TITLE IX MERGER AND CONSOLIDATION

The merger shall be effective upon the issuance by the SEC of a certificate of merger.

CONSOLIDATION SEC. 76. PLAN OF MERGER OR CONSOLIDATION. Two or more corporations may merge into a single corporation which shall be one of the constituent corporations or may consolidate into a new single corporation which shall be the consolidated corporation. The board of directors or trustees of each corporation, party to the merger or consolidation, shall approve a plan of merger or consolidation setting forth the following: 1. The names of the corporations proposing to merge or consolidate, hereinafter referred to as the constituent corporations; 2. The names of the corporations proposing to merge or consolidate, hereinafter referred to as the constituent corporations; 3. The names of the corporations proposing to merge or consolidate, hereinafter referred to as the constituent corporations; 4. Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable. COMPARISON OF MERGER AND CONSOLIDATION MERGER CONSOLIDATION X Inc. and Y Inc. are existing corporations. They unite together to form Z Inc. to which they transfer all their assets. X Inc. and Y Inc. are dissolved by the consolidation. The title to their property passes to Z Inc. and all their liabilities are assumed by Z Inc. In the case above, The dissolved corporations, X Inc. and Y Inc. are constituent corporations. They are also the original corporations. Z Inc., the new corporation, is called the consolidated corporation The stockholders of X Inc. and Y Inc. become stockholders of Z Inc. The merger shall be effective upon the issuance by the SEC of a certificate of merger.

SEC. 77. STOCKHOLDERS OR MEMBERS APPROVAL.

PROCEDURE FOR THE APPROVAL OF THE MERGER CONSOLIDATION BY THE STOCKHOLDERS AND MEMBERS

AND

1. Upon approval of the plan by the board of directors or trustees, the same shall be submitted for the approval by the stockholders or members or each corporation at separate corporate meetings duly called for that purpose. 2. Notice of such meeting shall be given to all stockholders or members of the respective corporations, at least two (2) weeks prior to the date of meeting, either personally or by registered mail. Said notice shall state the purpose of the meeting and shall include a copy or summary of the plan of merger and consolidation, as the case may be. 3. The affirmative vote of stockholders representing at least two-thirds (2/3) of the 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 non-stock corporations shall be necessary for the approval of such plan. Any dissenting stockholder in stock corporations may exercise his appraisal right in accordance with the Code: Provided, That if after the approval by the stockholders of such plan, the board of directors decides to abandon the plan, the appraisal right shall be extinguished. APPRAISAL RIGHT

1.

A union whereby one or more existing corporations and absorbed by another corporation which survives and continues the combined business. All constituent corporations, except the surviving corporation, are dissolved. 3. No new corporation is created.

1. A union of two or more existing corporations to form a new corporation called the consolidated corporation.

2.

2.

All constituent corporations are dissolved and absorbed by the new consolidated enterprise.

3. A single new corporation emerges.

4.

The surviving corporation acquires all the assets, liabilities and capital stock of all constituent corporation.

4. All assets, liabilities and capital stock of all consolidated corporations are transferred to new corporation.

The right to withdraw from the corporation and demand payment of the fair value of his shares after dissenting from certain corporate acts involving fundamental changes in corporate structure.

INSTANCES WHEREIN APPRAISAL RIGHT MAY BE EXERCISED: 1. Extension or reduction of corporate term;

The parties to a merger or consolidation are called constituent corporations.

ILLUSTRATION:

2. Change in the rights of stockholders, authorize preferences superior to those stockholders, or restricts the right of any stockholder; 3. Corporation authorized the board to invest corporate funds in another business or purpose; 4. Corporation decides to sell or dispose of all or substantially all assets of the corporation; 5. Merger and consolidation.

MERGER X Inc. and Y Inc. are existing corporations. X Inc. transfers all of its assets to Y Inc. Y Inc. absorbs and acquires all the property, rights and liabilities of X Inc., which is dissolved. Y Inc. continues its corporate existence. In this case, X Inc. and Y Inc. are constituent corporations. X Inc. is the merged or absorbed corporation. Y Inc. is the merging, absorbing or surviving corporation. The stockholders of X Inc. become stockholders of Y Inc.

4. Any amendment to the plan of merger or consolidation may be made, provided such amendment is:

approved by majority vote of the respective board of directors or trustees of all the constituent corporations ratified by the affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members of each of the constituent corporations.

3. List of creditors of the absorbed corporations or constituent corporations, in case of consolidation, as of the date of approval of the plan of merger or consolidation with their addresses and the amounts owing to each; 4. Audited financial statements (Balance Sheet and related statement of income and expenses) of the constituent corporations as of a date not earlier than 120 days prior to the date of filing of the application with the Commission. The financial statements shall be accompanied by a long form audit report of a certified public accountant; 5. Amended Articles of Incorporation and By-Laws of the surviving corporation, whenever necessary in accordance with the term of the plan of merger such as change of name of the surviving corporation, increase of capital stock, etc. In case of Consolidation, Articles of Incorporation, By-Laws and supporting documents of the proposed or consolidated corporation. Approval of the Articles of Merger or Consolidation The Securities and Exchange Commission shall approve the articles of merger/consolidation and issue the corresponding certificate of Filing of Articles of Merger/Consolidation if it is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of the Corporation Code of the Philippines and existing laws.

Such plan, together with any amendment, shall be considered as the agreement of merger or consolidation.

SEC. 78 ARTICLES OF MERGER OR CONSOLIDATION Articles of merger or consolidation refers to the instrument executed by the constituent corporations embodying the plan of merger or consolidation; the number of shares outstanding in case of stock corporations, or of members, in case of non-stock corporations; and as to each corporation, the number of shares outstanding or members voting for and the names of stockholders or members voting against such plans, respectively. When Made The instrument is made after the approval by the stockholders or members of the merger or consolidation as required by Sec. 77 of B.P. Blg. 68 otherwise known as The Corporation Code of the Philippines. SEC. 79 EFFECTIVITY OF MERGER OR CONSOLIDATION. The articles of merger or of consolidation, signed and certified shall be submitted to the Securities and Exchange Commission in quadruplicate for its approval. In the case of merger or consolidation of banks or banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions and other special corporations governed by special laws, the favorable recommendation of the appropriate government agency shall first be obtained. 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 laws, it shall issue a certificate of merger or of consolidation, at which time the merger or consolidation shall be effective. When Hearing is Necessary 1. The plan of the merger or the plan of consolidation; 2. As to stock corporations, the number of shares outstanding, or in the case of non-stock corporations, the number of members; and 3. As to each corporation, the number of shares or members voting for and against such plan, respectively. 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. PROCEDURE FOR EFFECTING A PLAN OF MERGER OR CONSOLIDATION.

Signatories Articles of merger or articles of consolidation shall be executed by each of the constituent corporations. Articles of merger or articles of consolidation shall be signed by the president or vice-president and certified under oath by the secretary or assistant secretary of each corporation.

Contents of Articles of Merger or Consolidation:

Submission to SEC for approval Corporations desiring to merge or consolidate are required to submit to the Commission, in quadruplicate, the following instruments: 1. Articles of Merger or Consolidation signed by the President or Vice-President and certified under oath by the Secretary or Assistant Secretary of the constituent corporations setting forth the following: a. The plan of merger or consolidation; b. As to stock corporations, the number of shares outstanding, or in the case of non-stock corporations, the number of members; and c. As to each corporation, the number of outstanding shares or members voting for and the names of stockholders or members voting against such plan, respectively. 2. Copies of the minutes of the board of directors meeting and minutes of the stockholders' or members' meeting of the constituent corporations, approving and ratifying the plan of merger or consolidation, certified under oath by their respective secretaries or assistant secretaries;

Merger and Consolidation distinguished from sale of assets: SEC. 80. EFFECTS OF MERGER OR CONSOLIDATION. The merger or consolidation shall have the following effects: 1. The 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. The separate existence of the constituent corporations 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. Assumption of Liabilities With regards to: Acts involved Merger and Consolidation Sale of Assets is always involved Sale of Assets Merger/Consolidation is not always involved

Transfer of Title

Title to assets are transferred by operation of law Automatic assumption of liabilities

Transfer of title is by virtue of contract

Purchasing corporation is not generally liable for the debts and liabilities of the selling corporation

Dissolution

The constituent corporations are automatically dissolved

The selling corporation is not dissolved by the mere transfer of all its property

Liquidation

There is continuance of the enterprise and of the stockholders

The selling corporation ordinarily contemplates a liquidation of the enterprise

REORGANIZATION OF A CORPORATION. A means whereby those variously interested financially in a distressed business seek, through continuance of that business as a going concern, to work out the difficulty for themselves and thus gain more than they could by a sale of the assets or of the business to others. 1.) Distinguished from merger or consolidation. Reorganization is not ordinarily the combination of several existing corporations, but rather the carrying out by proper agreements and legal processes of a business plan for winding up the affairs of, or foreclosing a mortgage or mortgages upon, the property of insolvent corporations, and the organization of a new corporation to take over the property and business of the distressed corporation. 2.) Distinguished from sale. - A sale is a transfer of property from one person to another for a consideration of value. As a mere purchase by one corporation of the properties of another corporation, it is not included in the term reorganization, because reorganization imports continuity of interest on the part of the transferor or its stockholders in the properties transferred. 3.) Distinguished from reincorporation. Reorganization means the creation of a new company to take over the assets of a new corporation. Reincorporation resembles the amendment of a charter, and is usually resorted either to correct errors in the original incorporation or to obtain the benefits of a statute enacted after the original incorporation or to extend the corporate life. 4.) Distinguished from bankruptcy. Reorganization is not a bankruptcy proceeding but a special proceeding which has for its object the rehabilitation of a debtor-corporation. It contemplates the conservation of the corporation and continuity of its business and not a liquidation of its assets.

Legal effects of Merger and Consolidation: 1.) There is automatic assumption of the liabilities of the absorbed corporation or constituent corporations which are dissolved. 2.) The absorbed or constituent corporations are ipso facto dissolved by operation of law without necessity of any further act or deed but there is no winding up or liquidation of their assets for the surviving corporation automatically acquires all the liabilities of the constituent corporation. 3.) Permits the transfer of the assets to the purchaser and the distribution of the consideration received in a single operation. 4.) Involve exchanges of properties. A transfer of the assets of the constituent corporations in exchange for the securities in the new or surviving corporation but neither involves winding up of the affairs of the constituent corporations in the sense that their assets are distributed to the stockholders. 5.) Dissolution of the constituent corporations cannot be made to retroact to a date prior to the ratification of the stockholders but the transfer of the assets and liabilities of the constituent corporations could be made effective retroactively as of the date the said board of directors so resolved. 6.) Consent of the creditors not necessary.

QUASI-REORGANIZATION OF A CORPORATION Procedure recognized in accounting by which the accounts of the corporation may be restated to the same extent they would be if a new corporation were created and acquired the business of the existing corporation; a new basis for accountability of assets, liabilities, and capital is established. GROUP 1

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CANDELARIA, Jocelyn DEL ROSARIO, Elijah PADON, Catherine SANTIAGO, Joan Elvira TIOTINGCO, Margot

General rule when a corporation buys all the shares of another corporation: This will not operate to dissolve the other corporation and as the two corporations still maintaining their separate corporate entities, one will not answer for the debts of the other. Exceptions as to non-assumption of liabilities: 1.) 2.) 3.) 4.) If the purchase was in fraud of creditors; If there is an express assumption of liabilities; If there is a consolidation or merger; If the purchaser is merely a continuation of the seller.

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February 2, 2013

DE FACTO MERGER One corporation acquiring all or substantially all of the properties of another corporation in exchange for shares of stock of the acquiring corporation. The acquiring corporation would end-up with the business enterprise of the selling corporation whereas the latter would end up with basically its remaining assets being the shares of stock of the acquiring corporation and may then distribute it as liquidating dividend to its stockholders.

Types of Acquisitions 1.) Assets-Only Level (Property only Purchase)

The purchaser is interested only in the raw assets and properties of the business. He is not interested in the entity of the corporate owner of the assets or on the goodwill and other factors relating to the business itself. The transferee would not be liable for the debts and liabilities of his transferor since there is no privity of contract over debt obligations between the transferee and the transferors creditors. 2.) Business-Enterprise Concern) Level (Purchase as On-Going

The transferee merely continues the same business of the transferor since he obtains the earning capability of the venture. The transferee is liable for the debts and liabilities of the transferor.

3.)

Equity Level (Share Purchase)

The purchaser takes control and ownership of the business by purchasing the shareholdings of the corporate owner. What the purchaser actually purchased is the ability to elect the members of the board of the corporation who run the business.

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