Merger of companies

The merger of companies seeks an economic improvement for the companies involved, but both partners, shareholders, and employees may have doubts about the reliability of the process or the consequences that this action may have on their future.

With the company merger action, we describe the formation of a new entity with a specific name, activity, structure, and objectives, in which the different participating companies group together, combining their assets and liabilities, regardless of their origin, size, or economic activity. The merger of public limited companies, limited liability companies, and limited partnerships may occur.

In the merger between companies, we can find two types: if there is a merger by absorption where an absorbing company receives the transfer of assets and liabilities from another company, or if a pure merger occurs with the creation of a newly constituted company that receives the transfer of the business entities that are part of the project.

It is also important to mention that during commercial merger operations it is vital to establish the type of exchange that partners and shareholders of the involved companies will receive. Likewise, it is necessary to note that the merger between companies implies the dissolution of the participating companies once the new entity has been created.

Mergers between companies are regulated by Royal Decree-Law 5/2023 of 28 June.

There are common requirements and characteristics in business mergers. We highlight the following:

• At least two companies must participate
• All assets are transferred to the final entity
• The partners retain their shares in the new company

Mergers of commercial companies can bring advantages that benefit both the companies merging and the resulting company.

Thus, among the advantages we find various aspects related both to branding and brand positioning, as well as economic improvements or market access. Among others, we distinguish:

• Resolving economic risks due to the market, the product, or the environment that may pose a danger as long as there is a probability of recovery
• Reducing competition
• Strengthening against other companies
• Penetrating other territories by joining forces with companies already established there
• Diversifying the product range
• Gaining access to new technologies

However, the disadvantages that a merger of commercial companies may entail are varied and affect the consequences we outlined at the beginning. Among them, we can highlight the loss of personnel, price increases, the emergence of monopoly due to reduced competition, or the presentation of homogeneous prices.

There are different types of company mergers. We have already presented the first two, but we wish to mention some more.

• Pure merger: the merger causes the creation of a new company, extinguishing the previous ones
• Merger by absorption of commercial companies: one company absorbs others
• Horizontal merger: union of companies in the same sector to gain competitiveness and have a greater market share
• Vertical merger: union of companies that are usually in the same sector but operate at different stages of the value chain
• Conglomerate: merger of unrelated companies

• Reverse merger
• Reverse merger
• Merger by absorption of a 90% owned company
• Merger between sister companies
• Leveraged company merger
• Merger by unanimous agreement of partners

We can distinguish three phases in the merger of companies:

Once the option of merger of commercial companies has been established, the administrators must assess the partners' assets so that they are aware of their value in the new company. A merger project and a report will be prepared together with the associated companies, establishing the new company statute, company name, company type, registered office of the resulting company and the participants, assets, shares and holdings along with their possible exchange, possible consequences of the merger for creditors, employees and the company, new company management body and CSR. The project must also include the dates on which the holders of the new shares or holdings will be entitled to receive profits and the merger date for accounting purposes.

Likewise, an independent expert report must be created in the case that the entities involved are public limited companies or limited partnerships by shares.

The Commercial Registry will be approached for the deposit of the project and it must be published on the companies' website.

A notice will be given one month in advance of the holding of the General Meeting of the company for the agreement on the merger of commercial companies. Information must be provided on the merger project, the merger balance sheet of the companies involved (which may be a balance sheet prepared 6 months before the merger project) or the annual accounts of the last 3 financial years, among other documents.

The General Meeting will be held with the aim of approving the merger of companies by the shareholders of the General Meeting, after they have obtained all the information associated with the value of the shares and holdings after the merger.

The shareholders will be able to obtain information about the merger and how they are affected through the documents provided by the administrators of their entity or the merger balance sheet. Also through expert reports that notify about the exchange of holdings, shares and the manner in which the exchange will take place. The Minutes of the Adoption of the Merger Agreement must be drafted.

Finally, the publication in the BORME (Official Gazette of the Commercial Registry) and in provincial newspapers of the registered offices of each of the companies participating in the merger will be managed. With the publication, creditors are guaranteed the option to oppose the merger to protect their credits.

Once the above has been processed and the share exchange resolved, the public deed of merger agreement before a Notary will be executed.

Subsequently, the registration of the new company in the Commercial Registry is necessary. At this point, the effects of the merger of companies begin.

Mergers and acquisitions between companies can be complicated and arduous, whether due to the integration process involving reorganisation or the creation of a new company. The type of company, financial analyses, potential legal issues, and the drafting of related deeds suggest the need for legal and tax advice, which we can assist you with. Consulting professionals is essential to avoid disputes or misunderstandings. For this reason, it is advisable to contact Notaries in Barcelona, whether you live here or anywhere else in the State, so that we can guide you throughout your process.

The Notary is a legal professional who guarantees the legality and authenticity of merger operations.

In the complexity demonstrated by company mergers, the figure of the Notary plays a decisive role, advising and counselling impartially throughout the procedure, not only for the deed of merger of companies, but also during the absorption or creation of the new company and related public deeds that must be granted. Present us with your doubts and make all the enquiries you consider appropriate.

JLA Notarios acts objectively and neutrally, certifying the authenticity of your documents and securing your transactions, so that procedures such as the deed of merger of companies comply with laws and regulations, guaranteeing legal certainty and giving credibility to the facts presented in the deed.

The Notary validates both the documentation submitted and the drafting of the deed by signing the document and carries out complementary tasks such as registering the deed in the Commercial Registry.

All companies must submit the following documentation for the execution of the public deed of company merger:

• Merger project
• Merger agreement
• Merger balance sheet of the companies involved or the semi-annual financial report
• Compliance with information duties with the publication of the merger agreement
• Non-existence of opposition from creditors and bondholders and the identification of those who have opposed with the amount of credit and guarantees provided or payment
• Type of exchange of shares and stocks
• Identification of the members of the board of directors
• Date of publication in the BORME of the deposit of the merger project and the merger agreement

The type of documentation to be submitted will depend on whether the merger is by creation of a new company or by absorption:

• Pure merger with newly created company: legal mentions must be submitted for the deed of incorporation of the company
• Merger by absorption: amendment of the articles of association of the absorbing company

The price for Notary fees in public deeds is set out in the Notarial Fee Schedule. Your estimate will also depend on the total number of pages, as well as the authorised and simple copies issued.

However, the exact price of a notarial document cannot be calculated until its specific content is known, that is, until it is signed, as there are many circumstances that can cause it to vary. The number of copies requested of a document, the pages it contains, as well as possible changes or additions, can slightly alter the final price.

If you wish to receive a detailed estimate, we invite you to contact us directly by the method that is most convenient for you. You can do so through the contact form on the main page of this website, via the contact section found in the footer of the website, using the direct WhatsApp access at the bottom right of this page, by sending an email to bcn@jlanotarios.com or by calling us on 93 159 17 62.

There are three deadlines to consider during the company merger process. On the one hand, the shareholders' meeting of the companies must be convened at least one month before it is held for the merger agreement. In addition, the companies participating in the merger must approve it within 6 months of the projected merger date.

The month following the publication of the merger agreement must also be taken into account for creditors to oppose the merger.

The model 600 of Property Transfer Tax must be submitted in its corporate operations modality.

After the merger of a commercial company and its registration in the Commercial Registry, the adoption of the Tax Regime must be communicated to the Tax Authorities within the following 3 months.