Under Philippine law, two or more corporations can merge into a single entity, taking on the identity of one of the constituent corporations or that of a new corporation, which will be known as the consolidated corporation.
The board of trustees of the constituent corporations must create a plan that outlines the following information:
- The names of the corporations that intend to merge or consolidate; these corporations will be known as the constituent corporations.
- The terms of the merger or consolidation and the mode in which the whole process will be carried out.
- A statement of any changes or amendments to the articles of the incorporation of the surviving corporation, in case of mergers.
- All the statements that need to be set forth in the articles of incorporation for all corporations organized under the Code, in case of consolidations.
- Other provisions that are relevant to the merger or consolidation as deemed desirable or necessary.
When the board of trustees of constituent corporations makes a majority vote, they must send it for approval by stockholders and members at separate meetings.
Notice of these meetings must be sent to all stockholders or members of constituent corporations at least two weeks before the date of the meeting, either in person or through registered mail. The notice must indicate the purpose of the meeting, as well as include a summary or a copy of the plan of merger or consolidation.
Stockholders must vote for the plan to get approved. With stock corporations, the merger or consolidation must get the affirmative vote of stockholders representing at least two-thirds of the outstanding capital stock of each constituent corporation. In the case of non-stock corporations, the plan must get at least two-thirds of the members’ affirmative votes.
Dissenting stockholders in stock corporations can exercise their appraisal rights in accordance with the Corporation Code of the Philippines.
However, if the board decides to abandon the plan after gaining the approval of stockholders, dissenting stockholders’ appraisal right will be extinguished.
Amendments can be made to the plan of merger or consolidation if the amendment gets approved by majority vote of the boards of directors or trustees of all constituent corporations and gets ratified by the affirmative vote of stockholders representing at least two-thirds of the outstanding capital stock, or two-thirds of members of each constituent corporation.
The plan, including any amendments that have been made, will serve as the agreement of merger or consolidation.
Articles of merger or consolidation
After the approval of the majority of stockholders or members has been gained, the articles of merger or consolidation will be executed by the constituent corporations.
These articles must include the following:
- Plan of merger or consolidation
- Number of shares or members voting for and against the plan
- Number of shares outstanding (stock corporations) or number of members (non-stock corporations)
Effectivity
After these have been signed and certified, four copies of the articles of merger or consolidation must be submitted to the Securities and Exchange Commission (SEC) for approval.
The following entities must secure recommendations from the appropriate government agencies beforehand:
- Banks and banking institutions
- Building and loan associations
- Trust companies
- Insurance companies
- Public utilities
- Educational institutions
- Corporations governed by special laws
If SEC rules that the merger or consolidation complies with the provisions of the Code, it will issue a certificate of merger or of consolidation. At that point, the merger or consolidation will come into effect.
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