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Merger

What is a merger?

In a merger, the entire assets of a corporation are transferred by way of universal succession to another corporation (merger by absorption) or to a newly formed corporation (merger by incorporation). The transferring corporation ceases to exist as a result of the merger, without undergoing liquidation.

What is a merger agreement?

The (written) merger agreement serves as the legal basis for the merger. It primarily governs the assets to be transferred to the acquiring company, as well as the merger effective date (reorganization effective date). 

What is a downstream merger?

In a downstream merger, the holding company (parent company) is merged into the company in which it holds an interest (subsidiary). Under corporate law, a downstream merger is permissible only under certain conditions (positive market value of the parent company after deducting the carrying amount of the investment in the acquiring subsidiary) with regard to the prohibition on the repayment of deposits. Under certain conditions, the tax and fiscal benefits provided by the Reorganization Tax Act may be claimed.

 

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