LAWS GOVERNING THE RULES AND PROCEDURES IN

MERGER AND CONSOLIDATION

By: May Angelica M. Teneza

1. The Corporation Code of the Philippines [Batas Pambansa Blg. 68]

TITLE IX
MERGER AND CONSOLIDATION

Sec. 76. Plan of merger or consolidation. - Two or more corporations may merge into a single
corporation which shall be one of the constituent corporations or may consolidate into a new
single corporation which shall be the consolidated corporation.

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:

1. The names of the corporations proposing to merge or consolidate, hereinafter referred to

as the constituent corporations;

2. The terms of the merger or consolidation and the mode of carrying the same into effect;

3. 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. (n

Sec. 77. Stockholder's or member's approval. - Upon approval by majority vote of each of the
board of directors or trustees of the constituent corporations of the plan of merger or
consolidation, 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. Notice of
such meetings shall be given to all stockholders or members of the respective corporations, at
least two (2) weeks prior to the date of the meeting, either personally or by registered mail. Said
notice shall state the purpose of the meeting and shall include a copy or a summary of the plan
of merger or consolidation. 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: Provided, That if after the approval by the
stockholders of such plan, the board of directors decides to abandon the plan, the appraisal
right shall be extinguished.

Any amendment to the plan of merger or consolidation may be made, provided such
amendment is approved by majority vote of the respective boards of directors or trustees of all
the constituent corporations and ratified by the affirmative vote of stockholders representing at
least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members of
each of the constituent corporations. Such plan, together with any amendment, shall be
considered as the agreement of merger or consolidation. (n)

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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 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. (n)

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

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

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 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.
(n)

2. CCP RULE NO. 2 :RULES ON MERGERS AND CONSOLIDATIONS (1986)

The following rules governing mergers and consolidations (Secs. 76-80 CCP) are
hereby promulgated:

SECTION 1. Definition of Term - The following terms shall have the respective
meaning when used in these Rules:

A. MERGER - is the absorption of one or more corporations by another existing

corporation, which retains its identity and takes over the rights, privileges,
franchises, and properties of the absorbed corporation(s). The absorbing
corporation continues its existence while the life or lives of the other
corporation(s) is/or are terminated.

B. CONSOLIDATION - is the union of two or more corporations to form a new

corporation, having the combined rights, privileges, franchises and properties
of the constituent companies, all combining to lose their corporate existence.
Briefly, it is described as the union of two or more corporations into a single
new corporation, all the constituent corporations thereby ceasing to exist as
separate entities.

C. ARTICLES OF MERGER OR CONSOLIDATION - refers to the instrument

executed by the constituent corporations embodying the following: (1) plan of
merger or consolidation; (2) the number of shares outstanding in case of stock
corporations, or of members, in case of non-stock corporations; and (3) as to
each corporation, the number of shares outstanding or members voting for
and the names of stockholders or members voting against such plans,
respectively.

D. CONSTITUENT CORPORATIONS - refers to the absorbed and absorbing

corporations in case of merger; and to two or more corporate bodies desiring
to unite into a new corporation in the case of consolidation.

SECTION 2. Procedure and Requirements

I. Procedure
A. IN MERGER
1. Meeting of the Board of Directors or Trustees of the constituent
corporations to approve the plan of merger;

2. Notice of meeting of the stockholders or members of the

constituent corporations, sent at least two (2) weeks prior to

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 the date of the meeting, either personally or by registered mail
at the post office address of the stockholders or members as
appearing in the corporate or membership book, stating the
purpose of the meeting and including a copy or a summary of
the plan of merger;

3. Meeting of the stockholder or member of each constituent

corporation approving the plan of merger by at least two-thirds
(2/3) of the members of non-stock corporations.

B. IN CONSOLIDATION:
1. Meeting of the Board of Directors or Trustees of the constituent
corporations to approve the plan of consolidation;

2. Notice of meeting of stockholders or members of the

constituent corporations, sent at least 2 weeks prior to the date
of the meeting, either personally or by registered mail at the
post office address of the stockholders or members as
appearing in the corporate-or-member ship book stating the
purpose of the meeting and including a copy or a summary of
the plan of consolidation;

3. Meeting of the stockholders or members of each constituent

corporation approving the plan of consolidation by at least 2/3
of the outstanding capital stock or at least 2/3 of the members
of non-stock corporations.

II. Requirements

A. For Merger - Corporations desiring to merge are required to submit to

the Commission, in quadruplicate, the following instruments:

1. Article of Merger signed by the President or Vice-President and

certified under oath by the Secretary or Assistant Secretary of
the constituent corporations setting forth the following:

a. The plan of merger;

b. As to stock corporations, the number of shares
outstanding, or in the case of non-stock corporations,
the number of members; and
c. As to each corporation, the number of outstanding
shares or members voting for and the names of
stockholders or members voting against such plan,
respectively.

2. Copies of the minutes of the board of directors meeting and

minutes of the stockholders' or members' meeting of the
constituent corporations, approving and ratifying the plan of
merger, certified under oath by their respective secretaries or
assistant secretaries;

3. List of creditors of the absorbed corporations, as of the date of

approval of the plan of merger with their addresses and the
amounts owing to each;

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 4. Audited financial statements (Balance Sheet and related
statement of income and expenses) of the constituent
corporations as of a date not earlier than 120 days prior to the
date of filing of the application with the Commission. The
financial statements shall be accompanied by a long form audit
report of a certified public accountant;

5. Amended Articles of Incorporation and By-Laws of the

surviving corporation, whenever necessary in accordance with
the term of the plan of merger such as change of name of the
surviving corporation, increase of capital stock, etc.

B. For Consolidation - Corporation desiring to consolidate are required to

submit to the Commission in quadruplicate, the following
instruments:

1. Articles of Consolidation signed by the President or Vice-

President and certified under oath by the Secretary
Assistant Secretary of the constituent corporations setting
forth the following:

a. The plan of consolidation;

b. As to stock corporations, the number of shares
outstanding of the constituent corporations or in the
case of non-stock corporations, the number of
members; and
c. As to each corporation, the number of outstanding
shares or members voting for and the names of
stockholders or members voting against such plan
respectively.

2. Copies of the minutes of the board of directors' meeting and

minutes of the stockholders' meeting of each of the constituent
corporations, approving and ratifying the plan of consolidation,
certified under oath by their respective secretaries or assistant
secretaries;

3. List of the creditors of the constituent corporations as of the

date of approval of the plan of consolidation with their
addresses and the amount owing to each;

4. Audited Financial Statements (Balance Sheet and related

Statement of Income and Expenses) of each of the constituent
corporations as of a date not earlier than 120 days prior to the
date of filing of the application with the Commission. The
financial statements shall be accompanied by a long form audit
report of a certified public accountant;

5. Articles of Incorporation, By-Laws and supporting documents

of the proposed or consolidated corporation.

C. Rural Banks and other Banking Institutions may submit instead of

A(4) and B(4) the following:
1. The audited financial statements of the constituent banks,

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 together with a long form audit report, as of a date not earlier
than 120 days prior to the date of filing of the merger or
consolidation with the Central Bank; and

2. The tentative financial statements of the constituent banks as

of a date not earlier than 120 days prior to the date of filing of
the merger or consolidation with the Commission. (in case
where the filing with the Commission is beyond the period
required in paragraph a).

SECTION 3. Appraisal Rights of Dissenting Stockholder in Mergers and

Consolidations - A stockholder who voted against the plan of merger or consolidation
has the right to demand payment of the fair value of his shares in accordance with
the provisions of Section B2 of the Corporation Code of the Philippines.

SECTION 4. Approval of the Merger/Consolidation: When hearing is necessary - The

Securities and Exchange Commission shall approve the articles of
merger/consolidation and issue the corresponding certificate of Filing of Articles of
Merger/Consolidation if it is satisfied that the merger or consolidation of the
corporations concerned is not inconsistent with the provisions of the Corporation
Code of the Philippines and existing laws.

However, if the Securities and Exchange Commission has reason to believe, upon
proper investigation, that the proposed merger/consolidation is contrary to or
inconsistent with the provisions of the Corporation Code of the Philippines and
existing laws, it shall set a hearing to give the corporations concerned and other
parties affected the opportunity to be heard. Written notice of the date, time and
place of said hearing shall be sent to the constituent corporations and other parties
affected at least two (2) weeks before said hearing.

If after the hearing, the Commission finds that the requirements of the Corporation
Code of the Philippines, its implementing rules and regulations and other pertinent
laws have been complied with, and that no valid reason(s) exists for the disapproval
of the merger/consolidation, the Commission shall issue the necessary certificate of
merger/consolidation, at which time the merger/consolidation shall be effective.
The Commission shall inform the Bureau of Internal Revenue of the approval of the
merger/consolidation.

SECTION 5. Filing Fees - An amount equal to 1/10 of one (1%) per centum of the
equity of the absorbed corporations which was used as basis of the merger or
consolidation but not less than P1,000.00 nor more than P100,000.00 shall be
collected by the Commission as filing fees for the articles of merger or consolidation.
For non-stock corporations, a fee of P1,000.00 shall be collected for the articles of
merger or consolidation.

SECTION 6. Violation of these Rules - Any violation of these rules shall be penalized
by a fine of not less than One Thousand (P1,000.00) Pesos nor more than Ten
Thousand (P10,000.00) Pesos, and such other sanctions as provided for under
Section 144 of the Corporation Code of the Philippines.

SECTION 7. Effectivity - These rules shall take effect fifteen (15) days after their
publication in two (2) newspaper of general circulations in the Philippines.

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References:

http://www.chanrobles.com/legal5title9.htm#

Chapter 53 of Business Mergers and Consolidations

http://attylaserna.blogspot.com/2011/12/consolidation-of-cases-explained-gr-no.html

http://www.apeccp.org.tw/doc/Philippines/Decision/phdec3.html

http://www.formsphilippines.com/guide/228/merger-consolidation