amalgamation, merger or split-up of a company

 

          The amendment of the Commercial Code (Act No. 264/2017 Coll., amending the Act No. 513/1991 Coll. Commercial Code) has introduced new conditions of the amalgamation, merger or split-up of companies.

            The aim of these new conditions is to prevent the successor company from entering the crisis, respectively the value of the obligations of the successor company exceeds the value of its assets.

            It is required that a company that will be wound up without liquidation is in the so-called good condition.

            The purpose of these introduced changes is to improve the protection of creditors and shareholders of companies in the amalgamation, merger or split-up of companies by limiting the amalgamation, merger or split-up of companies in such cases where such a decision could harm the interests of creditors and shareholders. 

            In accordance with the amended provision of the Section 69 Subsection 11 of the Commercial Code: „As of the effective date of the amalgamation, merger or split-up of a company,

a) the value of obligations of the successor company must not exceed the value of its assets; however, the sum of obligations shall not include the sum of obligations that are connected with an obligation of subordination,

b) the successor company or the company being dissolved must not be in liquidation,

c) no declaration of bankruptcy may be in effect against the successor company or the company being dissolved, unless the bankruptcy trustee agrees with the amalgamation, merger or split-up of the company,

d) the initiation of restructuring proceedings or a restructuring permit may not be in effect against the successor company or the company being dissolved,

 e) no winding-up proceedings may be conducted against the successor company or the company being dissolved, and such companies may not be wound up by a court or under a court decision.“

            In accordance with the amendment companies, which do not have a sufficient proportion of the value of the assets and obligations, the companies against which the bankruptcy or restructuring has been declared, the companies that are in liquidation or winding-up proceedings is conducted against them are no longer able to participate in the amalgamation, merger or split-up of companies.

            In accordance with the amended Section 69 of the Commercial Code, it is further required that the members of the company bodies are obliged to refrain from acts leading to the amalgamation, merger or split-up of the company if it may be assumed that the abovementioned conditions of amalgamation, merger or split-up of the company are not met. Failing that, they shall be liable to the creditors for the damage caused to them by violating this obligation.

            It is further required that a notice that a draft agreement on the amalgamation or draft agreement on the merger of companies or draft company split-up project was drawn up shall be delivered by each company being dissolved to the competent tax administrator, which is the tax authority or customs authority, no less than 60 days prior to the date of the general meeting that is to decide on the approval of the draft agreement on the merger or draft agreement on the amalgamation of companies or draft company split-up project, and if the business shares or shares of the company being dissolved are subject to a lien, the notice shall be sent to the pledgee as well within the same period.       

            After the shareholders/members or competent bodies of the participant companies adopt the decision on the amalgamation, merger or split-up of the company and before the application for the entry of the amalgamation, merger or split-up of the company is filed, the auditor designated in the approved agreement on the amalgamation, agreement on the merger of companies or approved company split-up project shall draw up a report of ascertained facts and such a report shall confirm that the conditions - the value of obligations of the successor company must not exceed the value of its assets will be met, provided that the situation of the participant companies as of the date from which the acts of the dissolved companies are deemed, in accounting terms, to be acts made on the account of the successor company is maintained. For the purposes of confirmation of the facts the application for entry of amalgamation, merger or split-up of the companies into the Commercial Register shall be obligatory accompanied by this auditor's report of ascertained facts.

            These abovementioned changes concerning the amalgamation, merger and split-up of companies are effective from the date of the pronouncement of the Amendment of the Commercial Code in the Collection of Laws, i.e. from 08 November 2017. In accordance with the transitional provision for legislation effective from the date of pronouncement the original regulations of the Commercial Code shall apply to the amalgamation, merger and split-up of a company, provided that the draft agreement on the amalgamation, draft agreement on the merger or draft company split-up project was approved prior to the effective date of this Act, and the application for entry of the amalgamation, merger or split-up of the company into the Commercial Register was filed no later than 90 days from the effective date of this Act.