A merger is a transaction whereby two companies join to form a single company either by the creation of a new company or by the absorption of one company by the other.
A spin-off is a transaction whereby a company’s assets and liabilities are shared among several existing or newly-created companies.
A partial business transfer is a transaction whereby a company contributes an autonomous division of its activity to another existing or newly created company.
Transfer to the absorbing company of all assets and liabilities of the absorbed company or division
- Automatic Transfer: This means that all the assets and liabilities of the absorbed company, including those which may not have been mentioned in the restructuring deed due to errors or omissions, are transferred to the absorbing company.
- Allocation of Shares: As a result of a merger or spin-off, the shareholders of the absorbed company become shareholders of the absorbing company. In other words, mergers and spin-offs lead to an exchange of shares, with the shareholders of the absorbed company contributing their shares in the absorbed company in exchange for shares in the absorbing company.
- Employment Aspects: Mandatory employment law provisions which protect employees must be complied with in any restructuring. Attention must therefore be paid to the employment law applicable in the state concerned in order to determine what provision is made for the transfer of employees in the event of a merger or spin-off.
Winding-up of the absorbed company
The merger or spin-off leads to the automatic winding-up of the absorbed company. There is no need, however, to liquidate the company, since all its assets and liabilities are transferred to the absorbing company.
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