STATUTORY MERGERS IN THE DUTCH CARIBBEAN
A notarial deed is required
A statutory merger involves at least two legal entities. The law uses the terms acquiring and disappearing legal entity. The law specifies that only legal entities having the same legal form may merge, specifying that a BV (closed limited liability company) and a NV (public limited liability company) are considered to be the same. Statutory mergers usually take place within a group of companies.
Essential for a statutory merger is that all assets and liabilities of one legal entity transfer as a whole to another legal entity. An actual transfer does not therefore take place.
A statutory merger has some additional legal consequences. Firstly, the disappearing legal entity ceases to exist. Liquidation or formal dissolution does not occur. Secondly, the shareholders of the disappearing legal entity become shareholders of the acquiring entity by operation of law. The nominal value of the shares involved depends on their shareholding and the exchange ratio. The statutory merger replaces the shares held in the disappearing legal entity with shares of the acquiring legal entity. Generally the acquiring entity issues shares.
There are exceptions to this rule if the shares of the disappearing entity are held directly or indirectly for the account of the acquiring legal entity. In the case of a parent-subsidiary merger the shares are canceled, without shares in the acquiring entity being issued. This is logical: it is not the intention of the merger that the acquiring legal entity obtains shares in its own equity which would be the case if shares in the acquiring entity were to be issued. With respect to a sister merger, it is optional whether shares in the acquiring entity are issued.
The merger process may be divided in three parts. The first is the proposal to merge. The proposal to merge must be initiated by the managing boards of the merging entities.
The second part concerns the decision by both entities to merge. The general meeting of shareholders of the merging entities must adopt a resolution to merge. The acquiring legal entity may also have the decision to merge taken by its managing board.
Once the second part has been completed the statutory merger is implemented by executing a deed of merger before a civil law notary. The parties to the deed of merger are the merging legal entities.
Karel Frielink
Attorney (Lawyer) / Partner
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