Title IX: Merger and Consolidation

Section 76: Plan of merger or consolidation

 Two or more corporations may merge into a single corporation which shall be one of the
constituent
corporation
 OR may consolidate into a new single corporation
 BOD/T of each corporation shall approve a plan of merger or consolidation
 Contents of the plan:
a. Names of the corporations proposing to merge or consolidate, hereinafter referred to as the
constituent
corporations
b. Terms of the merger or consolidation and the mode of carrying the same into effect
c. Statement of changes, if any, in the AIO of the surviving corporation in case of merger, and
with
respect to the consolidated corporation in case of consolidation
d. Such other provisions with respect to the proposed merger or consolidation as are deemed
necessary or
desirable
Section 77: Stockholders’ or members’ approval
 Majority vote of each of the BOD/T of the constituent corporations of the plan
 The same shall be submitted for approval by the stockholders or members of each of such
corporations at
separate corporate meetings duly called for that purpose.
 Notice of such meetings shall be given to all stockholders or members of the respective
corporations
atleast 2 weeks prior to the date of the meeting
 Said notice shall state the purpose of the meeting and shall include a copy or a summary of the
plan
Approval of plan
 2/3 of the outstanding capital stock or members of each corporation shall be necessary for the
approval of
the said plan
Note: Any dissenting stockholder in stock corporations may exercise his appraisal right
 If after the approval by the stockholders of such plan, the BOD decides to abandon the plan,
the appraisal
right shall be extinguished.
Amendment of plan
 Any amendment to the plan may be made, provided such amendment is approved by majority
vote of the
BOD/T of all constituent corporations and ratified by the affirmative vote of the stockholders
representing
atleast 2/3 of the outstanding capital stock or members
 Such plan, together with any amendment, shall be considered as the agreement of merger or
consolidation
Section 78: Articles of merger or consolidation
 After approval by the stockholders or members, articles of merger or consolidation shall be
executed by
each of the constituent corporations
 To be signed by the president or vice president and certified by the secretary or assistant
secretary of each
Contents of the articles of meger or consolidation
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1. Plan of merger or the plan of consolidation

2. As to stock corporations, numbers of shares outstanding, or if non-stock, number of members
3. As to each corporation, number of shares or members voting for and against such plan,
respectively
Section 79: SEC’s approval and effectivity of merger
 Articles of merger or consolidation shall be submitted to the SEC for its approval
 In case of merger of banks, building and loan associations, trust and insurance companies,
public utilities,
educational institutions and other special corporations governed by special laws, favorable
recommendation of the appropriate government agency shall first be obtained.
Issuance of certificate of merger or consolidation
 If the Commission is satisfied that the merger or consolidation of the corporations concerned is
not
inconsistent with the provisions of this Code and existing law, it shall issue a certificate of
merger or of
consolidation at which time the merger or consolidation shall be effective.
Proposed merger or consolidation is contrary to laws
 If upon investigation, SEC has a reason to believe that the proposed merger or consolidation is
contrary or
inconsistent with the provisions of this code or existing laws, it shall set a hearing to give the
corporation
concerned opportunity to be heard.
 Written notice of the date, time and place of hearing shall be given to each constituent
corporation atleast
2 weeks before said hearing
Section 80: Effects of merger or consolidation
1. Constituent corporations shall become a single corporation which, in case of merger, shall be
the surviving
corporation designated in the plan of merger; and in case of consolidation, shall be the
consolidated
corporation designated in the plan of consolidation .
2. Sepearate existence of the constituent corporation shall cease, except that of the surviving or
the
consolidated corporation.
3. The surviving or the consolidated corporation shall possess all the rights, privileges,
immunities and
powers and shall be subject to all the duties and liabilities of a corporation organized under this
Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the
rights,
privileges, immunities and franchises of each of the constituent corporations; and all property,
real or
personal, and all receivables due on whatever account, including subscriptions to shares and
other choses
in action, and all and every other interest of, or belonging to, or due to each constituent
corporation, shall
be deemed transferred to and vested in such surviving or consolidated corporation without
further act or
deed; and
5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities
and
obligations of each of the constituent corporations in the same manner as if such surviving or
consolidated
corporation had itself incurred such liabilities or obligations; and any pending claim, action or
proceeding
brought by or against any of such constituent corporations may be prosecuted by or against the
surviving
or consolidated corporation. The rights of creditors or liens upon the property of any of such
constituent
corporations shall not be impaired by such merger or consolidation.
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Common forms of corporate combinations

1. Sale of assets – union of corporations may be effected by one corporation selling all or
substantially all of
its assets to another.
Note: Sale do not work a dissolution of the corporation inasmuch as possession of property is not
essential to
corporate existence.
 When one corporation sells or trasnfers all its assets to another corporation, the latter is not
liable for the
debts and liabilities of the transferor.
 But if in the agreement, new corporation acquired the assets and properties and assumed the
obligations
and liabilities of an old corporation the former cannot excuse itself
 Sale of the assets for stock, if followed by dissolution has the effect of a merger.
2. Lease of assets – corporation without being dissolved, leases its property to another
corporation for which
the lessor merely receives rental paid by the lessee.
 Usually practiced by railroad and transportation companies
3. Sale of stock – Purpose of a holding company is to acquire a sufficient amount of the stock of
another
corporation for the purpose of control.
 Acquiring corporation is called the parent or holding company
 Corporation whose stocks are acquired is known as subsidiary company
Note: In all 3 cases above of corporate combination, the legal entity of each corporation is
retained.
4. Merger – 2 or more corporations unite, 1 corporation remains in being, absorbing or merging
itself the
other which disappears as a separate corporation.
5. Consolidation – 2 or more corporation unite, giving rise to a new corporate body and
dissolving
constituent corporations as separate corporations.
Procedure for effecting a plan of merger or consolidation
1. Approval of plan – BOD/T of each shall approve the plan
2. Submission to stockholders or members for approval – plan shall be submitted for
approval by the
stockholders or members of each corporation at separate corporate meetings duly called for that
purpose.
Note: Even non-voting shares/members are entitled to vote on the said plan
3. Execution of formal contract – articles of merger or consolidation shall be executed by each
of the
constituent corporations, to be signed by the president or vice president and certified by the
secretary or
assistant secretary of each corporations
4. Submission to SEC for approval – Articles shall then be submitted to SEC.
Note: In case of corporations governed by special laws, favorable recommendation of the
appropriate government
agency shall first be obtained.
5. Conduct of hearing by SEC – If upon, investigation has a reason to believe that the proposed
plan is
contrary in this Code or existing law
6. Issuance of certificate by SEC – Commission shall issue a certificate of merger or
consolidation at which
the time the merger or consolidation shall be effective.