Transformation, Mergers, and Divisions PDF

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. Transformat...

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. Transformation, 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)  Trasformation, mergers and divisions Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Transformation 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 (art. 2498 c.c.). The current legislation provides for two kind of trasformation: → homogeneous transformations: transformations in which for-profit companies or partnerships transforme themselves into another for-profit companies or partnerships → heterogeneous transformation: transformation in which for-profit companies or partnerships transforme themselves into an entity with a different purpose, and vice versa 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.). Procedure (quorum) → approval following the rules provided for the amendments to the instrument of incorporation (partnership agreement) → trasformation from a partnership into a LLC: majority calculated according to the profit share, right to withdrawal → trasformation from a LLC into a partnership: resolution of the extraordinary shareholders’ meeting with a higher majority, consent of those who will assume unlimited liability, right to withdrawal Procedure: resolution of transformation → Form and content requirements for the instrument of incorporation (partnership agreement) of the type of company/partnership chosen and compliance with the rules provided for incorporation From LLC to partnership → directors must draw up a report explaining the reasons and the effects of the transformation, which must remain deposited at the company’s office during the thirty days before the meeting that will decide on the transformation From partnership to LLC → the resolution must be drawn up with the form of public deed and must contain the information required by the law for the instrument of incorporation of the type of company chosen → check by the notary → recording in the Business register 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. After the recording in the Business register of the resolution the procedure has been completed, and the transformation take effect. Once the resolution is recorded in the register, the invalidity of the transformation resolution can no longer be pronounced (art. 2500-bis c.c.). (without prejudice to the right to compensation for damages by damaged shareholders or third parties) Each members have the right to receive a number of shares or a quota in proportion to his/her participation (art. 2500-quater, c.c. – art. 2500-sexies, par. 3, c.c.). Member liability for the corporate obligations 1) Whether by the transformation the members assume unlimited liability: → is required the consent of the members who will assume an unlimited liability (art. 2500-sexies, par. 1, c.c.; this liability also covers the corporate obligations prior to the transformation: art. 2500-sexies, par. 4, c.c.) 2) Whether with the transformation the unlimited liability of the members is lost (art. 2500-quinquies c.c.) → members are not released from liability for corporate obligations prior to the registration of the 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 (individually, by appropriate means) and they have not expressly denied their consent to the transformation (within 60 days after the receipt of the communication) Merger Merger is an extraordinary operation that consist in the 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 other companies → homogeneous merger: is the merger between same type of companies → heterogeneous merger: is the merger between different type of for-profit companies or between for-profit companies and non-profit entities (in this case it must be applied the same limits provided in the case of heterogenous transformation, because it implies also the transformation of one or more companies or entities involved in the merger) After this procedure «the company resulting from the merger or the absorbing company shall take on the merging companies’ rights and obligations, continuing whit all the relationships exixting prior to the merger,…» (art. 2504-bis, par. 1, c.c.) Merger procedure: 1) Draft terms of merger 2) Merger decision 3) Deed of merger 1) Draft terms of merger (art. 2501-ter c.c.) → competence: administrative bodies → content → filing in the Business register → drawning up of the following documents: up-to-date balance sheet (art. 2501-quater, c.c.), report by the administrative body (art. 2501-quiquies, c.c.), experts’ report (2501-sexies, c.c.) → documents filing at the registerd offices of the companies involved or publishing on their website (during the thirty days preceding the meeting) (art. 2501-septies c.c.) 2) Merger decision (art. 2502 c.c.) → competence → quorum (companies, partnerships) → recording in the Business register (art. 2502- bis c.c.) → merger implementation and opposition of the companies’ creditors (art. 2503 c.c.) 3) Deed of merger (art. 2504 c.c.) → drawning up of the merger deed by the legal representatives of all the companies involved → public deed → recording in the Business register → effects of a merger (art. 2504-bis c.c.) → invalidity of the merger deed (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 new incorporated companies → division through absorption: the beneficiaries of the division are companies that have already been incorporated Division procedure: 1) Draft terms of division (art. 2506-bis c.c.) 2) Division decision 3) Deed of division → unless otherwise provide by the law, it will apply the rules provided for mergers → effects of a division (art. 2506-quater c.c.)