Merger and consolidation are different paths taken by companies for
economic reasons, whether for economic growth (e.g. cutting competition)
or to cut costs.
MERGER
Section 76 of the Corporation Code of the Philippines provides that
there is Merger when two or more corporations merge into a single
corporation which shall be one of the constituent corporations.
In a merger, a corporation absorbs another corporation and remains
in existence while the other is dissolved. It signifies the absorption of one
corporation by another which retains its name and corporate identity with
the added capital, franchises and powers of a merged corporation.1
CONSOLIDATION
The same provision2 of law provides that corporations may consolidate
into a new single corporation which shall be the consolidated corporation.
In consolidation, a new corporation is created, and the consolidating
corporations are extinguished.3
CHARACTERISTICS MERGER CONSOLIDATION
DEFINITION A corporation absorbs In consolidation, a
another corporation new corporation is
and remains in created, and the
existence while the consolidating
other is dissolved. corporations are
extinguished.
DISSOLVED All constituent All constituent
CORPORATION corporations, except corporations are
the surviving dissolved and
corporation, are absorbed by the new
dissolved. consolidated
enterprise.
CREATION OF NEW No new corporation is A single new
CORPORATION created. corporation emerges.
ACQUISITION OF RIGHTS The surviving All assets, liabilities
AND LIABILITIES corporation acquires and capital stock of
1
Aquino, The Philippine Corporate Law Compendium, 2014 Edition
2
Section 76, Corporation Code
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Aquino, The Philippine Corporate Law Compendium, 2014 Edition
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all the assets, all consolidated
liabilities and capital corporations are
stock of all transferred to new
constituent corporation.
corporation.
PROCEDURE FOR MERGER/CONSOLIDATION
1. Approval of Plan - The Board of each corporation shall draw up a
plan of merger/consolidation and shall approve it. The plan of merger
or consolidation shall be approved by majority vote of each board of
the concerned corporations at separate meetings.
2. Submission to stockholders or members for approval - The plan
of merger or consolidation shall be approved by majority vote of the
Board and stockholders representing 2/3 of the outstanding capital
stock or members in case of a non-stock corporation;
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3. Execution of Articles of Merger/Consolidation: The Articles of
Merger/Consolidation shall be executed by each of the constituent
corporators, signed by the President or Vice-President and certified by
the secretary or assistant secretary;
4. Conduct of hearing by SEC: If, upon investigation, the Securities
and Exchange Commission has reason to believe that the proposed
merger or consolidation is contrary to or inconsistent with the
provisions of this Code or existing laws, it shall set a hearing to give
the corporations concerned the opportunity to be heard. Written notice
of the date, time and place of hearing shall be given to each
constituent corporation at least two (2) weeks before said hearing. The
Commission shall thereafter proceed as provided in this Code.
5. Submission of Requirements to SEC: Four copies of the Articles of
Merger/Consolidation together with favorable recommendation of a
pertinent government agency in certain cases (e.g. educational
institution) shall be submitted to SEC for approval.
6. Issuance of Certificate by SEC
EFFECTS OF MERGER OR CONSOLIDATION
a. The constituent corporations become one.
b. The separate existence of the constituent corporations
cease except that of the surviving or consolidated
corporation.
c. The surviving corporation (in case of merger) or the
consolidated corporation (in case of consolidation) shall
possess all the rights and privileges, immunities and
franchises of the constituent corporation. Moreover, the
personal and real property, choses in action (right
under the law to institute suits) and other interests of
the constituent corporation shall be transferred to the
surviving or new corporation;
d. The surviving corporations shall be liable for all the
liabilities and obligations of each of the constituent
corporations as if it itself has procured it.
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