MERGER AND CONSOLIDATION as an existing disappear with the

juridical person, emergence of a new

Definition and Concept
whereas the other corporate entity
MERGER CONSOLIDATION corporation shall
cease to exist.
A corporation absorbs the other A new corporation is created,
and remains in existence while and consolidating corporations The surviving corporation shall The new corporate entity shall
the others are dissolved are extinguished [Sec.75]. acquire all the assets, obtain all the assets of the
[Sec.75]. rights of action, and disappearing corporations, and
assuming all the likewise shall assume all their
Mergers may be; liabilities of the liabilities.
●​ horizontal (between disappearing
competing firms), corporation/s
●​ vertical (if a corporation
acquires another There is no liquidation of the assets of the dissolved
which uses or distributes corporation, all rights, properties and franchises are acquired
its by the surviving/new corporation.
products) or Note: Merger and consolidation involve fundamental changes in the
●​ conglomerate (neither corporation, the rights of stockholders and creditors. There must
competing nor related in be an express provision of law that authorizes them. Otherwise,
the chain of production or
such combinations are ultra vires. With the approval of the
distribution).
Corporation Code, such express authority has been granted.
One or more Union of 2 or more
corporations are corporations to form Distinguish: Constituent and Consolidated Corporation
absorbed by another a new corporation Constituent Consolidated Surviving
which survives and Corporation Corporation Corporation
continues the
combined business The parties to a The new single One of the
merger or corporation was constituent
One of the constituent All constituents consolidation created through corporations which
corporations remains corporations consolidation. remain in existence
 after the merger Articles of plan, respectively.
Merger/Consolidation 4.​The CARRYING AMOUNTS and FAIR
Requisites: VALUES of the ASSETS and
Plan of Merger or Consolidation
●​ Executed by each of the LIABILITIES of the RESPECTIVE
Each of the constituent a.​Names of the corporation constituent COMPANIES as of the AGREED
corporations must draw up a Plan involved; corporations CUT-OFF DATE.
of Merger or Consolidation which b.​Terms and mode of carrying ●​ Signed by the 5.​The METHOD to be used in the
shall set forth: it to effect; president/vice- merger or consolidation of
c.​Statement of changes, if president. ACCOUNTS of the companies.
Required Vote:​ any, in the present ●​ Certified by the 6.​The PROVISIONAL or PRO-FORMA
Majority Vote of BOD or BOT articles of the surviving secretary/ assistant VALUES, as merged or
corporation to be formed secretary of each consolidated, using the
in the case of merger; and corporation ACCOUNTING METHOD; and
7.​Such OTHER INFORMATION as may
with respect to the
be PRESCRIBED by the
consolidated corporation
COMMISSION.
in case of consolidation.
PROCEDURE
Articles of Merger or Consolidation
APPROVAL OF PLAN of Merger or 1.​Approval by MAJORITY VOTE of
The Articles of Merger or CONTENTS Consolidation by BOD and each BOD or BOT of the
Consolidation: The Article must contain the STOCKHOLDERS of CONSTITUENT CONSTITUENT CORPORATIONS of
a.​Take the place of the following; CORPORATIONS the PLAN OF MERGER or
AOI of​ the 1.​PLAN of the Merger/ CONSOLIDATION.
consolidated Consolidation 2.​Approval by the STOCKHOLDERS
corporation; or 2.​As to STOCK CORPORATIONS, the or MEMBERS of each of such
b.​Amend the Articles of NUMBER of SHARES OUTSTANDING, corporations at SEPARATE
Incorporation of the or in the case of NON-STOCK CORPORATE MEETINGS duly
surviving corporation. CORPORATIONS, the NUMBER OF called for that purpose.
MEMBERS. The AFFIRMATIVE VOTE of
3.​As to each corporation, the STOCKHOLDERS representing AT LEAST
NUMBER of SHARES or MEMBERS TWO-THIRDS (⅔) of OUTSTANDING
VOTING FOR or AGAINST such
CAPITAL STOCK or MEMBERS necessary capital stock or of two-thirds
for the APPROVAL of SUCH PLAN. (2/3) of the members of each of the
constituent corporations. Such a
Holders of NON-VOTING SHARES are plan, together with any amendment,
ENTITLED TO VOTE on the plan. shall be considered as the
3.​NOTICE OF SUCH MEETING. In agreement of merger or
the same manner as giving consolidation.
notice of REGULAR or SPECIAL
MEETINGS (SECTION 49) EXECUTION of Articles of Articles of Merger or Articles of
The notice shall state the PURPOSE Merger or Consolidation Consolidation shall be executed by
of the meeting and include a COPY EACH OF THE CONSTITUENT
or SUMMARY of the plan of merger or CORPORATIONS.
consolidation.
SUBMISSION to SEC of the Submission of the Articles of
Articles Merger or Articles of Consolidation
Note: Any dissenting stockholder in
to the SEC for approval.
stock corporations may exercise his
appraisal right in accordance with
Note: Mergers and consolidations of
the Code. Provided that if after
corporations GOVERNED BY SPECIAL
the approval by the stockholders of
LAWS requires a RECOMMENDATION from
such a plan, the board of directors
the APPROPRIATE GOVERNMENT AGENCY
decides to abandon the plan, the
[Sec. 78 (1)].
appraisal right shall be
extinguished.
ACTION by SEC Conduct hearing or issue
certificates. [Sec. 78]
Note: An AMENDMENT TO THE PLAN may
a.​If necessary, the SEC shall
be made by approval of the majority
set a hearing, notifying all
vote of the respective boards of
corporations concerned at
directors or trustees of all the
least 2 weeks before hearing.
constituent corporations and
Note: If the proposed plan of
ratified by the affirmative vote of
merger or consolidation is contrary
stockholders representing at least
to or inconsistent with provisions
two-thirds (2/3) of the outstanding
of this Code.
 b.​SEC shall issue a CERTIFICATE SHALL CEASE,
APPROVING the articles and EXCEPT: SURVIVING or
plan of merger or of CONSOLIDATED CORPORATION.
consolidation. 3.​The SURVIVING or the
CONSOLIDATED CORPORATION
EFFECTIVITY ●​ Upon issuance of the shall POSSESS ALL THE RIGHTS,
CERTIFICATE of MERGER or PRIVILEGES, IMMUNITIES, and
CONSOLIDATION POWERS, and shall be subject
Note: Merger or Consolidation DOES to ALL THE DUTIES and
NOT BECOME EFFECTIVE by MERE LIABILITIES of a corporation
AGREEMENT of the CONSTITUENT organized under this Code;
CORPORATIONS. The APPROVAL of the 4.​The SURVIVING or CONSOLIDATED
SEC is REQUIRED. CORPORATION shall
●​ Parties may STIPULATE a a.​POSSESS ALL THE RIGHTS,
SPECIFIC EFFECTIVE DATE of PRIVILEGES, IMMUNITIES,
merger or consolidation. AND FRANCHISES of EACH
CONSTITUENT CORPORATION
EFFECTS The FF. are LEGAL EFFECT of
b.​and ALL REAL or
MERGER/CONSOLIDATION:
PERSONAL PROPERTY,
1.​The CONSTITUENT CORPORATION
c.​ALL RECEIVABLES DUE on
shall become a SINGLE
whatever account,
CORPORATION, which, in case
INCLUDING SUBSCRIPTIONS
of MERGER, shall be the
to shares and other
SURVIVING CORPORATION
choses in action,
designated in the plan of
d.​And EVERY OTHER
merger; and in case of
INTEREST OF, BELONGING
CONSOLIDATION, shall be
TO, or DUE to each
CONSOLIDATED CORPORATION
constituent
designated in the plan of
corporation, shall be
consolidation.
DEEMED TRANSFERRED TO
2.​GR: The SEPARATE EXISTENCE of
and VESTED in such
the CONSTITUENT CORPORATIONS
SURVIVING or
 CONSOLIDATED PRIVILEGES, POWERS, and
CORPORATION WITHOUT LIABILITIES. Same goes for
FURTHER ACT or DEED; CONSOLIDATED CORPORATION.
and
5.​The SURVIVING or CONSOLIDATED SALIENT ADVANTAGES OF 1.​Unlike regular
CORPORATION shall be MERGERS/CONSOLIDATION transfer/acquisition, it is
RESPONSIBLE for ALL THE able to ACHIEVE A CONTINUOUS
LIABILITIES and OBLIGATIONS FLOW of the JURIDICAL
of EACH CONSTITUENT PERSONALITIES and BUSINESS
CORPORATION, as though such ENTERPRISES of the
SURVIVING or CONSOLIDATED constituent corporations.
CORPORATION had itself There is NO “LEGAL BREAK” in
INCURRED such LIABILITIES or their juridical personalities
OBLIGATIONS; and ANY PENDING and business enterprises.
CLAIM, ACTION or PROCEEDING 2.​Thus, MERGER/CONSOLIDATION is
brought by or AGAINST any NOT A VIOLATION of a
CONSTITUENT CORPORATION may NON-TRANSFER CLAUSE
be PROSECUTED by or AGAINST 3.​SURVIVING/CONSOLIDATED
the SURVIVING or CONSOLIDATED corporation is NOT CONSIDERED
CORPORATION. The RIGHTS OF a TRANSFEREE
CREDITORS or LIENS upon the 4.​Unlike regular transfer of
property of such constituent assets/business enterprise,
corporations SHALL NOT BE there is NO GAIN or LOSS in
IMPAIRED by the MERGER or the PURSUIT of MERGER OR
CONSOLIDATION. CONSOLIDATION, thus it is NOT
SUBJECT TO TAXABLE GAINS
Note: Although in a Merger, there under Section 40(C)(2)(a) of
is a DISSOLUTION of the ABSORBED the NIRC, as amended by the
CORPORATIONS, there is NO WINDING Train Law.
UP of their affairs, because the
AS TO CONSTITUENT CORPORATE EXISTENCE
SURVIVING CORPORATION AUTOMATICALLY
CORPORATIONS ●​ The constituent corporations
acquires all their RIGHTS,
 shall become a SINGLE AS TO CREDITORS ●​ The CREDITORS of a
CORPORATION. CORPORATION CANNOT PREVENT
●​ GR: The SEPARATE EXISTENCE of its MERGER or CONSOLIDATION
the constituents SHALL CEASE, with another even if the
EXCEPT: that of the SURVIVING SURVIVING or NEW CORPORATION
or CONSOLIDATED CORPORATION. is NOT AS ACCEPTABLE a DEBTOR
●​ The ABSORBED or CONSTITUENT as the ABSORBED CORPORATION
CORPORATIONS are IPSO FACTO [CAMPOS].
DISSOLVED by OPERATION OF LAW ●​ ANY CLAIM, ACTION or
[SEC Opinion, July 16, 1981]. PROCEEDING PENDING by or
AGAINST any of the
ASSETS AND LIABILITIES CONSTITUENT CORPORATIONS may
●​ There is NO LIQUIDATION of be PROSECUTED by or AGAINST
the ASSETS of the DISSOLVED the SURVIVING or CONSOLIDATED
CORPORATIONS [CAMPOS]. CORPORATION; and
●​ The SURVIVING or the ●​ The RIGHTS of the creditors
CONSOLIDATED CORPORATION or LIEN upon the property of
shall POSSESS ALL THE RIGHTS, any of each constituent
PRIVILEGES, IMMUNITIES, corporation SHALL NOT BE
POWERS, and FRANCHISES of IMPAIRED by such merger or
each constituent corporation consolidation.
and the PROPERTIES shall be
deemed TRANSFERRED to and MERGERS/CONSOLIDATION ON ●​ Because there is NO LEGAL
vested in the surviving or EMPLOYEES BREAK by the ACT OF MERGING,
consolidated corporation CONSOLIDATING, it is logical
without further act or deed. to expect that the
●​ The SURVIVING or the CONTRACTUAL RIGHTS OF
CONSOLIDATED shall be subject EMPLOYEES and the EXISTING
to ALL THE DUTIES and COLLECTIVE BARGAINING
LIABILITIES of the DISSOLVING AGREEMENT, if any, would have
CORPORATIONS to be ABSORBED BY THE
SURVIVING or CONSOLIDATED
 corporation
●​ However, SC has MADE CONTRARY
RULINGS.

RULE ON AUTOMATIC
ASSUMPTION/ABSORPTION DOES NOT
IMPAIR the RIGHT OF AN EMPLOYER to
TERMINATE THE EMPLOYMENT of the
ABSORBED EMPLOYEES for a LAWFUL or
AUTHORIZED CAUSE or the RIGHT OF AN
EMPLOYEE to RESIGN, RETIRE, or
OTHERWISE sever his employment,
WHETHER BEFORE or AFTER the MERGER,
subject to EXISTING CONTRACTUAL
OBLIGATIONS. (The Philippine
Geothermal Inc. Employees Union vs.
Unocal Philippines, Inc, September
26, 2016)