbing company automatically takes its place as a party to the proceedings. No additional procedural act is required. Nor is it necessary to repeat procedural acts that have already been carried out.<\/p>\n
This change does not result in the automatic interruption of the proceedings under the general provisions of the Greek Code of Civil Procedure. The absorbing company becomes the universal successor of the absorbed company by operation of law.<\/p>\n
The proceedings are continued by the absorbing company. Procedural acts already carried out remain valid.<\/p>\n
Correspondingly, the absorbing company also succeeds to the position of the absorbed company in administrative or arbitration proceedings. An exception exists only where a specific provision provides otherwise.<\/p>\n
Upon completion of the merger, the absorbed company is automatically dissolved without liquidation.<\/p>\n
This dissolution is an immediate consequence of universal succession. All its assets and liabilities are transferred to the absorbing company. Accordingly, neither liquidation of the assets nor satisfaction of corporate creditors through liquidation is required. The business activity continues through the absorbing company.<\/p>\n
At the same time, dissolution of the absorbed company entails the loss of shareholder\/partner status by its members. Upon completion of the merger, these members acquire the status of partner or shareholder of the absorbing company.<\/p>\n
The critical point in time is the registration and publication of the merger agreement with the G.E.MI.<\/p>\n
Upon completion of the merger, the shareholders or partners of the absorbed company automatically acquire the corresponding status in the absorbing company.<\/p>\n
This acquisition takes place in accordance with the exchange ratio provided for in the draft merger agreement.<\/p>\n
By way of exception, Article 18 \u00a75 provides for two cases in which corporate participations are not exchanged.<\/p>\n
First, participations in the absorbed company held by the absorbed company itself or by a third party on its behalf are not exchanged.<\/p>\n
Second, participations in the absorbed company held by the absorbing company or by a third party on its behalf are not exchanged.<\/p>\n
A merger is not exhausted in the contractual agreement between the legal entities involved and their partners\/shareholders, nor in the internal corporate approvals.<\/p>\n
Its critical effects are activated through publication of the agreement with the G.E.MI. From that point onwards, the absorbing company continues the business of the absorbed company, assuming as a whole its rights, obligations, contracts, licences and pending proceedings.<\/p>\n
For management, investors and legal and other advisers, the key issue is the timely mapping of the legal relationships being transferred and of their consequences. In particular, contracts, licences, corporate participations and pending disputes must be reviewed.<\/p>\n
In the next article of this series, we will examine the liability that may arise in the context of the merger.<\/p>\n
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