The merger of companies is a legal operation by virtue of which two or more companies join together to form a single company. As I have been repeating on many occasions throughout this blog, the best way to deal with corporate law is by thinking of large corporations, and so to understand the meaning of the merger project we are going to give two different examples, some very large companies and some very small companies.
Let us imagine, first of all, that two large telephone companies or hotel chains decide to merge. The procedure would begin with a more or less formal meeting of its top representatives, who came to the conclusion that it would be good for both companies to merge, since it would allow them to manage their joint client portfolio at a lower cost, which would increase the companies' profits, and thus the remuneration of the shareholders and the Directors, the amount of which is linked to the company's performance and the conditions of the merger would be determined.
As the decision to merge ultimately falls to the shareholders, who are the owners of the company ("shareholders"), so that they, and also the creditors, bondholders, employees and holders of special rights other than shares and in general holders of risks with respect to the participating companies ("stakeholders"), can have sufficient knowledge and at the appropriate time of the conditions of the merger, and thus exercise the rights attributed to them by law, there is a regulated procedure, protective of them, which broadly includes: a preliminary phase, a decision-making phase and an execution phase.
TO) The preliminary phase
The preliminary phase of the merger involves the drafting by the directors of the companies of a document, called merger project, in which, based on the value of each company, the conditions under which the merger will take place are determined, ranging from what each shareholder will receive to the date from which it will take effect; then, the directors must prepare a report on the merger project, that is, They must be wet, indicating the convenience of the fusion; and on certain occasions a complementary report on the merger project is necessary, so that there is an objective opinion of the project.
B) The decision-making phase.
This phase would consist of the approval of the merger by the General Meetings of Shareholders of each of the companies participating in it., with a qualified majority, and in the terms that had been provided for in the project.
c) The execution phase
And finally, the merger would be concluded through the granting of the deed and registration in the Commercial Registry.
The procedure is actually complex, and with some reason given the magnitude of the interests at stake. But if we look at it in some detail, what is sought is for the partners to be well informed, due to the consequences that the merger has on the money they have invested in the company.
¿Is this whole procedure suitable for small companies??
Let us now think of Virgilio and Paco, who are the only partners, managers and employees of two companies that are dedicated to car repairs, and that despite being a single business, they manage it through two companies, the company “Virgilio SL” runs the workshop in the northern part of the city, and “Paco SL” runs the workshop in the southern part of the city. One Sunday, having coffee, one says to the other: don’t you think it’s silly that we are paying two accounting fees and that we have bank accounts for the two companies, when everything is the same? Don’t you think that we are spending a lot of money on this? A few days earlier they had gone to sign the annual policy at their Notary, whom they trust a lot, and they told him their concerns, who told them that they could merge the two companies. To Virgilio and Paco this sounded like something from big businessmen, but the Notary told them no, and that in their case it could be very simple, because the law exempted them from many requirements, since they themselves were the partners, administrators and the only workers of the companies, so their agreement and little else was enough.
Returning to the theory, what is the point in a case like that of Virgilio and Paco of a procedure as complex as the one we have pointed out before for telephone companies, when it is all aimed at providing information to the partners?
The Law has been quite receptive to this situation by regulating a simplified merger procedure, which is the most common, given the characteristics of the Spanish business fabric. The essence of this simplified procedure is that if all the partners vote in favour of the agreement and in a universal meeting, the entire preparatory phase of the merger is not necessary, that is, the merger project and the reports on it.
The lack of need for the merger project does not mean that there is no prior phase of the merger, What happens is that this phase does not have a specific procedural regulation.In a small company, it will also be necessary to assess and know why the merger is being carried out, determine the exchange ratio, the effective accounting date, approve a balance sheet... but as we have said, if the agreements are adopted unanimously by all the partners and in a universal meeting, it is not necessary for there to be a specific document, other than the approval of the merger by the General Meetings of partners of each company.
Based on my professional experience, the mergers we carry out, mostly involving small and medium-sized companies, are carried out in a manner that is completely different from that provided for by law.
In the sense that the company's advisor usually goes to the Notary and asks us what is needed to carry out the merger, to which we usually respond that it is enough to give us the value of the companies, as long as they want it to be different from the book value, and from there we prepare the exchange ratio, draft the agreements, match the dates of their adoption based on the existing balance sheets, agree on the date of accounting effects in accordance with the applicable regulations, prepare the announcements, and once a month has passed since the date of publication of the last of them, the deed is granted.
The purpose of this explanation is to try to explain the content of some rules and the interpretation, erroneous in my opinion, that some Commercial Registries sometimes make about the rules of the merger, since it is very common for them to advise on a merger project, when the agreements have been adopted in a universal meeting and unanimously by all the partners with voting rights, which only achieves adding expenses without any justification, neither legal nor economic.
In Lleida on November 16, 2015
