Law 4601\/2019 provides special rules for mergers in which the shareholding relationship permits a substantial simplification of the procedure. Where the absorbing S.A. holds all, or at least 90%, of the voting rights in the absorbed company, certain formalities are reduced.\u00a0The two cases do not, however, provide the same extent of exemptions, because in the second case a minority continues to exist in the absorbed company.\u00a0The law also regulates the acquisition of an S.A., which is treated as equivalent to a merger by absorption, although the shareholders receive consideration instead of participating interests.\u00a0For management and advisers, the fundamental issue is the correct choice of the applicable regime and compliance with the formalities that remain mandatory.<\/p>\n
One of the simplified forms of merger provided for by law concerns the absorption of one or more capital companies by an S.A. holding all voting securities in the absorbed company (Article 35).\u00a0The holding may be direct or through a person acting in his or her own name but on behalf of the absorbing company.\u00a0The absorbed company is dissolved without liquidation and all its assets and liabilities are transferred by universal succession to the absorbing company.\u00a0Because no minority exists in the absorbed company, formalities serving primarily to inform or protect its shareholders or partners may be omitted.\u00a0The simplification, however, concerns specific requirements and does not eliminate the other obligations and formalities applicable to the merger procedure.<\/p>\n
For the provision to apply, the absorbing company must be an S.A. and the absorbed company must be a capital company.\u00a0The absorbing company must hold 100% of the shares, quotas or other securities of the absorbed company carrying voting rights.\u00a0The special regime applies only to a merger by absorption and not to a merger by formation of a new company.<\/p>\n
The absorbing company is not required to hold the full 100% at the start of the merger process. This percentage may be acquired during the procedure, even after execution of the draft merger agreement, provided that it has been acquired by the time the merger takes effect, namely upon registration of the merger agreement with the General Commercial Registry (GEMI) under Article 18.<\/p>\n
The exemption from corporate approval requires timely publication of the draft merger terms by every participating company at least one month before completion of the merger (Article 35).\u00a0During the same period, shareholders of the absorbing company must be able to inspect at its registered office the documents that remain mandatorily available. These include the draft merger terms, the financial statements and management reports for the previous three financial years and, where required, an interim accounting statement.<\/p>\n
A shareholder or shareholders of the absorbing company representing at least one twentieth of the paid-up share capital may request the convening of an extraordinary general meeting up until completion of the merger.\u00a0The request must concern approval of the merger and is exercised in accordance with the minority right under Article 141(1) of Law 4548\/2018.\u00a0If the right is exercised, the exemption from a general meeting resolution no longer applies. Management must therefore allow in the timetable for the possibility that a meeting will need to be convened and a resolution adopted without jeopardising completion of the merger.<\/p>\n
Where a company wholly owned by the absorbing company is absorbed, neither the report of the management body nor examination of the draft merger terms by experts is required (Article 35).\u00a0The draft is also not required to include information regarding the exchange ratio, the allotment of new participating interests or the date from which those interests entitle their holders to participate in profits.\u00a0These exemptions are explained by the fact that, because the absorbing company wholly owns the absorbed company, no exchange of participating interests takes place.\u00a0The special liability of management and experts in connection with the preparation and implementation of the merger under Article 19 is also excluded.\u00a0This exemption does not remove potential liability of board members towards the company for breach of their duties under Article 102 of Law 4548\/2018.<\/p>\n
Provided that the statutory requirements relating to publication, information and minority protection are satisfied under Article 35, no resolution of the corporate bodies of the participating companies approving the merger is required.\u00a0The exemption is not mandatory. The participating companies may follow the ordinary procedure and obtain approving resolutions. This may be useful where there is corporate complexity, a financing requirement or a need for enhanced internal corporate authorisation.<\/p>\n
If the simplified procedure is applied without the statutory conditions being met and the required corporate approval is omitted, the merger may be annulled in accordance with Article 20.<\/p>\n
Where the absorbing S.A. holds at least 90%, but less than 100%, of the voting securities of the absorbed company, a narrower simplification applies under Article 36.\u00a0The fundamental difference is that minority shareholders or partners continue to exist in the absorbed company and therefore require the general protective formalities.<\/p>\n
Unlike Article 35, Article 36 does not provide the same exemptions from the individual procedural requirements.\u00a0The simplification concerns the possibility of dispensing with a resolution of the general meeting of the absorbing company, provided that the specific conditions of Article 36 are satisfied.\u00a0The management report, expert examination, exchange ratio and approval by the absorbed company remain, in principle, subject to the general regime.\u00a0Accordingly, the exemptions available for a wholly owned subsidiary should not be mechanically transferred to the 90% case.\u00a0For management, the 90% threshold operates as the basis for a specific exemption rather than as a general shortening of the merger procedure.<\/p>\n
For a general meeting resolution of the absorbing company not to be required, the draft must have been published for that company at least one month before the general meeting of the absorbed company.\u00a0During the same period, shareholders of the absorbing company must have access to the merger documents at the company\u2019s registered office (Article 36).\u00a0In addition, shareholders of the absorbing company representing at least one twentieth of the paid-up capital may request the convening of an extraordinary general meeting up until completion of the merger.\u00a0If such a request is submitted, the exemption from the general meeting resolution ceases to apply (Article 36; Article 141(1), Law 4548\/2018).<\/p>\n
The simplification under Article 36 therefore concerns only approval by the general meeting of the absorbing company.\u00a0The absorbed company continues to approve the merger, and the other general and special provisions remain applicable.\u00a0Incorrect omission of the absorbing company\u2019s resolution, because the conditions were not met or the minority right was exercised, may trigger the annulment mechanism under Article 20.<\/p>\n
An acquisition is a particular form of corporate transformation which the law treats as equivalent to a merger by absorption (Article 37).\u00a0One or more S.A.s are dissolved without liquidation and transfer all their assets and liabilities to another S.A.\u00a0The former are regarded as the companies being acquired and the latter as the acquiring company.\u00a0The shareholders of the acquired companies do not receive participating interests in the acquiring company. Instead, they receive consideration for their rights.\u00a0The consideration may be monetary or non-monetary, but it may not consist of participating interests in the acquiring company.<\/p>\n
The essential difference from a merger by absorption lies in the consideration.\u00a0The shareholders receive consideration for their rights rather than equity interests in the acquiring company.\u00a0If the consideration consisted of shares in the acquiring company, the fundamental distinction between acquisition and merger by absorption would disappear.<\/p>\n
The special rules governing mergers involving an S.A. apply mutatis mutandis to an acquisition, with the necessary adjustments (Article 37).\u00a0In practice, the draft terms, required reports, publicity, corporate approval, creditor protection and legality review remain critical.\u00a0The special simplifications applicable to the 100% or 90% cases apply only where the corresponding ownership conditions are satisfied.<\/p>\n
An unjustifiably low or high consideration does not constitute an independent ground for annulment of the acquisition (Article 38). Where the consideration is unjustifiably low, each shareholder of the acquired company may claim monetary compensation from the acquiring company.\u00a0The amount of compensation is determined by the court and the claim becomes time-barred twelve months after registration of the resolution approving the acquisition with GEMI.\u00a0The acquisition remains valid, while the shareholder retains a monetary claim against the acquiring company.\u00a0An unjustifiably high consideration likewise does not invalidate the transaction.\u00a0Depending on the circumstances, however, it may raise issues concerning management liability towards the acquiring company under Article 102 of Law 4548\/2018.\u00a0For management and advisers, documenting the valuation and the consideration is essential in order to prevent subsequent claims.<\/p>\n
Simplified forms do not permit a general relaxation of the applicable rules.\u00a0In the 100% case, specific reports, elements of the draft and, subject to conditions, corporate approvals are removed.\u00a0In the 90% case, the simplification is essentially limited to the resolution of the general meeting of the absorbing company, because the minority of the absorbed company continues to require protection.\u00a0Incorrect classification of the transaction or omission of a mandatory approval may turn a procedural shortcut into a material completion risk.\u00a0In an acquisition, the focus shifts from the exchange ratio to the consideration and its substantiation.\u00a0A low consideration does not invalidate the transaction but may give rise to a compensation claim.\u00a0In the next article, we examine mergers involving a limited liability company (E.P.E.).<\/p>\n
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