Q: Can you research and give me narrative 1. Merger vs Consolidaiton, process etc.

2
Petition for bankruptcy process etc.

Merger and consolidation are different paths taken by companies for economic
reasons, whether for economic growth (e.g. cutting competition) or to cut costs.

MERGER

Section 76 of the Corporation Code of the Philippines provides that there

is Merger when two or more corporations merge into a single corporation which shall be one
of the constituent corporations.

In a merger, a corporation absorbs another corporation and remains in existence

while the other is dissolved. It signifies the absorption of one corporation by another which
retains its name and corporate identity with the added capital, franchises and powers of a
merged corporation.1

CONSOLIDATION

The same provision2 of law provides that corporations may consolidate into a new
single corporation which shall be the consolidated corporation.

In consolidation, a new corporation is created, and the consolidating corporations

are extinguished.3

CHARACTERISTICS MERGER CONSOLIDATION

DEFINITION A corporation absorbs In consolidation, a new
another corporation and corporation is created,
remains in existence while and the consolidating
the other is dissolved. corporations are
extinguished.
DISSOLVED CORPORATION All constituent All constituent
corporations, except the corporations are dissolved
surviving corporation, are and absorbed by the new
dissolved. consolidated enterprise.
CREATION OF NEW No new corporation is A single new corporation
CORPORATION created. emerges.
ACQUISITION OF RIGHTS AND The surviving corporation All assets, liabilities and
LIABILITIES acquires all the assets, capital stock of all
liabilities and capital stock consolidated corporations
of all constituent are transferred to new
corporation. corporation.

1
Aquino, The Philippine Corporate Law Compendium, 2014 Edition
2
Section 76, Corporation Code
3
Aquino, The Philippine Corporate Law Compendium, 2014 Edition

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PROCESS FOR MERGER/CONSOLIDATION

1.) FIRST STEP: THE BOARD OF DIRECTORS/TRUSTEES OF EACH CORPORATION

SHALL APPROVE THE PLAN OF MERGER/CONSOLIDATION

Sec. 76 of the Corporation Code provides that:

Sec. 76. Plan or merger of consolidation. The board of directors

or trustees of each corporation, party to the merger or consolidation,
shall approve a plan of merger or consolidation setting forth the
following:

a. The names of the corporations proposing to merge or consolidate,

hereinafter referred to as the constituent corporations;

b. The terms of the merger or consolidation and the mode of carrying

the same into effect;

c. A statement of the changes, if any, in the articles of

incorporation of the surviving corporation in case of merger; and, with
respect to the consolidated corporation in case of consolidation, all
the statements required to be set forth in the articles of incorporation
for corporations organized under this Code; and

4. Such other provisions with respect to the proposed merger or

consolidation as are deemed necessary or desirable.

To start the process, a plan of merger or consolidation which contains the names
of the corporation, the terms of the merger or consolidation and the mode of carrying it out,
a statement of changes in the articles of incorporation and other pertinent provisions must
be approved by the board of directors or trustees of each corporation.

2. APPROVAL BY THE STOCKHOLDERS OR MEMBERS OF THE PLAN OF MERGER OR

CONSOLIDATION

Sec. 77. of the Corporation Code requires first the approval by majority vote of
each of the board of directors or trustees of the constituent corporations of the plan of
merger or consolidation.

Thereafter, the same shall be submitted for approval by the stockholders or

members of each of such corporations at separate corporate meetings duly called for the
purpose. The affirmative vote of stockholders representing at least two-thirds (2/3) of the
outstanding capital stock of each corporation in the case of stock corporations or at least
two-thirds (2/3) of the members in the case of non-stock corporations shall be necessary
for the approval of such plan. Any dissenting stockholder in stock corporations may exercise
his appraisal right in accordance with the Code.

3. EXECUTION OF ARTICLES OF MERGER OR ARTICLES OF CONSOLIDATION

Sec. 78 of the Corporation Code provides as follows:

Sec. 78. Articles of merger or consolidation. - “After the approval by

the stockholders or members as required by the preceding section,
articles of merger or articles of consolidation shall be executed by
each of the constituent corporations, to be signed by the president or

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 vice-president and certified by the secretary or assistant secretary of
each corporation setting forth:

1. The plan of the merger or the plan of consolidation;

2. As to stock corporations, the number of shares outstanding, or in

the case of non-stock corporations, the number of members; and

3. As to each corporation, the number of shares or members voting

for and against such plan, respectively.

After the approval of the plan of merger or consolidation by both the board of
directors and trustees and the approval of the stockholders/members (at least two-thirds
(2/3) of the outstanding capital stock of each corporation in the case of stock corporations
or at least two-thirds (2/3) of the members in the case of non-stock corporations), the
articles of merger or consolidation shall be made. The articles of merger or consolidation
must be signed by the president/vice-president, and must be certified by the secretary or
assistant secretary of each corporation. The articles of merger or consolidation shall
contain: the plan of merger or consolidation, if non-stock, the number of shares outstanding
and if non-stock, the number of members. Lastly, it shall contain the number of shares
voting for or against the plan in each corporation.

4. EFFECTIVITY

The mere agreement of the corporations to merge or consolidate DOES NOT give
effect to the merger or consolidation. The approval of the SEC, by its issuance of a
certificate of merger or consolidation, makes effective the merger/consolidation of the
corporations.

Sec. 79 of the Corporation Code provides as follows:

Sec. 79. Effectivity of merger or consolidation. - The articles of
merger or of consolidation, signed and certified as herein above
required, shall be submitted to the Securities and Exchange
Commission in quadruplicate for its approval: Provided, That in the
case of merger or consolidation of banks or banking institutions,
building and loan associations, trust companies, insurance companies,
public utilities, educational institutions and other special corporations
governed by special laws, the favorable recommendation of the
appropriate government agency shall first be obtained. If the
Commission is satisfied that the merger or consolidation of the
corporations concerned is not inconsistent with the provisions of this
Code and existing laws, it shall issue a certificate of merger or of
consolidation, at which time the merger or consolidation shall be
effective.
If, upon investigation, the Securities and Exchange Commission has
reason to believe that the proposed merger or consolidation is
contrary to or inconsistent with the provisions of this Code or existing
laws, it shall set a hearing to give the corporations concerned the
opportunity to be heard. Written notice of the date, time and place of
hearing shall be given to each constituent corporation at least two (2)

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 weeks before said hearing. The Commission shall thereafter proceed
as provided in this Code.

EFFECTS OF MERGER OR CONSOLIDATION

The effect of the Merger or Consolidation is laid down in Sec. 80 of the

Corporation Code.

Sec. 80. Effects or merger or consolidation. - The merger or

consolidation shall have the following effects:

1. The constituent corporations shall become a single corporation

which, in case of merger, shall be the surviving corporation
designated in the plan of merger; and, in case of consolidation, shall
be the consolidated corporation designated in the plan of
consolidation;
2. The separate existence of the constituent corporations shall
cease, except that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess
all the rights, privileges, immunities and powers and shall be
subject to all the duties and liabilities of a corporation
organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises
of each of the constituent corporations; and all property, real or
personal, and all receivables due on whatever account, including
subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent
corporation, shall be deemed transferred to and vested in such
surviving or consolidated corporation without further act or deed; and

5. The surviving or consolidated corporation shall be responsible and

liable for all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations; and any
pending claim, action or proceeding brought by or against any of such
constituent corporations may be prosecuted by or against the
surviving or consolidated corporation. The rights of creditors or liens
upon the property of any of such constituent corporations shall not be
impaired by such merger or consolidation.

To summarize, the following are the effects of the Merger or Consolidation:

a. The constituent corporations become one.

b. The separate existence of the other corporation cease in case of
merger while in consolidation, the separate existence of the
corporations cease and a new corporation is created.
c. The surviving corporation (in case of merger) or the consolidated
corporation (in case of consolidation) shall possess all the rights
and privileges, immunities and franchises of the constituent
corporation. Moreover, the personal and real property, choses in
action (right under the law to institute suits) and other interests of
the constituent corporation shall be transferred to the surviving or
new corporation;

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d. The surviving corporations shall be liable for all the liabilities and
obligations of each of the constituent corporations as if it itself has
procured it.

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