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4. Is a certificate of tax clearance from the BIR similar to that required in
TITLE 9: Merger and Consolidation the dissolution of corporations required in a merger?

Guide Questions: Yes, they are similar. Section 52 (c) of the National Internal Revenue
code provides that every corporation shall render a correct return to the
1. What are the provisions in the Philippine Competition Act or in its rules Commissioner.
and issuances that impact on the authority of the SEC over mergers and
consolidations? The dissolving or reorganizing corporation shall, prior to the issuance by
the SEC of the Certificate of Dissolution or Reorganization, as may be
According to Sections 12(b), 16, 17, 18, 19, 20, 21, 22, and 23 of the defined by rules and regulations prescribed by the Secretary of Finance,
Philippine Competition Act, the commission shall have the power to: upon recommendation of the Commissioner, secure a CERTIFICATE
OF TAX CLEARANCE from the BIR which shall be submitted to the
a. Review proposed mergers and acquisitions; SEC.
b. Determine thresholds for notification;
c. Determine the requirements;
d. Issue clearance for transactions that may significantly affect
competition in the relevant market; 5. What differentiates a mere transfer of assets and liabilities from one
e. Prohibit mergers and acquisitions. corporation to another from a merger between two corporations?

2. Give one illustration of a de facto merger. A mere transfer of assets and liabilities from one corporation to another
means that both the life of the participating corporations continues to
Jana sold her 85% of her shares in Dog Lovers Corporation to Patty, the exist. There are three types of transfers. First, the assets-only transfer
owner of an airline company. Jana declared in her ITR that the selling of only affects the corporate seller’s raw assets and properties. The
her shares was for the merger of Dog Lovers Corporation with the airline purchaser is not interested in the seller’s corporate personality – its good
company. Her intention of declaring such merger is to avoid paying will, or in other factors affecting the business itself. There are no
taxes for the sale of assets and properties. complications affecting the employer-employee relationship. Second is
the business enterprise level transaction where the whole business is
It must be noted that when a sale of assets or properties is for the sold and purchased but the parties retain their respective juridical
purpose of merger, even if it is a de facto merger, it is exempt from tax. personalities. The employer-employee and employer liability
complications arise in this type of transfer. Lastly, the equity level does
To add, the merging of dog lovers with an airline company is not not disturb the participating corporations’ separate juridical personality
essential to purpose of the business of the latter’s. as both continues to exist. The purchaser corporation simply buys the
underlying equity of the selling corporation which remains its separate
3. When is the effectivity date of a merger or consolidation? corporate personality.

Upon the issuance of the Commission of a certificate approving the One the other hand, a total merger is where the merged corporation
articles and plan of merger or consolidation. transfers everything – its body and soul – to the surviving corporation.
Merger is the absorption of one or more corporation by another existing
 An issuance of a such certificate is done if the Commission is corporation, which retains its identity and takes over the rights,
satisfied that the merger or consolidation of the corporations is privileges, franchises and properties, and assumes all the liabilities and
consistent with the provisions of the Revised Corporation Code obligations of the absorbed corporation(s) in the same manner as if it
and existing laws. had itself incurred such liabilities or obligations. The absorbing
corporation continues its existence while the life or lives of the other
corporation(s) is/are terminated.

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c. Security for Share or Security Exchange
6. What is the distinction between the Plan of Merger and the Articles of  The transferor is the security holder of a constituent corporation
Merger? and the transferee of the securities of such constituent
corporation and issuer of shares or securities is the surviving
Section 75 of the Code provides that a Plan of Merger simply initiates corporation.
the merger by the execution of a plan presented by each board to their  The securities of the constituent corporation are eventually
respective stockholders for approval. The law prescribes the basic transferred to the surviving corporation.
contents of the plan. It must provide the basic terms of the merger, the
mode of implementing them, and amendments to the plan itself. 9. What are the possible changes, if any, in the Articles of Incorporation of
the surviving corporation that should be mentioned in the plan of
On the other hand, Section 77 provides that the Articles of Merger merger?
comes after the approval of the plan of the merger by the stockholders
or members. The articles must contain the proposed contract between The articles of incorporation of the surviving or consolidated corporation
the corporation and the State and it incorporates the plan of merger. It may:
must also contain the statement of votes for or against the plan, the  reflect the business activities of the constituent corporation
carrying amounts and respective fair values of assets and liabilities as of  may also reflect the change in business address
cut-off date, the accounting method to be used, and the provisional or  increase in number of directors
pro forma values of the accounts of the merged corporations.  increase in capital of the merged or consolidated corporation,
and other material stipulations of the parties
7. Who should sign the Articles of Merger?
The Section 77 of the Code requires the articles of merger or
Section 77 of the Revised Corporation Code provides that the articles of consolidation must reflect:
Merger or Consolidation is to be signed by the president or vice
 carrying amounts and fair values of the assets and liabilities of
president of each corporation.
the respective companies as of the agreed cut-off date
 method to be used in the merger or consolidation of accounts
8. What are the ways of implementing a merger or consolidation?
of the companies
According to the Tax Code, there are three ways of implementing a  provisional or pro forma values, as merged or consolidated,
merger or consolidation: using the accounting method

a. Property for Share Exchange 10. What are the new amendments, if any, brought about by the Revised
Corporation Code under Title IX on Merger and Consolidation?
 The transferor of the property is the constituent corporation and
the transferee of property and issuer of shares is the surviving
The Code prescribes compliance with the PCA in relation to agreements
corporation.
that will adversely affect market competition, specifically in all forms of
 The issued shares are eventually distributed to the
mergers and acquisitions, joint ventures, and agreements on corporate
shareholders of the constituent corporation.
control.
b. Share for Share Exchange
Additionally, the Code requires additional information that must be
 The transferor is the shareholder of a constituent corporation reflected in the plan and articles of merger or consolidation for the
and the transferee of shares of such constituent corporation and understanding of the effects of reorganization.
issuer of shares is the surviving corporation.
 The properties of the constituent corporation are eventually 11. How can the SEC determine the fairness and reasonableness of the
transferred to the surviving corporation. valuation of properties and/or shares subject of the exchange between
and among the corporations involved in a merger or consolidation?
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 With notice to all stockholders or members of the respective
According to Section 77 of the Code, the SEC is able to determine the corporations in accordance with Section 49 regarding regular
fairness and reasonableness of the exchange between the corporations or special meetings.
involved in a merger or consolidation by setting forth in the Articles of  Notice shall state the purpose and include a copy of summary
Merger or Consolidation the following: of the plan
c. Affirmative vote of stockholders representing at least 2/3 of the
d. The carrying amounts and fair values of the assets and liabilities of outstanding capital stock or 2/3 members in case of nonstock
the respective companies as of the agreed cut-off date; corporations
e. The method to be used in the merger or consolidation of accounts of d. Dissenting stockholder has appraisal right unless plan is abandoned
the companies; and by the board in which case such right shall be extinguished
f. The provisional or pro forma values, as merger or consolidated,
using the accounting method. 13. Daniel sold all his shares in D’ Hotel Corporation (DHC) to Claudio.
Daniel owned 90% of DHC. As new owner, Claudio wants a
In particular, the SEC will: reorganization of DHC for the purpose of terminating all its existing
a. Determine the adjusted fair value of the shareholders’ equity of the employees and hiring of new employees claiming there was a merger. Is
surviving corporation and divide the same by the outstanding capital Claudio correct or not? Explain.
stock, to arrive at the fair value per share of such corporation. In
case of a consolidated corporation, the fair value per share is the No. Claudio is not correct. In relation to Section 39 of the Code, a
par value per share. legitimate business purpose is essential for the merger. In this case, the
b. Divide the adjusted net asset value of the constituent corporation/s purpose of merging with the company is not in relation to the purpose of
by the fair value per share of the surviving corporation, as computed the business, thus, being a de facto merger. In a de facto merger, the
above (or par value per share of the consolidated corporation), to assets of the corporation that were acquired survives after the transfer
arrive at the number of new shares that the surviving corporation will until it is later dissolved by another act. For the acquisition to be
issue for the exchange. considered substantial, at least 80 percent of the assets acquired must
have an element of permanence.
The provisional or pro forma values, as merger or consolidated, using
the accounting method, will give the shareholders an overview if the
additional issued shares on account of the merger or consolidation
approximates the fair net asset value of assets merged or consolidated
into the surviving or consolidated corporation.

12. What are the procedural requirements for the approval of the plan of
merger and the articles of merger?

Section 76 provides the procedural requirements for the approval of the

a. Approval by a majority vote of each of the board of directors or

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thirty (30)-day period referred. The issuance of such a request has the effect of
extending the period within which the agreement may not be consummated for
an additional sixty (60) days, beginning on the day after the request for
information is received by the parties: Provided, That, in no case shall the total
period for review by the Commission of the subject agreement exceed ninety (90)
days from initial notification by the parties.

When the above periods have expired and no decision has been promulgated for
whatever reason, the merger or acquisition shall be deemed approved and the
Lecture Notes: parties may proceed to implement or consummate it. All notices, documents and
information provided to or emanating from the Commission under this section
PHILIPPINE COMPETITION ACT shall be subject to confidentiality rule under Section 34 of this Act except when
the release of information contained therein is with the consent of the notifying
• PCA applies to: entity or is mandatorily required to be disclosed by law or by a valid order of a
o Agreements that will adversely affect market competition court of competent jurisdiction, or of a government or regulatory agency,
o All forms of mergers and acquisitions (de facto or statutory), including an exchange.
joint ventures, and agreements on corporate control
• The PCC has the authority to review mergers and acquisitions. In the case of the merger or acquisition of banks, banking institutions, building
• The PCC is required to issue a clearance for transactions that may and loan associations, trust companies, insurance companies, public utilities,
significantly affect competition in the relevant market specifically those educational institutions and other special corporations governed by special laws,
which meet the notification thresholds. a favorable or no-objection ruling by the Commission shall not be construed as
dispensing of the requirement for a favorable recommendation by the appropriate
SEC. 16. Review of Mergers and Acquisitions. — The Commission shall have the government agency under Section 79 of the Corporation Code of the Philippines.
power to review mergers and acquisitions based on factors deemed relevant by
the Commission. A favorable recommendation by a governmental agency with a competition
mandate shall give rise to a disputable presumption that the proposed merger or
SEC. 17. Compulsory Notification. – Parties to the merger or acquisition acquisition is not violative of this Act.
agreement referred to in the preceding section wherein the value of the
transaction exceeds one billion pesos (P1,000,000,000.00) are prohibited from DEFINITION:
consummating their agreement until thirty (30) days after providing notification to
the Commission in the form and containing the information specified in the WHAT IS A MERGER OR CONSOLIDATION?
regulations issued by the Commission: Provided, That the Commission shall
promulgate other criteria, such as increased market share in the relevant market  A pooling of resources and businesses of two or more corporations that
in excess of minimum thresholds, that may be applied specifically to a sector, or may or may not involve dissolution of the concerned corporations.
across some or all sectors, in determining whether parties to a merger or
acquisition shall notify the Commission under this Chapter.  A consolidation is the union of two or more existing entities to form a
new entity called the consolidated corporation. A merger, on the other
An agreement consummated in violation of this requirement to notify the hand, is a union whereby one or more existing corporations are
Commission shall be considered void and subject the parties to an administrative absorbed by another corporation that survives and continues the
fine of one percent (1%) to five percent (5%) of the value of the transaction. combined business. (Philippine National Bank v. Andrada Electric &
Engineering Co., G.R. No. 142936, [April 17, 2002], 430 PHIL 882-903)
Should the Commission deem it necessary, it may request further information
that are reasonably necessary and directly relevant to the prohibition under TWO KINDS OF MERGERS OR CONSOLIDATIONS
Section 20 hereof from the parties to the agreement before the expiration of the
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1. STATUTORY – pooling with automatic dissolution; governed by Title IX dissenting stockholder may exercise the right of appraisal under the conditions
on: provided in this Code.
o Measures
o Rights and duties of parties After such authorization or approval by the stockholders or members, the board
o Consequences of directors or trustees may, nevertheless, in its discretion, abandon such sale,
 Execution of a plan lease, exchange, mortgage, pledge, or other disposition of property and assets,
 Approval of the concerned shareholders subject to the rights of third parties under any contract relating thereto, without
 Execution of the articles of merger or consolidation further action or approval by the stockholders or members.

2. DE FACTO – transfer of all or substantially all assets of one or more Nothing in this section is intended to restrict the power of any corporation, without
corporations by the other corporation, or the management of one or the authorization by the stockholders or members, to sell, lease, exchange,
more corporations by the other corporation under Secs 39, 41 and 43 mortgage, pledge, or otherwise dispose of any of its property and assets if the
same is necessary in the usual and regular course of business of the corporation
SEC. 39. Sale or Other Disposition of Assets. – Subject to the provisions of or if the proceeds of the sale or other disposition of such property and assets
Republic Act No. 10667, otherwise known as “Philippine Competition Act”, and shall be appropriated for the conduct of its remaining business.
other related laws, a corporation may, by a majority vote of its board of directors
or trustees, sell, lease, exchange, mortgage, pledge, or otherwise dispose of its SEC. 41. Power to Invest Corporate Funds in Another Corporation or Business or
property and assets, upon such terms and conditions and for such consideration, for Any Other Purpose. – Subject to the provisions of this Code, a private
which may be money, stocks, bonds, or other instruments for the payment of corporation may invest its funds in any other corporation, business, or for any
money or other property or consideration, as its board of directors or trustees purpose other than the primary purpose for which it was organized, when
may deem expedient. approved by a majority of the board of directors or trustees and ratified by the
stockholders representing at least two-thirds (2/3) of the outstanding capital
A sale of all or substantially all of the corporation’s properties and assets, stock, or by at least two thirds (2/3) of the members in the case of nonstock
including its goodwill, must be authorized by the vote of the stockholders corporations, at a meeting duly called for the purpose. Notice of the proposed
representing at least two-thirds (2/3) of the outstanding capital stock, or at least investment and the time and place of the meeting shall be addressed to each
two-thirds (2/3) of the members, in a stockholders’ or members’ meeting duly stockholder or member at the place of residence as shown in the books of the
called for the purpose. corporation and deposited to the addressee in the post office with postage
prepaid, served personally, or sent electronically in accordance with the rules and
In nonstock corporations where there are no members with voting rights, the vote regulations of the Commission on the use of electronic data message, when
of at least a majority of the trustees in office will be sufficient authorization for the allowed by the bylaws or done with the consent of the stockholders: Provided,
corporation to enter into any transaction authorized by this section. That any dissenting stockholder shall have appraisal right as provided in this
Code: Provided, however, That where the investment by the corporation is
The determination of whether or not the sale involves all or substantially all of the reasonably necessary to accomplish its primary purpose as stated in the articles
corporation’s properties and assets must be computed based on its net asset of incorporation, the approval of the stockholders or members shall not be
value, as shown in its latest financial statements. A sale or other disposition shall necessary.
be deemed to cover substantially all the corporate property and assets if thereby
the corporation would be rendered incapable of continuing the business or SEC. 43. Power to Enter into Management Contract. – No corporation shall
accomplishing the purpose for which it was incorporated. conclude a management contract with another corporation unless such contract
is approved by the board of directors and by stockholders owning at least the
Written notice of the proposed action and of the time and place for the meeting majority of the outstanding capital stock, or by at least a majority of the members
shall be addressed to stockholders or members at their places of residence as in the case of a nonstock corporation, of both the managing and the managed
shown in the books of the corporation and deposited to the addressee in the post corporation, at a meeting duly called for the purpose: Provided, That (a) where a
office with postage prepaid, served personally, or when allowed by the bylaws or stockholder or stockholders representing the same interest of both the managing
done with the consent of the stockholder, sent electronically: Provided, That any and the managed corporations own or control more than one-third (1/3) of the

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total outstanding capital stock entitled to vote of the managing corporation; or (b) the  equity level. Each has its own impact on the participating corporations and
where a majority of the members of the board of directors of the managing the immediately affected parties, among them, the employees. Beyond and
corporation also constitute a majority of the members of the board of directors of encompassing all these levels of transfers is total corporate merger or
the managed corporation, then the management contract must be approved by consolidation.
the stockholders of the managed corporation owning at least two-thirds (2/3) of
the total outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of The asset-only transfer affects only the corporate seller's raw assets and
the members in the case of a nonstock corporation. properties; the purchaser is not interested in the seller's corporate personality —
its goodwill, or in other factors affecting the business itself. In this transaction, no
These shall apply to any contract whereby a corporation undertakes to manage complications arise affecting the employer-employee relationship, except
or operate all or substantially all of the business of another corporation, whether perhaps the redundancy of employees whose presence in the selling company is
such contracts are called service contracts, operating agreements or otherwise: affected by the sale of the chosen assets and properties, but this is a
Provided, however, That such service contracts or operating agreements which development completely internal to the selling corporation. 
relate to the exploration, development, exploitation or utilization of natural
resources may be entered into for such periods as may be provided by the In the business enterprise  level transaction, the purchaser's interest goes
pertinent laws or regulations. beyond the assets and properties and extends into the seller corporation's whole
business and "earning capability," short of the seller's juridical personality. Thus,
No management contract shall be entered into for a period longer than five (5) a whole business is sold and purchased but the parties retain their respective
years for any one (1) term. juridical personalities. In this type of transaction, employer-employee and
employer liability complications arise, as can be seen from a survey of the cases
DEFINITION: on corporate transfers that this Court has already passed upon. 

“ x x x, the present law now authorizes, under Section 76, two or more A transaction at the equity level does not disturb the participating corporations'
corporations to merge under one of the participating constituent corporations, or separate juridical personality as both corporations continue to remain in
to consolidate into a new single corporation called the consolidated corporation. existence; the purchaser corporation simply buys the underlying equity of the
In either case, no liquidation of the assets of the dissolved corporations takes selling corporation which thus retains its separate corporate personality. The
place, and the surviving or consolidated corporation assumes ipso jure the selling corporation continues to run its business, but control of the business is
liabilities of the dissolved corporations, regardless of whether the creditors transferred to the purchaser corporation whose control of the selling
consented to the merger or consolidation.  corporation's equity enables it to elect the members of the selling corporation's
“The transaction between BPI and FEBTC was a merger under one of the modes board of directors. 
provided under Section 76 — i.e.,  the two corporations, BPI and FEBTC, merged
with FEBTC fading away as a corporate entity and BPI surviving as FEBTC's As pointed out above, a total merger or consolidation goes way beyond all three
successor.” levels of dealings in corporate business, assets and property.  In a total merger,
  the merged corporation transfers everything — figuratively speaking, its "body
(Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter- and soul" — to the surviving corporation. This was what happened in the BPI-
Federation of Unions in BPI Unibank, G.R. No. 164301, [August 10, 2010], 642 FEBTC merger.”
PHIL 47-158)
(Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-
A TRANSFER OF CORPORATION ASSETS AND LIABILITIES OR A Federation of Unions in BPI Unibank, G.R. No. 164301, [August 10, 2010], 642
MERGER? PHIL 47-158)

“An overview of the whole range or levels of transfers of corporate assets and WAYS OF IMPLEMENTING A MERGER OR CONSOLIDATION
liabilities, as established by jurisprudence, is helpful and instructive for the full
appreciation of the nature of the BPI-FEBTC merger. These levels of transfers 1. Property for share exchange
are: (1) the assets-only level; (2) the business enterprise level; and (3) • Transferor of the property is the constituent corporation

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• Transferee of the property and the issuer of shares is the
surviving corporation 1. “Merger” is when two or more corporations are folded into an
• The issued shares are distributed among the stockholders of existing or a surviving single corporation
the constituent corporation
2. “Consolidation” is when two or more corporations are folded into
2. Share for share exchange a new or a new consolidated corporation.
• Transferor of shares is the shareholder of the constituent
corporation 3. “Constituent corporations” are those that are automatically
• Transferee of shares (of such constituent corporation) and dissolved upon a merger or consolidation
issuer of shares is the surviving corporation
• Properties of the constituent corporation are eventually 4. “Plan of merger or consolidation” initiates the merger or
transferred to the surviving corporation while the issued shares consolidation by the execution of a plan that:
are distributed among the stockholders of the constituent
corporation • Is presented to stockholders of the corporations
concerned for approval
3. Security for share or security exchange
• Transferor is the security holder of a constituent corporation • Contains the amendatory agreement between the
• Transferee of the securities of such constituent corporation and stockholders and their respective corporation
issuer of shares or securities is the surviving corporation
• Securities of the constituent corporation are eventually • Has basic contents such as the:
transferred to the surviving corporation
 Basic terms
UPSTREAM MERGER  Mode of implementing
 Amendments to, or matters that
• A merger between a parent company and its subsidiary, where the need to be reflected in, the
former is the surviving entity and the subsidiary is the constituent articles of incorporation
corporation is called an “upstream merger”.
CONTENTS
• Example of an upstream merger is where the absorbing (parent)
corporation opts not to issue shares to itself being already a stockholder SEC. 75. Plan of Merger or Consolidation. – Two (2) or more corporations may
of the absorbed (subsidiary) corporation. In this situation, “the merge into a single corporation which shall be one of the constituent corporations
investment account of the absorbing corporation will be closed against or may consolidate into a new single corporation which shall be the consolidated
the net assets acquired and any excess shall be treated as additional corporation.
paid in capital (APIC).”
The board of directors or trustees of each corporation, party to the merger or
• Further, under the Tax Code, if the surviving corporation will continue the consolidation, shall approve a plan of merger or consolidation setting forth the
business of the subsidiary, then the liquidation or upstream merger following:
should be tax free. However, it must be clear that there exists ”a bona
fide business purpose and not solely for the purpose of escaping the a. The names of the corporations proposing to merge or consolidate,
burden of taxation.” hereinafter referred to as the constituent corporations;

PLAN OF MERGER OR CONSOLIDATION b. The terms of the merger or consolidation and the mode of carrying the
same into effect;
DEFINITIONS:

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c. A statement of the changes, if any, in the articles of incorporation of the
surviving corporation in case of merger; and, in case of consolidation, all 2. Approval by the stockholders or members of each of such corporation at
the statements required to be set forth in the articles of incorporation for separate corporate meetings
corporations organized under this Code; and • Duly called for the purpose
• With notice to all stockholders or members of the respective
d. Such other provisions with respect to the proposed merger or corporations (in accord with Sec 49 re regular or special
consolidation as are deemed necessary or desirable. meetings
• Notice shall state the purpose and include a copy or summary
o The names of the corporations proposing to merge or consolidate, of the plan
referred to as constituent corporations
3. Affirmative vote of stockholders representing at least 2/3 of the OCS or
o The terms of the merger or consolidation and the mode of carrying the 2/3 members in case of NS corporation
same into effect
4. Dissenting stockholder has appraisal right (unless plan is abandoned by
o A statement of the changes, if any, in the articles of incorporation of the the board in which case such right shall be extinguished)
surviving corporation in case of merger; and, in case of consolidation, all
the statements required to be set forth in the articles of incorporation for AMENDMENT (third part of Sec 76)
corporations organized under the Code
SEC. 76. Any amendment to the plan of merger or consolidation may be made:
o Such other provisions with respect to the proposed merger or Provided, That such amendment is approved by a majority vote of the respective
consolidation as are deemed necessary or desirable boards of directors or trustees of all the constituent corporations and ratified by
the affirmative vote of stockholders representing at least two-thirds (2/3) of the
PROCEDURE FOR APPROVAL (first & second part of Sec 76) outstanding capital stock or of two-thirds (2/3) of the members of each of the
constituent corporations. Such plan, together with any amendment, shall be
SEC. 76. Stockholders’ or Members’ Approval. – Upon approval by a majority considered as the agreement of merger or consolidation.
vote of each of the board of directors or trustees of the constituent corporations
of the plan of merger or consolidation, the same shall be submitted for approval An amendment of the plan may be made:
by the stockholders or members of each of such corporations at separate o Provided, that it is approved by a majority vote of the respective BOD or
corporate meetings duly called for the purpose. Notice of such meetings shall be trustees of all constituent corporations; and,
given to all stockholders or members of the respective corporations in the same
manner as giving notice of regular or special meetings under Section 49 of this o Ratified by the affirmative vote of stockholders representing at least 2/3
Code. The notice shall state the purpose of the meeting and include a copy or a of OCS or 2/3 members of each constituent corporation
summary of the plan of merger or consolidation.
o Such plan together with any amendment shall be considered as the
The affirmative vote of stockholders representing at least two-thirds (2/3) of the agreement of merger or consolidation
outstanding capital stock of each corporation in the case of stock corporations or
at least two-thirds (2/3) of the members in the case of nonstock corporations shall ARTICLES OF MERGER OR CONSOLIDATION
be necessary for the approval of such plan. Any dissenting stockholder may
exercise the right of appraisal in accordance with this Code: Provided, That if EXECUTION
after the approval by the stockholders of such plan, the board of directors
decides to abandon the plan, the right of appraisal shall be extinguished. SEC. 77. Articles of Merger or Consolidation. – After the approval by the
stockholders or members as required by the preceding section, articles of merger
1. Approval by a majority vote of each of the board of directors or trustees or articles of consolidation shall be executed by each of the constituent
of the constituent corporations
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corporations, to be signed by the president or vice president and certified by the • The provisional or pro forma values, as merged or consolidated, using
secretary or assistant secretary of each corporation setting forth: the accounting method; and
• Such other information as may be prescribed by the Commission
a. The plan of the merger or the plan of consolidation;
CONTENTS (Sec 77 d to f)
b. As to stock corporations, the number of shares outstanding, or in the
case of nonstock corporations, the number of members; d. The carrying amounts and fair values of the assets and liabilities of the
respective companies as of the agreed cut-off date;
c. As to each corporation, the number of shares or members voting for or
against such plan, respectively; e. The method to be used in the merger or consolidation of accounts of the
companies;
d. The carrying amounts and fair values of the assets and liabilities of the
respective companies as of the agreed cut-off date; f. The provisional or pro forma values, as merged or consolidated, using
the accounting method; and
e. The method to be used in the merger or consolidation of accounts of the
companies; o Purpose of including these 3 items in the articles – permit the concerned
stockholders or members and the Commission to ascertain if the
f. The provisional or pro forma values, as merged or consolidated, using exchange is fair and reasonable based on pre and post disclosures
the accounting method; and
o Aggregate fair value of shares to be issued by the surviving or
g. Such other information as may be prescribed by the Commission. consolidated corporation should approximate the adjusted NAV of the
constituent corporation’s
The Articles shall be executed:
• After the approval by stockholders or members as required under Sec o The above will be established by using “the carrying amounts and fair
76; values of assets and liabilities of the respective accompanies as of the
• By each of the constituent corporations; agreed cut off date” vis-à-vis ”the method to be used in the merger or
• Signed by the president or vice president; and, consolidation of accounts of companies.”
• Certified by the secretary or assistance secretary of each corporation.
o The purpose of these 3 items is for the Commission to ascertain if the
Take note that instead of the Chairman or in his absence the president, it is the exchange is fair and reasonable by the:
“president or vice-president and certified by the secretary or assistant secretary”
a. Determination of the adjusted fair value of the shareholders’ equity
CONTENTS (Sec 77) (taking into account appraisal increments) of the surviving corporation
and dividing the same by the OCS, to arrive at the fair value per share of
• The plan of merger or the plan of consolidation such corporation. In case of a consolidated new corporation, the fair
• As to stock corporation, the number of shares outstanding, or in the case value per share is the par value per share.
of nonstock corporation, the number of members
• As to each corporation, the number of shares or members voting for or b. Dividing the (i) adjusted NAV (or adjusted fair value of the shareholders’
against such plan, respectively equity taking into account appraisal increments) of the constituent
• The carrying amount and fair values of the assets and liabilities of the corporations by the (ii) fair value per share of the surviving corporation,
respective companies as of the agreed cut-off dates as computed in par. a (or par value share of the consolidated
• The method to be used in the merger or consolidation of accounts of the corporation), to arrive at the number of new shares that the surviving
companies corporation (or the consolidated corporation) will issue for the
exchange.
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o The merger or consolidation shall be effective upon issuance of the
o “The provisional or pro forma values, as merged or consolidated, using certificate of approval.
the accounting method” will give shareholders or members an overview
if the additional issued shares on account of the merger or consolidation “The merger, however, does not become effective upon the mere agreement of
approximates the fair NAV of assets merged or consolidated into the the constituent corporations. Since a merger or consolidation involves
surviving or consolidated corporation. fundamental changes in the corporation, as well as in the rights of stockholders
and creditors, there must be an express provision of law authorizing them.  For a
EFFECTIVITY OF MERGER OR CONSOLIDATION valid merger or consolidation, the approval by the Securities and Exchange
Commission (SEC) of the articles of merger or consolidation is required. These
SEC. 78. Effectivity of Merger or Consolidation. – The articles of merger or of articles must likewise be duly approved by a majority of the respective
consolidation, signed and certified as required by this Code, shall be submitted to stockholders of the constituent corporations.”
the Commission for its approval: Provided, That in the case of merger or
consolidation of banks or banking institutions, loan associations, trust companies,  (Philippine National Bank v. Andrada Electric & Engineering Co., G.R. No.
insurance companies, public utilities, educational institutions, and other special 142936, [April 17, 2002], 430 PHIL 882-903)
corporations governed by special laws, the favorable recommendation of the
appropriate government agency shall first be obtained. If the Commission is EFFECTS OF MERGER OR CONSOLIDATION
satisfied that the merger or consolidation of the corporations concerned is
consistent with the provisions of this Code and existing laws, it shall issue a SEC. 79. Effects of Merger or Consolidation. – The merger or consolidation shall
certificate approving the articles and plan of merger or of consolidation, at which have the following effects:
time the merger or consolidation shall be effective.
a. The constituent corporations shall become a single corporation which, in
If, upon investigation, the Commission has reason to believe that the proposed case of merger, shall be the surviving corporation designated in the plan
merger or consolidation is contrary to or inconsistent with the provisions of this of merger; and, in case of consolidation, shall be the consolidated
Code or existing laws, it shall set a hearing to give the corporations concerned corporation designated in the plan of consolidation;
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 b. The separate existence of the constituent corporations shall cease,
hearing. The Commission shall thereafter proceed as provided in this Code. except that of the surviving or the consolidated corporation;

o After approval and execution of the articles of merger or consolidation, c. The surviving or the consolidated corporation shall possess all the rights,
the same should be submitted to the Commission; privileges, immunities, and powers and shall be subject to all the duties
• If the Commission is satisfied that the merger or consolidation is and liabilities of a corporation organized under this Code;
consistent with the Code and existing laws, it shall issue a
certificate of approval; d. The surviving or the consolidated corporation shall possess all the rights,
• If upon investigation, the Commission has reason to believe that privileges, immunities and franchises of each constituent corporation;
the proposed merger or consolidation is contrary to or and all real or personal property, all receivables due on whatever
inconsistent with the Code or existing laws, it shall hear the account, including subscriptions to shares and other choses in action,
corporations concerned after notice at least 2 weeks before and every other interest of, belonging to, or due to each constituent
hearing; corporation, shall be deemed transferred to and vested in such surviving
o In the case of banks, banking institutions, loan associations, trust or consolidated corporation without further act or deed; and
companies, insurance companies, public utilities, educational
institutions, and other special corporations governed by special laws, the e. The surviving or consolidated corporation shall be responsible for all the
favorable recommendation of the appropriate government agency shall liabilities and obligations of each constituent corporation as though such
first be obtained. surviving or consolidated corporation had itself incurred such liabilities or
obligations; and any pending claim, action or proceeding brought by or
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against any constituent corporation may be prosecuted by or against the a. In case an amendment to the articles of incorporation has the effect of
surviving or consolidated corporation. The rights of creditors or liens changing or restricting the rights of any stockholder or class of shares, or
upon the property of such constituent corporations shall not be impaired of authorizing preferences in any respect superior to those of
by the merger or consolidation. outstanding shares of any class, or of extending or shortening the term
of corporate existence;
o The constituent corporations shall become a single corporation which in
case of merger shall be the surviving corporation designated in the plan b. In case of sale, lease, exchange, transfer, mortgage, pledge or other
of merger; and in case of consolidation, shall be consolidated disposition of all or substantially all of the corporate property and assets
corporation designated in the plan of consolidation; as provided in this Code;

o The separate existence of the constituent corporations shall cease c. In case of merger or consolidation; and
except that of the surviving or the consolidated corporation;
d. In case of investment of corporate funds for any purpose other than the
o The surviving or consolidated corporation shall possess all the rights, primary purpose of the corporation.
privileges, immunities and powers and shall be subject to all the duties
and liabilities of a corporation organized under the Code; “Section 80 of RCC provides for the legal effects of a merger. As applied to BPI
and FEBTC, the effects were: 
o The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and franchises of each constituent corporation; a. BPI and FEBTC became a single corporation with BPI as the surviving
and corporation;
• All real or personal property, b. The separate corporate existence of FEBTC ceased;
• All receivables due on whatever account, including c. BPI now possesses all the rights, obligations, privileges, immunities, and
subscriptions to shares and other choses in action, and franchises of both BPI and FEBTC;
• Every other interest of belonging to, or due to each constituent d. All property, real or personal, and all receivables due on whatever
corporation shall be deemed transferred to and vested in such choses in action, and all other interest of, belonging to, or due to FEBTC
surviving or consolidated corporation without further act or are deemed transferred to BPI;
deed; and e. BPI becomes responsible and liable for all the liabilities and obligations
of FEBTC as if it had incurred these liabilities or obligations;
o The surviving or consolidated corporation shall be responsible for all the f. Any claim, action, or proceeding pending by or against FEBTC should be
liabilities and obligations of each constituent corporation as though such prosecuted by or against BPI; and
surviving or consolidated corporation had itself incurred such liabilities or g. Neither the rights of creditors nor any lien on the property of FEBTC is
obligations; and any pending claim, action or proceeding brought by or impaired by the merger.
against any constituent corporation may be prosecuted by or against the
surviving or consolidated corporation. In short, FEBTC ceased to have any legal personality, and BPI stepped into
everything that was FEBTC's, pursuant to the law and the terms of their Merger
oThe rights of creditors or lien upon the property of such constituent Plan.”
corporations shall not be impaired by the merger or consolidation.
(Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-
APPRAISAL RIGHT
Federation of Unions in BPI Unibank, G.R. No. 164301, [August 10, 2010], 642
PHIL 47-158)
SEC. 80. When the Right of Appraisal May Be Exercised. – Any stockholder of a
corporation shall have the right to dissent and demand payment of the fair value
“This court has held that a sale of assets is legally distinct from a merger or
of the shares in the following instances:
consolidation. Section 76 of NCC expressly authorizes two or more corporations
to merge into a single corporation, which shall be one of the constituent

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corporations, or to consolidate into a new single corporation, which shall be the “In the case at bar, we hold that there is no merger or consolidation with respect
consolidated corporation. A merger or consolidation "does not become effective to PASUMIL and PNB. The procedure prescribed under Title IX of the NCC was
upon the mere agreement of the constituent corporations." These corporations not followed.
that seek to merge or consolidate must first comply with the required procedure
under the NCC. In fact, PASUMIL's corporate existence, as correctly found by the CA, had not
been legally extinguished or terminated. Further, prior to PNB's acquisition of the
One of the legal effects of a merger or consolidation under Section 80 of the NCC foreclosed assets, PASUMIL had previously made partial payments to
is the assumption ipso jure by the surviving or consolidated corporation of the respondent for the former's obligation in the amount of P777,263.80. As of June
dissolved corporation's liabilities: x x x” 27, 1973, PASUMIL had paid P250,000 to respondent and, from January 5, 1974
to May 23, 1974, another P14,000.
(Bank of Commerce v. Radio Philippines Network, Inc., G.R. No. 195615, [April
21, 2014], 733 PHIL 491-581) Neither did petitioner expressly or impliedly agree to assume the debt of
PASUMIL to respondent. LOI No. 11 explicitly provides that PNB shall study and
“The merger of a corporation with another does not operate to dismiss the submit recommendations on the claims of PASUMIL's creditors. Clearly, the
employees of the corporation absorbed by the surviving corporation. This is in corporate separateness between PASUMIL and PNB remains, despite
keeping with the nature and effects of a merger as provided under law and the respondent's insistence to the contrary.”
constitutional policy protecting the rights of labor. The employment of the
absorbed employees subsists. Necessarily, these absorbed employees are not (Philippine National Bank v. Andrada Electric & Engineering Co., G.R. No.
entitled to separation pay on account of such merger in the absence of any other 142936, [April 17, 2002], 430 PHIL 882-903)
ground for its award.”
“In a merger, the real properties are not deemed "sold" to the surviving
(Philippine Geothermal, Inc. Employees Union v. Unocal Philippines, Inc., G.R. corporation and the latter could not be considered as "purchaser" of realty since
No. 190187, [September 28, 2016], 796 PHIL 96-124) the real properties subject of the merger were merely absorbed by the surviving
corporation by operation of law and these properties are deemed automatically
To reiterate, Section 80 of the NCC provides that the surviving corporation shall transferred to and vested in the surviving corporation without further act or deed.
possess all the rights, privileges, properties, and receivables due of the absorbed Therefore, the transfer of real properties to the surviving corporation in pursuance
corporation. Moreover, all interests of, belonging to, or due to the absorbed of a merger is not subject to documentary stamp tax. As stated at the outset,
corporation "shall be taken and deemed to be transferred to and vested in such documentary stamp tax is imposed only on all conveyances, deeds, instruments
surviving or consolidated corporation without further act or deed." The surviving or writing where realty sold shall be conveyed to a purchaser or purchasers. The
corporation likewise acquires all the liabilities and obligations of the absorbed transfer of SPPC's real property to respondent was neither a sale nor was it a
corporation as if it had itself incurred these liabilities or obligations.  conveyance of real property for a consideration contracted to be paid as
contemplated under Section 196 of the Tax Code. Hence, Section 196 of the Tax
This acquisition of all assets, interests, and liabilities of the absorbed corporation Code is inapplicable and respondent is not liable for documentary stamp
necessarily includes the rights and obligations of the absorbed corporation under tax. (Emphasis in the original)”
its employment contracts. Consequently, the surviving corporation becomes
bound by the employment contracts entered into by the absorbed corporation. (Commissioner of Internal Revenue v. La Tondeña Distillers, Inc., G.R. No.
These employment contracts are not terminated. They subsist unless their 175188 , [July 15, 2015], 764 PHIL 42-53)
termination is allowed by law.

(Philippine Geothermal, Inc. Employees Union v. Unocal Philippines, Inc., G.R.

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