Mergers and consolidation are complex corporate strategies that play a significant role in the business landscape of the Philippines. In this guide, we will explore the key aspects of mergers and consolidation, helping you gain a better understanding of these processes and their implications in the Philippine context.
What is merger?
A merger is a joining of two or more corporations, which results in one or more corporations being absorbed into one surviving corporation, The separate existence of the absorbed corporation ceases.[1]
What is consolidation?
Consolidation is one where two or more existing corporations are combined to form a new corporation called the consolidated corporation.
What is the difference of constituent corporations from a consolidated corporation.
Constituent corporations are the parties to the merger or consolidation, while a consolidated corporation is the new corporation formed by virtue of a valid consolidation.
Note: The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation.
When is merger or consolidation deemed effective?
The merger or consolidation shall only be effective upon issuance by the SEC of a certificate approving the articles and plan of merger or consolidation.
Note: If, upon investigation, the SEC 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 lo give the corporations concerned the opportunity to be heard.
What is the limitation on mergers and acquisitions under the Philippine Competition Act (PCA)?
Merger or acquisition agreements that substantially prevents restrict or lessen competition in the relevant market or in the market for goods or services as may be determined by the Philippine Competition Commission shall be prohibited.[2]
What are the effects of merger or consolidation?
The merger or consolidation shall have the following effects:
- The constituent corporations shall become a single corporation;
- The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;
- 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 the RCC.
- All real or personal property, all receivables due on whatever account and every other interest of, 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;
- The surviving, or consolidated corporation shall be responsible for all the labilities and obligations of each constituent corporation; and
- Any pending claim, action or proceeding brought by or against any constituent corporation, may be prosecuted-by or against the surviving or consolidated corporation.
Mergers and consolidation play a pivotal role in shaping the business landscape of the Philippines. Understanding the regulatory requirements, benefits, challenges, and implications of these corporate strategies is vital for making informed decisions. Whether you’re a business owner or a stakeholder, thorough research and professional guidance are essential when considering mergers and consolidation in the Philippines.
Source:
The Revised Corporation Code
[1] Philippine Geothermal, Inc., Employees Union v. Unocal Philippines, Inc., G.R. No. 190187, September 28, 2016
[2] Sec. 20, R.A. No. 10667, otherwise known as he “Philippine Competition Act”
