Amendment to the Commercial Companies Code, which came into effect on September 15, 2023, expanded the scenarios in which the merger of companies without an increase in share capital is possible:
When can a merger without an increase in share capital be applied?
In the merger of two sister companies, both 100% controlled by a parent company.
In the merger of a daughter company with a granddaughter company, where the parent company owns two daughter companies (each with 100% ownership), namely daughter company 1 and daughter company 2. In this case, daughter company 1 is the sole shareholder of the granddaughter company, and the merger occurs between daughter company 2 (acquiring company) and the granddaughter company (acquired company).
In the merger when the merging companies are controlled by a broader group of entities, but the level of involvement in the merging companies is the same. For example, when partner 1 owns 30% shares in both company 1 and company 2, and partner 2 owns 70% shares in both company 1 and company 2.
Simplified Division as an Alternative
The simplified division serves as an alternative to the regular merger process, and in each of the above cases, the simplified procedure can be used instead of the standard one.
What other simplifications are there in the division?
Waiver of the necessity to conduct an expert opinion (independent of shareholder approval).
Abandonment of the resolution regarding the merger (in the standard procedure) for the acquired company.
Restrictions on management reports concerning the merger.
A special instrument related to creditor protection. Creditors have the right to secure their claims within a month from the announcement of the merger plan if they can demonstrate that their satisfaction is jeopardized by the merger.
How does the simplified merger procedure of companies unfold?
The described simplified merger procedure primarily requires the preparation of appropriate financial documents, the creation of the most crucial document, the merger plan, the publication of the merger plan, notifying shareholders of the merging companies about the planned merger, and the constitutive document, which determines the completion of the process of entry into the National Court Register (KRS).
Even in the simplified variant, the procedure may take 3-4 months.
When is it advisable to use the simplified procedure?
Taking advantage of these simplifications not only streamlines the process of restructuring complex group capital structures but is also beneficial in areas such as:
Agricultural Land and Agricultural Property Agency (KOWR) and agricultural land transactions. The absence of share issuance may facilitate or even unlock transactions when the merging companies own agricultural land, leading to additional obligations and risks of losing control over shares/stocks by existing partners.
Maintaining the principle of tax neutrality in the merger.