Merger of companies or partnerships – procedure, effects, duration

Essence of the merger of companies or partnerships 

The merger of companies or partnerships is a form of the reorganisation of entities, as a result of which all assets of a given company (partnership) or given companies (partnerships) are acquired by another company. In principle, the merger may take place in two ways: 

1. by the transfer of all assets of the (acquired) company or partnership to another – already existing – (acquiring) company for shares that the acquiring company grants to the acquired company’s or partnership’s shareholders or partners (merger by acquisition); 
2. by the establishment of a new company to which assets of all companies or partnerships involved in the merger are transferred for shares in this new company (merger by the formation of a new company). 

What companies and partnerships may merge? 

Both - companies (limited liability company, simple joint-stock company and joint-stock company) as well as partnerships (general partnership, limited liability partnership, limited partnership and limited joint-stock partnership) may merge. The cross-border merger of companies is also allowed. 
 
However, the Polish Commercial Companies Code introduces some limitations as a partnership cannot be the acquiring company or the newly established company. Moreover, the provisions of law allow the merger of partnerships only through the establishment of a new company. It is also worth remembering that a company or a partnership in liquidation that has started the division of assets and a company or a partnership in bankruptcy cannot merge. 

What are the effects of the merger of companies or partnerships? 

Upon the merger date, capitals, assets and organisational structures of companies or partnerships involved in the merger are accumulated. All rights and obligations (also licences and permits) are transferred to the acquiring company or the newly established company. At the same time, the acquired companies or partnerships are wound-up without going into liquidation and their shareholders (partners) become the shareholders of the acquiring company or the newly established company. Due to this, the merger of companies or partnerships allows the use of common potential of the entities involved in the merger and the optimisation of some processes. 

Stages of the procedure of the merger of companies or partnerships 

Depending on the types of companies or partnerships and the way of their merger, there are some differences in the merger procedure. In principle, it requires the following activities: 

1. the preparation of the company or partnership merger plan together with appendices, 
2. the application for the examination of the merger plan by a statutory auditor, 
3. the adoption of a resolution on the merger of companies or partnerships, 
4. the preparation of or amendment to the articles of association, 
5. entering the merger into the register of entrepreneurs. 

The first stage of the merger is the preparation of the merger plan in written form. Its content is determined by the companies or partnerships involved in the merger. It should be submitted to the register and published in the Court and Commercial Gazette (Monitor Sądowy i Gospodarczy) or on the companies’ or partnerships’ websites. Then, the merger plan is examined by a statutory auditor, who prepares a detailed opinion, assessing its reliability and correctness. Moreover, the management board of each company involved in the merger prepares a written statement justifying the merger, its legal and economic grounds, in particular the ratio of the exchange of shares. The management boards or partners are also obliged to notify about the planned merger all shareholders (partners) of the companies (partnerships) involved in the merger. If all shareholders (partners) of each of the companies (partnerships) involved in the merger have granted their consent to it, it is possible to waive the requirement to prepare the statement and to have the merger plan examined by a statutory auditor and to obtain their opinion. 
 
Then the merger requires the adoption of an appropriate resolution of shareholders (partners) of each company (partnership) involved in the merger. The merger of companies is also possible without the adoption of a resolution on the merger if the acquiring company has shares with a total nominal value of no less than 90% of the acquired company’s share capital, but this value cannot cover its entire capital. 

Duration of the merger of companies or partnerships 

The time necessary to carry out the merger procedure depends primarily on the types of entities that will participate in this procedure, however the whole process usually lasts from 3 to 8 months. Nevertheless, the indicated time frameworks may be different. Fast benefit of the merger of companies or partnerships depends not only on deadlines resulting from the provisions of law, but also on the effectiveness of operations of the companies’ management boards, shareholders, partners, accountants and statutory auditors as well as the time of the examination of appropriate applications by registry courts. 

Date of the entry into force of the merger of companies or partnerships 

The merger of companies or partnerships becomes effective on the date of entering the merger into the register of entrepreneurs of the National Court Register appropriate for the acquiring company or the newly established company. 
 
The date of the merger is the date on which the merged company is entered into the National Court Register or the increase in the acquiring company’s share capital is registered. Then, the companies or partnerships that have merged (only the acquired company or partnership) are automatically struck off from the National Court Register, without the necessity to liquidate them.