Merger & Consoldation

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Appraisal Right
Sections 75 – 79
Sections 80 - 85
 A corporation that purchases the assets of another will
not be liable for the debts of the selling corporation,
provided the former acted in good faith and paid
adequate consideration for such assets, except when
any of the following circumstances are present:
1. Where he purchaser expressly or impliedly agrees
The Rule to assume the debts
2. Where the transaction amounts to a consolidation
or merger of the corporation
3. Where the purchasing corporation is merely a
continuation of the selling corporation
4. Where the transaction is fraudulently entered into
in order to escape liability for those debts.
 A merger is a union whereby one or more existing
corporations are absorbed by another corporation
Merger that survives and continues the combined
business.
A Corp. + B Corp. = A Corp.
 A consolidation is the union of two or more entities
to form a new entity called the consolidated
Consolidation corporation.
A Corp. + B Corp. = C Corp.
 1. The board of each corporation draws up the plan
for merger or consolidation. Such plan must
include any amendment, if necessary, to the
articles of incorporation of the surviving
Steps and/or corporation, or in case of consolidation, all the
statements required in the articles of incorporation
Procedure of a corporation.
*Plan for merger or consolidation must be
approved by Majority of the BOD/BOT of the
constituents corporations.
 2. Submission of plan to stockholders or members
of each corporation for approval. A meeting must
be called and at least 21 days notice must be sent
Steps and/or to all stockholders or members. A summa of the
plan must be attached to the notice. Vote of 2/3 of
Procedure the members or of stockholders representing 2/3
of the OCS will be needed.
*Appraisal right must be respected.
 3. Execution of the formal agreement, referred to
as the articles of merger or consolidation. These
Steps and/or take the place of the articles of incorporation of
the consolidated corporation, or amend the
Procedure articles of incorporation of the surviving
corporation.
Steps and/or 4. Submission of said articles of merger or
consolidation to the SEC for approval.
Procedure
 5. If upon investigation, the SEC has reason to
believe that the proposed merger or consolidation
Steps and/or is contrary to or inconsistent with the provisions of
the Revised Corporation Code or existing laws, it
Procedure shall set a hearing to give the corporations
concerned the opportunity to be heard.
Steps and/or 6. Issuance of certificate of merger or
consolidation.
Procedure
 (a) The constituent corporations shall become a
Effect of single corporation which, in case of merger, shall
be the surviving corporation designated in the plan
Merger or of merger; and, in case of consolidation, shall be
Consolidation the consolidated corporation designated in the
plan of consolidation;
 Effect of (b) The separate existence of the constituent
Merger or corporations shall cease, except that of the
surviving or the consolidated corporation;
Consolidation
 (c) The surviving or the consolidated corporation
Effect of shall possess all the rights, privileges, immunities,
Merger or and powers and shall be subject to all the duties
and liabilities of a corporation organized under this
Consolidation Code;
 (c) The surviving or the consolidated corporation
Effect of shall possess all the rights, privileges, immunities,
Merger or and powers and shall be subject to all the duties
and liabilities of a corporation organized under this
Consolidation Code;
 (d) The surviving or the consolidated corporation
shall possess all the rights, privileges, immunities
and franchises of each constituent corporation;
and all real or personal property, all receivables
Effect of due on whatever account, including subscriptions
Merger or to shares and other choses in action, and every
other interest of, belonging to, or due to each
Consolidation constituent corporation, shall be deemed
transferred to and vested in such surviving or
consolidated corporation without further act or
deed; and
 (e) The surviving or consolidated corporation shall
be responsible for all the liabilities and obligations
of each constituent corporation as though such
surviving or consolidated corporation had itself
Effect of incurred such liabilities or obligations; and any
pending claim, action or proceeding brought by or
Merger or against any constituent corporation may be
Consolidation prosecuted by or against the surviving or
consolidated corporation. The rights of creditors or
liens upon the property of such constituent
corporations shall not be impaired by the merger
or consolidation.
Merger & Consoldation
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Appraisal Right
Sections 75 – 79
Sections 80 - 85
Appraisal • Appraisal right means that a stockholder
who dissented and voted against the
Right proposed corporation action, may choose to
get out of the corporation by demanding
payment of the fair market value of his
shares.
 1. In case any amendment to the articles of
Four Instances incorporation has the effect of (a)
changing or restricting the rights of any
of Appraisal stockholder or class of shares, (b)
Right authorizing preferences in any respect
superior to those of outstanding shares of
any class, (c) extending or shortening the
term of corporate existence.
Four Instances 2. In case of sale, lease, exchange,
transfer, mortgage, pledge or other
of Appraisal disposition of all or substantially all of
Right the corporate property and assets as
provided in the Code.
Four Instances
of Appraisal 3. In case of merger or consolidation
Right
Four Instances
4. Investment of funds in another
of Appraisal corporation or business or for any other
Right purpose other than its primary purpose.
 In a close corporation, any stockholder of a
close corporation may, for any reason, compel
Close the said corporation to purchase his shares at
their fair value, which shall not be less than
Corporation their par or issued value, when the
corporation has sufficient assets in its books to
cover its debts and liabilities exclusive of
capital stock.
Sec. 81 The dissenting stockholder who votes against a
proposed corporate action may exercise the right of
How right is appraisal by making a written demand on the
corporation for the payment of the fair value of shares
exercised held within thirty (30) days from the date on which the
vote was taken: Provided, That failure to make the
demand within such period shall be deemed a waiver
of the appraisal right. If the proposed corporate action
is implemented, the corporation shall pay the
stockholder, upon surrender of the certificate or
certificates of stock representing the stockholder’s
shares, the fair value thereof as of the day before the
vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
Sec. 81 If, within sixty (60) days from the approval of the corporate
action by the stockholders, the withdrawing stockholder
and the corporation cannot agree on the fair value of the
How right is shares, it shall be determined and appraised by three (3)
disinterested persons, one of whom shall be named by the
exercised stockholder, another by the corporation, and the third by
the two (2) thus chosen. The findings of the majority of the
appraisers shall be final, and their award shall be paid by
the corporation within thirty (30) days after such award is
made: Provided, That no payment shall be made to any
dissenting stockholder unless the corporation has
unrestricted retained earnings in its books to cover such
payment: Provided, further, That upon payment by the
corporation of the agreed or awarded price, the stockholder
shall forthwith transfer the shares to the corporation.
Sec. 82
Effect of From the time of demand for payment of the fair
value of a stockholder’s shares until either the
demand and abandonment of the corporate action involved or
the purchase of the said shares by the corporation,
termination of all rights accruing to such shares, including voting
and dividend rights, shall be suspended in
right accordance with the provisions of this Code,
except the right of such stockholder to receive
payment of the fair value thereof: Provided, That if
the dissenting stockholder is not paid the value of
the said shares within thirty (30) days after the
award, the voting and dividend rights shall
immediately be restored.
 The rule is that the dissenting stockholder who
demands payment of his shares is no longer
allowed to withdraw from his decision.
When right to Exceptions:
payment ceases 1. The corporation consents to the withdrawal
2. The proposed corporate action is disapproved
by the SEC where the approval is necessary
3. The proposed corporate action is abandoned or
rescinded
4. The SEC determines that such stockholder is not
entitled to appraisal right.
Who bears The rule is that the corporation shall bear the
costs of costs of appraisal.
However, if the ascertained fair value by the
appraisal appraisers is approximately the same as the
price which the corporation may have offered
to pay the stockholder, in which case they
shall be borne by the stockholder.
 Within ten (10) days after demanding payment for
Sec. 85 shares held, a dissenting stockholder shall submit the
certificates of stock representing the shares to the
Notation on corporation for notation that such shares are dissenting
shares. Failure to do so shall, at the option of the
Certificates corporation, terminate the rights under this Title. If
shares represented by the certificates bearing such
notation are transferred, and the certificates
consequently cancelled, the rights of the transferor as a
dissenting stockholder under this Title shall cease and
the transferee shall have all the rights of a regular
stockholder; and all dividend distributions which would
have accrued on such shares shall be paid to the
transferee.
Summary a. The dissenting stockholder shall make a
written demand on the corporation within 30
days after the date on which the vote was
taken for payment of the fair value of his
shares.
Summary b. The withdrawing stockholder must submit
his shares to the corporation for notation of
being dissenting stockholder within 10 days
from his written demand.
 c. All rights accruing to such shares shall be
Summary suspended from time of demand for payment
of the fair value of the shares until either the
abandonment of the corporate action.
 d. The dissenting stockholder shall be entitled
Summary to recover the payment of the vote was taken,
excluding any appreciation or depreciation in
anticipation of such corporate action.
 e. The payment must be made by the
corporation within 30 days from the
determination by the Board of Appraisers of
the fair value of the shares otherwise the
Summary rights of the dissenting stockholders will be
restored. The Board of Appraisers consists of
person appointed by the corporation, a person
appointed by the dissenting stockholder and
the third person appointed by the two
appointees. The decision of majority of the
Board of Appraisers on the determination of
fair value of shares shall prevail.
Summary f. Stockholder must transfer his shares to the
corporation upon payment by the corporation.
Summary g. Upon payment of the fair value of shares, all
the rights of dissenting stockholders are
terminated and not merely suspended.
Summary h. There must be unrestricted retained
earnings for the exercise of appraisal right to
prosper.