MERGER BY ACQUISITION: SOME LEGAL ASPECTS Are you a business owner seeking to increase your market share, to develop your business or tackle a challenge of the market? Merger by acquisition may be the right answer for the future of your business.

The general framework for merger in Romania is the Law no. 31/1990 on companies. According to the legal provisions, the merger by acquisition is an operation whereby the acquired company is dissolved, without going through liquidation, and its patrimony is transferred to the acquiring company. The shareholders of the acquired company, which ceases to exist as a result of the merger, receive shares in the acquiring company and, as the case may be, an amount of 10% of the par-value of the shares allotted. Each company shall decide on the merger in compliance with the conditions for modification of the Articles of Incorporation thereof.

Please find here below some legal effects of merger, without insisting on the stages of the merger by acquisition as they are not very different from what we can find in Europe, especially in France.

THE LEGAL EFFECTS

CONTRACTS : As a rule, the transfer of the complete patrimony of the acquired company towards the acquiring company results in the lawful transfer, with no other formalities, of the contracts as well. To this effect, the acquiring company shall particularly take upon:
  • all contractual obligations of the acquired company;
  • all guarantees granted on a contractual and legal basis;
  • all contractual and legal liability arising from the contracts concluded;
  • all off-balance-sheet commitments of the acquired company;
  • payment of delay penalties and damages arising from the contracts of the acquired company.
This rule does not apply to contracts concluded «intuitu personae» ruling out the transfer / assignment of the contracts or requiring the other party’s agreement for such transfer / assignment.

If the companies with which the acquired company has concluded contracts go bankrupt, the contracts cease to exist. Thus, there should be no contract to be transferred. In this case, the acquired company owns only receivables to be recovered and the VAT pertaining thereto.


THE CREDITORS :

After the publication of the merger project, creditors having uncontested, liquid receivables that are prior to the publication date of the merger project but not enforceable at such date and which enforceability may be at risk because of the merger, may object thereto within 30 days from the date of publication of the merger project in the Official Gazette.

The National Trade Register Office shall send to the National Tax Agency, within 3 days from the submission of the merger project, a notice regarding the submission of such project. This procedure allows the Tax Agency to object to the merger, if the above conditions are met.

It must be noted that an opposition shall not result in the suspension of the merger. Though, if such claim is allowed the debtor or, as the case may be, the company having taken upon the rights and obligations of the debtor company (if the merger came into effect) shall have to pay the debt immediately or within a term that is to be determined by taking into account the value of the debt and the liabilities of the debtor or, as the case may be, of the company having taken upon the rights and obligations thereof.

LITIGATIONS: The acquiring company shall lawfully acquire (as an effect of the merger) the active procedural capacity of the acquired company. Therefore, the acquired company shall replace the acquired company in the litigations the later may be involved in.

NULLITY : The nullity of the merger may be declared within 6 months from the date of entering into thereof, whether such nullity is relative or absolute. The merger can be declared null and void only by means of a court’s decision. The merger can no longer be declared null (notwithstanding the reason) if the 6-month term since entering into has passed and it becomes irreversible.