Mergers and divisions of companies
Mergers of companies
The common forms of company restructuring are mergers or divisions of companies.
The methods and reasons for company mergers can vary, including:
- Merging similar subsidiaries to reduce overall administrative burden
- Merging with a competitor to improve market position
- Merging with a company whose products/services complement the existing portfolio or increase their added value
Generally, a merger leads to cost savings, increased operational efficiency, and market share growth.
In a merger, one company (the merging company) merges with another company (the receiving company), and as a result of the merger, the merging company is considered dissolved. Companies can also merge in a way that establishes an entirely new company during the merger process, in which case both of the previous companies are considered dissolved. During a merger, the assets and liabilities of the merging company are transferred to the receiving company. The transfer of assets in the course of a company merger is not subject to VAT.
The essential steps in the merger of companies are:
- Signing of a notarized merger agreement by the boards of the merging companies
- At least 2 weeks later, a decision by the shareholders to approve the merger agreement (merger decision)
- At least 1 month later, submission of the registration application to the Business Register for recording the merger
- Publication of a notice about the merger in the Official Announcements
- Changes in other registers (land register, traffic register, etc.)
Carrying out a merger requires thorough planning and precise execution, both in preparing documents and adhering to various deadlines.
Division of companies
The methods and reasons for company divisions can also vary, including:
- Separation of company units based on the field of activity, location, etc.
- Preparing the company or a part of it for sale
- Separating the company’s real estate and other fixed assets, as well as work tools, from operational activities to mitigate various business risks
- Dividing the company among shareholders when their wishes, expectations, or capabilities regarding the company’s future development are too different; division allows shareholders to proceed with their own business in their chosen manner and direction
The result of a division is typically companies focused on their specific field of activity or target market, independent economic units suitable for sale, or restructured companies with a new shareholder structure but a clear business plan.
Division can occur in two ways: through splitting or separation.
In a split, the dividing company transfers all its assets and liabilities to the acquiring companies, which can be either existing companies or new ones created during the division. The dividing company ceases to exist in the case of a split.
In a separation, the dividing company transfers only part of its assets and liabilities to the acquiring companies, which can also be either existing companies or new ones created during the division.
Since the transfer of assets during the division is not subject to VAT, division is especially useful for preparing a company or part of it for a planned sale, as well as for simply dividing the company among shareholders.
The essential steps in the division of companies are:
- Signing of a notarized division agreement by the boards of the companies involved in the division
- At least 2 weeks later, a decision by the shareholders to approve the division agreement (division decision)
- At least 1 month later, submission of the registration application to the Business Register for recording the division
- Publication of a notice about the division in the Official Announcements
- Making necessary changes in other registers (land register, traffic register, etc.)
Executing a division also requires careful planning and competent execution. With our practical experience and expertise, we can assist you in this process.
