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Mergers and Acquisitions (M&A transactions)
Settlement of transaction of Merger
In order to expand the business and reduce costs, organizations often use the procedure of mergers or acquisitions. The main advantage of these procedures is the so-called synergy effect, in which the value of the merged entity becomes greater than the sum of the individual parts of the business that were calculated before the merger. For example, mergers and acquisitions can reduce part of the personnel costs, increase share of the market or concentrate all production processes under the control of one organization. Along with this, despite the fact that the purpose of the merger and acquisition is the same, the essence and procedure for carrying out are quite seriously different.
The merger transaction is one of the forms of reorganization of a legal entity that is established by Article 57 of the Civil Code. A merger can be defined as a combination of two or more entities that leads to in a new economic entity. Meanwhile, in case of a merger, the rights and obligations of each organization that is participating in the procedure are transferred to the newly emerged legal entity. According to Article 14 of the Federal Law “On State Registration of Legal Entities” during registering legal entities that are created as a result of reorganization it is required to provide act of transfer or a dividing balance sheet to the tax authority. It is on the basis of such a document that the rights and obligations of the organizations that formed it will be transferred to the newly emerged legal entity.
The order of merger
The main difficulty during the merger is the procedure established for the reorganization of legal entities. Within three days from the date of the decision to reorganize in the form of a merger organizations that are participating in this procedure must notify the tax authority about this. After making an entry in the Uniform State Register of Legal Entities that the legal entities are in the process of reorganization, they jointly publish this information in the State Registration Bulletin twice a month. Such an obligation is the responsibility of the organizations that are participating in the merger in order to protect the interests of their creditors because after the completion of the merger they will completely cease their activities as separate entities. A newly formed legal entity will be registered only after the expiration of the period when creditors may make demands. In view of the provisions providing for the transfer to the newly created legal entity of all the rights and obligations of the legal entities that participated in the merger transaction, the legal verification of each participant in this procedure is essential.
The feature of the procedure of acquisition is that it can be carried out in various ways. Acquisition means:
- a transaction that is made in order to regain control of the parent company over the business company and carried out by acquiring either all parts / shares of the company being absorbed or one of the parts that will allow you to make important decisions;
- Accession of the merged company (absorbed) to the main one. Meanwhile, acquisition like a merger is a form of reorganization of a legal entity.
The acquisition procedure is carried out in one stage if all part/shares of the acquired company will be purchased and the main company does not have the purpose of reorganizing in the form of a merger, or if the controlling persons of the acquired company agree to the merger. Two stages are necessary when the main company buys that part of the shares / parts of the company being merged (absorbed), which will subsequently allow it to freely decide on joining the main company. In case of a transaction to establish control of the main company over the merged company all organizations continue to exist, acting in the civil rights turnover as separate entities. If it is more profitable for the corporate structure of the main company to carry out the accession of the merged organization to it then as a result the merged organization will cease to exist. According to clause 2 of article 58 of the Civil Code of the Russian Federation, its rights and obligations will be transferred to the parent company. Due to the fact that acquisition is one of the forms of reorganization the order for carrying out this procedure is similar to that used in a merger.
The advantages of working with us
Working with the specialists of the Tsentralny Okrug Law Firm gives lots of opportunities:
- Consultations of specialists and free rapid assessment of the most suitable for the client mergers or acquisitions
- Full accompaniment of procedures of reorganization or acquisition of shares / parts
- Money-back guarantee in case of the results will not be achieved
- The current loyalty program for regular customers
Due to our vast experience in the area of corporate law the specialists of the Tsentralny Okrug Law firm will quickly and efficiently accompany the transactions of mergers and acquisitions.
Author is Stanislav Valezhnikov