Groups Of Companies PDF

Groups of companies A company group is a set of companies that maintain their autonomy and independence from a formal point of view, but that are managed under a unified leadership. All the companies of the group act under the dominant influence of a single company, which controls them (directly or...

Groups of companies A company group is a set of companies that maintain their autonomy and independence from a formal point of view, but that are managed under a unified leadership. All the companies of the group act under the dominant influence of a single company, which controls them (directly or indirectly) and directs them by pursuing a common purpose (the so-called group interest). From an economic point of view, we have one business activity, but from a legal point of view we have different companies. Cross-shareholdings (art. 2359-quinquies c.c.) A controlled company may not purchase shares or quotas of the parent company. In case of violation, the subscription shall be deemed to be made by the directors of the subsidiary company. Art. 2359-bis, (2359-ter c.c.) - Purchase of shares when there is a controlling relationship: the purchase of shares or quotas of the parent company by the subsidiary companies is considered a purchase of its own shares, so it is subject to the same rules: -shares must be fully paid-up -limits of the profits available for distribution and available reserves -the nominal value of the shares purchased must never exceed one fifth of the share capital of the parent company when the latter is an open company -the purchase must be approved by the shareholders' meeting. -the controlled company cannot exercise the voting rights The law provide specific rules on: → the holding company's liability → disclosure that the company belongs to a group → the obligation to justify decisions that are influenced by the party managing the company on a unified basis → the conditions when it is permitted to grant a right of withdrawal to minority shareholders in the company subject to management and coordination activities → the rule applicable to intra-group financing Art. 2497-sexies and 2497-septies c.c. - The exercise of management and coordination activity by a company is presumed when: -there is an obligation to consolidate the financial statements -one of the situations provided for in Article 2359 exists, for instance if there are specific contractual obligations -also, it is presumed that there is a management and coordination activity when there is a contract (or clauses in the bylaws) whereby companies agree to conform to a unified direction Under article 2359, par. 1, a company under the dominant influence of another company, makes the latter able to direct its activities, as the following cases: 1) companies in which another company holds the majority of the voting rights that can be exercised in the ordinary shareholders' meeting (de jure internal control) 2) companies in which another company holds sufficient voting rights to exercise a dominant influence in the ordinary shareholders' meeting (de facto internal control) 3) companies under the dominant influence of another company by virtue of specific contractual obligations with the latter (de facto external control) Group consolidated financial statements on one hand, is a criteria for presuming the exercise of management and coordination activities and on the other hand, it is an obligation provided in case there is a group of companies. Consolidated financial statement is a financial statement drawn up by the parent company, in addition to its own financial statements. It represents the equity, financial and economic situation of the group considered as a whole and is drawn up on the basis of the financial statements of the group companies. It gives information about the overall situation of the group. Liability (art. 2497 c.c.) Companies that manage and coordinate other companies which act undermining the interest of the controlled companies are: -directly liable towards the shareholders of said companies (for any damage caused to the value of their shareholding) -directly liable towards the creditors of said companies (for any damage caused to the integrity of company's assets) Liability is excluded when: -no damage actually occurs, or damage is consequently eliminated -through specific group operations the shareholder or creditor has been satisfied by the subsidiary company Disclosure (art. 2497-bis c.c.) If a company is subject to the management and coordination activities of another company or entity, it must disclose it in its official documents. as well as register it in the Business register in the dedicated section for the management and coordination activity. Directors' are liable towards shareholders and creditors, for not disclosing the above information. Decisions influenced by the management and coordination activity of the controlled companies must be analytically justified and clear indicating the reasons and the interests that influenced that decision. Right of withdrawal (art. 2497-quater c.c.) Shareholders of a company subject to a management and coordination activity may withdraw when certain events occur affecting the parent company and that result in a change in the original risk conditions of the investment in the controlled company. Shareholders/quotaholders of a company subject to management and coordination activities may withdraw: 1) if the parent company passes a resolution to transform the company 2) if the parent company passes a resolution to change the company's object 3) if in favor of the shareholder/quotaholder there is a decision of the court 4) at the beginning and at the end of the management and coordination activity (this cause of withdrawal doesn't apply to listed companies) Loans in the context of management and coordination activity In order to avoid excessive indebtedness within the group, the loans made by the parent company to the controlled company will apply the rule provided. So the repayment of these loans is subordinate to that of other creditors. TTransformation, mergers and divisions Transformation is an extraordinary operation involving a change in the type of partnership or company or a change from a limited liability company (s.p.a., s.a.p.a., s.r.l.) to another legal entity, and vice versa. The main feature of this operation is the rule of continuity of legal relations: the transformed entity retains the rights and obligations and continues in the relations of the entity that carried out the transformation The current legislation provides for two kind of transformation: 1. homogeneous transformations: transformations in which for-profit companies or partnerships transform themselves into another for-profit companies or partnerships 2. heterogeneous transformation: transformation in which for-profit companies or partnerships transform themselves into an entity with a different purpose, and vice versa 1. Homogeneous transformations The law regulates the transformation of partnerships into limited liability companies (art. 2500-ter c.c. et seq.) and the transformation of limited liability companies into partnerships (art. 2500- sexies c.c.). The assets of the partnership must be subject to valuation, in accordance with the rules established for the valuation of contributions in kind (art. 2500-ter, par. 2, c.c.). The share capital will be established in an amount not exceeding the amount of the net assets resulting from the valuation. Member liability for the corporate obligations 1) Whether by the transformation the members assume unlimited liability: the consent of the members who will assume an unlimited liability is required 2) Whether with the transformation the unlimited liability of the members is lost: members are not released from liability for corporate obligations prior to the registration of the obligations resolution of transformation in the Business register. Creditors' consent to transformation counts as consent to the release of all unlimited members; the consent is presumed if the resolution of transformation has been communicated to the creditors. Merger is an extraordinary operation that consists in the unification of two or more companies/ partnerships into one. Main types of merger: -merger in strict sense: two or more companies merging together to form a new company -merger through absorption: an existing company absorbs one or more companies. -homogeneous merger: merger between same type of companies -heterogeneous merger: merger between different type of for-profit companies or between for- profit companies and nonprofit entities After this procedure «the company resulting from the merger or the absorbing company shall take on the merging companies' rights and obligations, continuing with all the relationships existing prior to the merger» Merger procedure: 1) Draft terms of merger 2) Merger decision 3) Deed of merger 1) Draft terms of merger (art. 2501-ter c.c.) -administrative body shall draft terms of the merger -content: legal form, company name, instrument of incorporation of the new company. -filing in the Business register of the draft merger or publishing of documents on the company website -drawing up of the following documents: up-to-date balance sheet, report by the administrative body 2) Merger decision (art. 2502 c.c.) -his/her competence are to approve the relative draft terms of the merging companies -quorum, the approval requires the consent of the majority of partners -recording in the Business register (art. 2502-bis c.c.) -the merger can be implemented, unless opposition of the companies' creditors (art. 2503 с.с.) 3) Deed of merger (art. 2504 c.c.) -drawing up of the merger deed by the legal representatives of all the companies involved -mergers must be recorded in public deed -recording in the Business register -effects of a merger are that the company resulting from the merger shall take on the merger company's rights and obligations -invalidity of the merger deed may not be declared invalid once it is registered (art. 2504-quater c.c.) Division Main types of division (art. 2506 c.c.): -total division: the entire assets of the company are transferred to more than one company, and the divided company is dissolved -partial division: only part of the company's assets are transferred to one or more companies, so that the divided company does not dissolve but continues its activity -division in strict sense: the beneficiaries of the division are the new incorporated companies been incorporated -division through absorption: the beneficiaries of the division are companies that have already Division procedure: 1) Draft terms of division (art. 2506-bis c.c.) 2) Division decision 3) Deed of division Unless otherwise provided by the law, the rules provided for mergers apply. A division takes effects upon completion and registration of the division deed to the company register (art. 2506, quarter)