Starting, running and closing a business - Mergers of companies or selling a business

Last update 6 November by the Ministry of Economic Development and the Ministry of Justice

Forms of merger

Companies can merge in two ways:

  • by setting up a new company (merger of equals);
  • by one company being acquired by one or more others (merger by absorption).

Companies in liquidation that have started the distribution of assets are not allowed to participate in a merger

 

Merger Procedure

The merger procedure is divided into three stages.

Stage 1

During the first stage, the directors of the merging companies must draw up:

  • draft terms of merger (2501 ter of the Civil Code), which must in all cases show:
    1. the type, name or company title and registered office of the merging companies;
    2. the memorandum of association of the new company resulting from the merger or of the acquiring company, with any amendments arising out of the merger;
    3. the exchange ratio of the company shares or units as well as any cash settlement;
    4. procedures for allocating shares or units of the company resulting from the merger or of the acquiring company;
    5. the date from which the shares or units are eligible for a share of the profits;
    6. the date from which transactions of the merging companies are entered into the financial statements of the company resulting from the merger or of the acquiring company;
    7. any treatment that may be reserved for particular categories of shareholders and holders of securities other than shares;
    8. any particular benefits to be enjoyed by those responsible for administering the merging companies.
  • the balance sheet of the companies (2501 quater of the Civil Code), according to the rules on the financial statements.
  • A report by the governing body (2501 quinquies of the Civil Code), which explains and justifies the draft terms of the merger and in particular the exchange ratio of shares or units from a legal and financial viewpoint.

During this first stage, one or more experts appointed by the presiding judge of the court from among the auditors must draw up a report on the fairness of the share and unit exchange ratio for each company (2501 sexies of the Civil Code).

 

Stage 2

During the second stage, each participating company adopts the decision on the merger (2502 Civil Code) by approving the relevant draft terms.

Unless otherwise provided for in the memorandum or articles of association, the decision is adopted:

  1. in partnerships with the consent of the majority of shareholders determined according to each of their allotted parts of the profits;
  2. in companies with share capital, in accordance with the rules laid down for amending the memorandum and articles of association by a resolution adopted by an extraordinary shareholders’ meeting.

The 60-day period for objection by creditors begins to run from the date on which the merger resolution is filed for registration in the commercial register (2502 bis of the Civil Code).

Immediately after the conclusion of stage 2), with the approval of the merger resolutions, the Directors may not immediately draw up the instrument of merger. The Directors can only proceed with stage 3), i.e. finalising the instrument of merger and entering it in the register, after 60 days, or after the creditor’s objection has been set aside.

 

Stage 3

During the third stage, the representatives of the participating companies draw up the instrument of merger (2504 Civil Code), which the notary or Directors of the company resulting from the merger or of the acquiring company must in any case file for registration, within 30 days, in the office of the commercial register in the places where the registered office of the companies participating in the merger, the resulting company or the acquiring company is located.

 

Objection by creditors

The merger can only be implemented 60 days after the final entry in the commercial register. Creditors may object to the merger within this period. The court may decide that the merger should go ahead despite the objection of creditors if it considers the reasons for the objection to be unfounded or if the company has provided security.

The merger may also be implemented before the end of the 60-day period in the following cases:

  • if the consent of the creditors in the companies taking part is recorded prior to registration or publication on the company website;
  • if the payment of creditors who have not given their consent, or the deposit of corresponding sums in a bank is recorded, unless an expert’s report is drawn up, for all companies participating in the merger, by a single audit firm which asserts, under its own responsibility, that the financial and asset situation of the merging companies does not warrant the issue of guarantees.

Holders of bonds in the company participating in the merger may also object to the merger, except where the merger is approved by the bondholders’ meeting (Article 2503 bis of the Civil Code).

 

Prohibition against the assignment of shares or units

The company resulting from the merger may not assign shares or units to replace those that the companies hold in the companies participating in the merger, including through trust companies or intermediaries.

The acquiring company may not assign shares or units to replace those that the acquired companies or acquiring companies hold in the companies participating in the merger, including through trust companies or intermediaries.

 

Effects of the merger

The company resulting from the merger or the acquiring company assume the rights and obligations of the merging companies, continuing in all their relations, including procedural relations, prior to the merger.

The merger takes effect when the last of the entries provided for in the deed of merger has been made, but a later date may also be established in a merger by absorption.

A merger by the establishment of a new limited liability company or by absorption into a limited liability company does not release shareholders with unlimited liability from liability for the obligations of the respective merging companies prior to the last of the registrations required for the instrument of merger, unless it is found that the creditors have given their consent.

 

Effects of publication in the commercial register

The following effects (2448 of the Civil Code) arise out of registering the draft terms of merger (2501 ter Civil Code), the merger decision (2501 ter Civil Code) and the instrument of merger (2504 Civil Code) in the commercial register:

  • the instruments indicated can be relied on as against third parties, unless the company proves that the third parties were aware of them before publication;
  • for transactions completed within the 15th day of publication, the instruments cannot be relied upon as against third parties who prove that they were unable to have knowledge of them.

 

Invalidation of a merger

Once the instrument of merger has been registered in accordance with the second paragraph of Article 2504, that instrument may not be ruled invalid. This does not affect the right to compensation for prejudice that may be caused to shareholders or to third parties harmed by the merger.

 

Mergers through leveraged buyouts

This occurs when one of the companies participating in the merger has taken out loans to acquire control of the other and as a result of the merger the latter’s assets become collateral or a source for the repayment of these loans.

In this case, the acts must have additional content:

  • the draft terms of merger must indicate the financial resources from which it is planned to meet the obligations of the company resulting from the merger;
  • the report by the governing body must give reasons justifying the transaction and contain an economic and financial plan indicating the source of the financial resources and a description of the objectives to be achieved;
  • the experts’ report certifies the reasonableness of the information contained in the draft terms of merger;
  • a report by the person in charge of conducting a statutory audit of the accounts of the target company or the acquiring company must be attached to the draft terms.

Provisions concerning the absorption of wholly-owned companies and the absorption of 90%-owned companies do not apply to these particular mergers.

 

Simplified mergers

Absorption of wholly-owned companies

If the merger results in the absorption of one company into another that owns all the shares and units of the former, it is not necessary for the draft terms of merger to contain:

  • the exchange ratio of the company shares or units as well as any cash settlement;
  • procedures for allocating shares or units of the company resulting from the merger or of the acquiring company;
  • the date from which the shares or units become eligible for a share of profits and the report of the governing body report and the experts’ report are not required.

The memorandum and articles of association may also provide that the merger can be decided, through a resolution set out in a public record, by the respective governing bodies instead of the shareholders’ meetings but the provisions on publishing the draft terms of merger and – for the acquiring company – those on the filing of acts in the companies registered office or their publication on the company’s website must be complied with. In any event, shareholders of the acquiring company representing at least 5% of the share capital may always request that the decision to approve the merger by the acquiring company should be taken by the shareholders meeting in accordance with the general rules laid down in the first paragraph of Article 2502 of the Civil Code (link to point 2 of the merger procedure, if applicable)

 

Absorption of 90%-owned companies

Upon merger by absorption of one or more companies in another company which owns at least 90% of their shares or units, if the other shareholders of the acquired company are granted the right to have their shares or units purchased by the acquiring company for a fee determined in accordance with the planned withdrawal criteria, it is not necessary to apply the provisions concerning the preparation of the financial statements, the governing body’s report, the experts’ report and the filing of these acts.

The memorandum and articles of association may provide that the administrative body, in the case of the acquiring company, must decide on this type of merger by means of a resolution resulting from a public deed, provided that:

  • the provisions on the filing of acts are complied with;
  • registration or publication in the commercial register or on the website is carried out, for the acquiring company, at least 30 days before the date fixed for the decision on the merger by the company being acquired

This type of merger is also subject to the rule allowing shareholders of the acquiring company representing at least 5% of the share capital to request that the decision to approve the merger by the acquiring company should be taken by the shareholders meeting in accordance with the general rules laid down in the first paragraph of Article 2502 of the Civil Code.

 

Mergers in which joint stock companies represented by shares are not involved

If the merger does not involve public limited companies and limited partnerships or cooperative joint stock companies, the following are not applicable:

  • the prohibition on companies in liquidation that have started the distribution of assets from participating in the merger (second paragraph of 2501 of the Civil Code);
  • the prohibition on paying more than 10% of the face value of shares on the exchange ratio (second paragraph of 2501 ter);

The following time limits are also halved:

  • the period between registration or publication of the draft terms on the website and the date set for a decision on the merger (fourth paragraph of 2501 ter of the Civil Code), reduced from 30 to 15 days;
  • the period for the filing of copies of the acts at the registered office of the companies participating in the merger or for publication on the website before the decision on the merger (first paragraph of 2501 septies of the Civil Code), reduced from at least 30 to at least 15 days;
  • the period for any objection by creditors (first paragraph of 2503 of the Civil Code), reduced from 60 to 30 days.

 

Documentation required

The document available at the following link:

https://www.mise.gov.it/images/stories/documenti/Fusioni_Scissioni-all-2020.pdf

provides all information on possible examples of mergers and demergers, divided into the stages of draft terms, decision and instrument of merger, with associated arrangements, including those involving other entities (social security, welfare, tax etc.).

 

The competent competition authorities

 

  • IVASS – Istituto per la Vigilanza sulle Assicurazioni (Institute for the Supervision of Insurance)
    Via del Quirinale 21
    00187 Rome
    Tel. +39 06 421331
    email: scrivi@ivass.it
    pec: ivass@pec.ivass.it

 

  • CONSOB (Italian Companies and Stock Exchange Commission)
    Via G. B. Martini, 3
    00198 Rome
    Fax: +39 06 8416703 - +39 06 8417707
    consob@pec.consob.it
    protocollo@consob.it, nei casi in cui non si è in possesso di PEC.

 

Relevant legislation

Civil code

  • Article 2448: Effects of publication in the commercial register
  • Article 2501: Forms of merger
  • Article 2501 bis: Mergers through leveraged buyouts
  • Article 2501 ter: Draft terms of merger
  • Article 2501 quater: Balance sheets
  • Article 2501 quinquies : Report by the governing body
  • Article 2501 sexies : Experts’ report
  • Article 2501 septies : Filing of acts
  • Article 2502: Decision on the merger
  • Article 2502 bis : Filing and registration of the merger decision
  • Article 2503: Objection by creditors
  • Article 2503 bis: Obligations
  • Article 2504: Instrument of merger
  • Article 2504 bis : Effects of the merger
  • Article 2504 ter: Prohibition against the assignment of shares or units
  • Article 2504 quater : Invalidation of a merger
  • Article 2505: Absorption of wholly-owned companies
  • Article 2505 bis: Absorption of 90%-owned companies
  • Article 2505 ter: Effects of publishing acts of the merger procedure in the commercial register
  • Article 2505 quater: Mergers in which joint stock companies represented by shares are not involved.

 

Special cases by way of derogation

  • Bank mergers under Article 57 of the Consolidated Banking Law
  • Private mergers under Article 201 of the Private Insurance Code
  • Listed companies under Article 117 bis of the Consolidation Law on Financial Intermediation (TUF).

 

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