On 7 July, the Sejm adopted a law introducing the possibility of cross-border reorganisations. In addition, new possibilities for the transformation of companies were introduced. In addition to the broader admission of limited partnership participation, or the introduction of a new type of demerger - demerger by spin-off, a simplified merger was introduced. And indeed, these are significant changes.
As indicated in the Explanatory Memorandum to the Amendment Act, "Directive 2019/2121 expands the opportunities for company transformation in the Single Market area. These new possibilities have created an opportunity to review national company transformation processes."
Thus, in addition to the mainstream changes related to enabling cross-border reorganisations in the European Union, it became necessary to update the rules on mergers, divisions and conversions applicable only to Polish companies. And so limited joint-stock partnerships were admitted to the reorganisation table along with limited liability companies. And so we got a new type of division - division by spin-off.
>>>> More on the new type of division by separation <<<
Also new is the simplified connection. But is such a complete novelty?
The Commercial Companies Code already provided for a simplified merger. However, this was a procedural simplification. In certain circumstances, the merger procedure was simply less formalised.
There are three variants of this simplification:
(1) The first in which the acquiring (non-public) company holds not less than 90% of the shares in the acquiring company. It is not necessary in such a case, inter alia:
• adoption of the merger resolution by the acquiring company,
• preparation of an expert opinion,
• the preparation of a report for the purposes of the merger by the boards of the companies involved in the merger,
• reporting on material changes in assets and liabilities that have occurred between the date of the merger plan and the date of the resolution to merge.
2. the second, where a company acquires another company in which it has 100% of the shares. In this case, additional simplifications, in addition to those indicated in option 1, include, among others, simplifications with regard to the plan of merger, which does not have to include the parity of exchange of shares, the rules concerning their allocation, or the determination of the date from which the shares entitle in dividends the acquiring company.
(3) The third simplification concerns mergers of limited liability companies if they have a maximum of 10 shareholders in total. In this case, the simplification lies in the fact that there is no obligation to announce the merger plan, to have an expert opinion on the plan or to notify the shareholders of the intention to merge.
It is worth pointing out that the Code still provides for a certain simplification related to reverse mergers, i.e. those in which a subsidiary company (as the acquiring company) acquires its parent company (the absorbed company).
In this case, there is no need to increase the share capital and issue new shares. It is possible to issue to the shareholders of the parent company exactly the same shares/shares that the parent company held in the daughter company.
The new proposed provision 515 [1] of the Companies Act, provides that "a merger may be effected without the allotment of shares in the acquiring company in the event that one shareholder holds directly or indirectly all the shares in the merging companies or the shareholders of the merging companies hold shares in the same proportion in all the merging companies".
Therefore, there will be no share capital increase and no issue of new shares. Condition:
• one shareholder holds all the shares in the merging companies (directly or indirectly)
• the shareholders hold all the shares in the merging companies in the same proportions (directly)
It is worth adding that such an emission-free merger was possible earlier, before 1.03.2020, but only to the extent that one acquiring company held 100% of the shares in the acquired company. You can read more about this, along with nuances and an analysis of whether it was also possible after 1.03.2020, in Przemysław Brzozowski's article entitled "The Simplified Merger Without Increase". "Simplified merger of companies without increasing share capital in the light of amendments to the Code of Commercial Companies", PPH 2021, no. 7.
What is certainly new is the possibility of such simplification in reorganisations where the sole owner emerges at the apex of the holding structure or in 'multi-shareholder' mergers, but with the same proportions.
I have illustrated all the simplifications discussed above in a presentation that can be downloaded by clicking the printer icon above.
It seems that the first exception in particular may have wide application in practice.
It is also worth mentioning that the simplifications discussed can be combined: procedural simplification with carbon-free simplification or with a reverse merger.
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