Company merger in Italy: proceedings, effects and types
The expression "company merger" refers the act through which two or more companies become united, creating only one company.
The normative discipline is contained in the articles of the civil code, precisely from art. 2051 to art. 2504 quinquies.
Article 2051 of the civil code states, in detail, that the merger can take place through:
- the establishment of a new one;
- incorporation into one company, of one or more others.
Participation in the merger is not allowed for those companies that are in liquidation and who have begun to distribute assets.
Banking companies (articles 31, 36 and 57 TUBC) and insurance companies (articles 87 et seq., article TU No. 449/59 and article 17 L. 990/69) have specific regulations regarding the purpose of merger.
The forms of company merger in Italy: by union or by incorporation
The forms of existing company merger are, therefore, strictly speaking, by union or by incorporation.
The merger can also be defined as:
- homogeneous, when it involves companies of the same type;
- heterogeneous, when it occurs between different types of companies.
As for the types of mergers, these can be summarized in:
- Full merger, implies that the companies that participate in it lose their legal subjectivity and become extinct, creating a new company, in which participate the associates of the merged company;
- Merger by incorporation, when only the incorporated company loses the subjectivity, while the participating one maintains it;
- Reverse merger, when the participating company is incorporated by the investee company, with consequent cancellation of the assets of the former;
- Merger by anomalous incorporation, is when the company that merges into another owns shares and capital shares of the latter;
- Merger by incorporation of companies owned by at least 90%;
- Merger following acquisition with indebtedness.
The procedure for the company merger in Italy
The company merger process is divided into several phases, including:
- Preliminary phase: this is the phase in which relations and contacts between administrative bodies are established. In this phase the documents necessary to start the procedure are produced;
- Registering phase: this is the phase in which the documents necessary to start the procedure are deposited at the headquarters;
- Deliberative phase: this is the phase in which the General Assembly decides whether to approve the company merger based on the documentation filed;
- Opposition phase: it is the phase during which the company's creditors can exercise the right of opposition;
- Implementation phase: this is the phase in which the merger takes place definitively.
The procedure of merger can be implemented through the ordinary procedure or, under certain conditions, using the simplified procedure.
The difference consists in the fact that in the ordinary procedure the completion of the operation takes place with the approval of the shareholders, while in the simplified one, the whole process is managed by the administrators.
The prerequisite for operating the so-called simplified procedure of the merger pursuant to art. 2505 of civil code consists in the possession by the merging company of all the shares or capital shares of the merged company and it must necessarily exist at the time of the completion of the merger deed.
In analogy to the provisions of art. 2505, paragraph 1, of the civil code, it is possible to resort to simplified merger in the following situations:
a) merger of two (or more) companies wholly owned by a third company;
b) merger of two (or more) companies, one of which is wholly owned by a third party, and the other partially owned by the latter and the remaining part owned by the former;
c) merger of three (or more) companies wholly owned "by cascade" (A owns 100% of B, which owns 100% of C);
d) merger of two (or more) companies whose associates are the same, with the same percentages and the same rights;
e) merger by "inverse" incorporation of the parent company into the wholly owned subsidiary.
The documents and acts that characterize the procedure of the company merger are as follows:
- Merger plan (art. 2501 ter, Italian Civil Code);
- Report of the Administrative Board (art. 2501 quinquies, Italian Civil Code);
- Experts report (art. 2501 sexies, Italian Civil Code);
- Balance Sheet of the participating companies (art. 2501 quater, Italian Civil Code);
- Decision of merger (art. 2502, Italian Civil Code);
- Execution of merger.
Company merger in Italy: what changes between partnership companies and capital companies according to Article 2502 of the Italian Civil Code?
According to the provisions of art. 2502 of the Italian Civil Code, the merger is decided by each of the companies that participate through the approval of the project, which, unless otherwise decided by the deed of incorporation or by the articles of association, takes place:
- in partnership companies, through the consent of the majority of associates, determined by virtue of the part attributed to each of them in profits, with the attached right of withdrawal for the associate who did not approved the company merger;
- in capital companies, as dictated by the rules for the modification of the deed of incorporation or the articles of association.
The decision to implement the merger may also lead to changes to the merger plan, provided that it does not affect the rights of associates or third parties.
Effects of the company merger in Italy
Concerning the effects resulting from the company merger, the reference article is art. 2504 of the Civil Code, which, in the first paragraph, states that the company resulting from the merger, or the merging company, assumes the rights and obligations of the participating companies, continuing in all their relations arose before the merger, even procedural ones.
In this regard it should be noted that recently the Supreme Court of Cassation, with sentence no. 8430/2016 of 27 April, specified that, pursuant to the new art. 2050 bis of the Italian Civil Code, the merger between companies in the case of merger by incorporation does not result in the extinction of the merged company or a new legal entity but implements the unification with the reciprocal integration of the participating companies, which retain their identity in a new organizational structure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.