Merging companies: step-by-step actions – Valen


In order to create a common structure and merge several companies into one enterprise, the legislation provides for a reorganization procedure. It is carried out in the form of a merger or acquisition. In the international market, such mergers are called M&A transactions, as a result of which the business reaches a qualitatively new level.

As part of the support of M&A transactions, we:

  • We will develop an action strategy.
  • We will find and evaluate the goals for a merger or acquisition, select an object for the transaction.
  • We will conduct Due Diligence – a comprehensive study of the company acting as the object of the M&A transaction.
  • Evaluate the assets and the business as a whole.
  • We will prepare the documents for the transaction and its implementation. The legal consulting team will be in touch.
  • We will monitor and evaluate the results of the transaction.

In this article, we will take a detailed look at the procedure for merging several legal entities into one company.

Mergers of firms: features

The main work in conducting M&A transactions falls on accountants and the financial service as a whole. The fact is that the reorganization involves monetary succession, which consists in a special procedure for the formation of the authorized capital. At the same time, reorganized companies stop working.  

It is important to note that Russian legislation allows for the reorganization of different legal forms into one company. For example, LLC and JSC are subject to merger. It is important to be guided by the rules of the Civil Code of the Russian Federation and relevant laws. It is important to take into account that all rights in the merger are transferred in full to the newly created company.

Few people know that all rights and obligations are transferred to the new organization in the order of universal succession in the form in which they existed before the change of the Unified State Register of Legal Entities. As for responsibilities, the newly created company must:

  • Pay tax obligations.
  • Pay fines.
  • Pay penalties.
  • Warn counterparties about the merger and continue to fulfill obligations to them.
  • Pay salaries to employees and continue employment relations until an entry is made in the Unified State Register of Legal Entities.

Do I need to draw up a transfer certificate?

A transfer act is an official document that is drawn up before the process of reorganization of legal entities. Contains provisions on succession for all obligations of the closed company in respect of all creditors and debtors. It is important to take into account that it is the transfer act and the accompanying documentation that reflects the distribution of assets and liabilities between the reorganized enterprises.

It should be noted that on May 5, 2014, amendments were made to Article 57 of the Civil Code of the Russian Federation, which excluded the obligation to draw up a transfer act when merging companies. However, the laws “On Limited Liability Companies” and “On Joint-Stock Companies” still contain similar provisions. Of course, the Civil Code has a dominant position, but we advise you to draw up a transfer act in order to reduce the risks of problems with counterparties. In addition, the document makes it possible to clarify controversial points regarding rights and obligations.

As for the methods of registration of the document, it is most often compiled in the form of an accounting balance sheet. Transcripts are attached to it, which can be taken from inventory lists. The document also needs to include data on the transfer to the newly created legal entity of all the rights and obligations of the reorganized firms that arose between the date of approval of the transfer act and the date of entry into the Unified State Register of the liquidation of the reorganized enterprises.

Documents for conducting mergers and acquisitions

  • Statement of the founders on the creation of a new organization in the form of P12001
  • Documents for the establishment of a new legal entity. It is advisable to prepare two copies.
  • Payment document on payment of the state fee.
  • Confirmation of publication in the “Bulletin of State Registration” or copies of letters addressed to creditors.
  • Merger agreement.
  • The accession agreement, which reflects the procedure and timing of the transaction, as well as data on the general meeting of participants of the reorganized companies. The document must also contain certain changes in the constituent documents of the company to which the new legal entity will join. This also includes information about the names of the companies to be joined, the conditions for their entry into business, the size of the authorized capital of the legal entity, specific actions for each of them, the size of the shares of the companies to be joined.

Documents are usually submitted in three ways: by mail, through the website of the tax service or the MFC. The Federal Tax Service will accept documents at the location of the legal entity to which the new companies are attached.

As a rule, the duration of registration actions is about 6 days. After that, you can get an extract from the Unified State Register of Legal Entities and other documents in person or by proxy.

Registration of relations with employees and creditors

Article 75 of the Labor Code of the Russian Federation does not contain grounds for dismissal of employees during the reorganization of companies. The procedure, in this case, is as follows:

  • Notification of employees two months or earlier before the end of the reorganization procedure.
  • If an employee refuses to work in a new company, the employment contract is terminated on the basis of part 6 of Article 77 of the Labor Code of the Russian Federation.

As for the counterparties, you should make sure that there are no provisions in the contracts concluded with them that prevent reorganization. This may relate to the conditions on the bank’s right to demand an early repayment of the loan. As for insurance premiums, the newly created company should inherit these contractual relations. Accordingly, the new legal entity should use the database of legal representatives.

It is important to take into account that many counterparties will want to renew contracts due to changed details.

How to submit reports when merging companies

Before the date of entry into the Unified State Register of Data on the termination of the activities of reorganized companies and the creation of a new company, it is necessary to draw up final accounting statements. All operations are carried out using the old details until the date of completion of the reorganization. After the final reporting is completed, the accounts are closed taking into account profits and losses.

Before forming the final reporting, you need to check:

  • The decision of the founders to reorganize in the form of a merger.
  • Merger agreement.
  • Transfer certificate with appendices.
  • The composition of the property and its assessment.
  • Audit results.
  • Acts of inventory of property and obligations.
  • Primary accounting documents on material values.
  • Transcripts of accounts payable and receivables and settlements with budgets and funds.

The reporting period for reporting is the period from January 1 of the year in which the state registration of the reorganized enterprise was made. The new accounting statements, which must be submitted after the reorganization, are compiled on the basis of the data of the transfer act and line-by-line consolidation, numerical indicators of the final accounting statements of the reorganized firms.

The algorithm of merging companies

The average duration of a company merger is from 3 to 12 months. During this time, it is necessary to take into account the interests of not only the owners of the reorganized legal entities, but also their creditors, clients, to deal with taxes and accounting, to pay off debts to off-budget funds.

The decision on the merger is made by the owners. The location of the company does not affect this process. The procedure can be carried out by firms located in different regions.

The order includes:

1. The negotiation stage.

2. Conclusion of an agreement on reorganization by merger. The decision to sign such an agreement is made by the companies independently of each other. Usually, the founders sign a special protocol, which is put on the agenda of an extraordinary meeting of the owners. The document fixes the proposals of the founders and shareholders on the creation of a special commission that deals with mergers or acquisitions, establishes the procedure for transferring the property of legal entities, its rights and obligations.

3. Choosing the place of tax registration. Firms involved in a merger or acquisition may be located in different regions. A new company can be registered in any of them or choose a third region to pay taxes and interact with the state.

4. Notify the tax service about the procedure. To do this, a notification letter is drawn up in a special form.

5. Repayment of all debts or the demand for their payment from debtors. All relations under the concluded contracts are transferred to the new company. If the debts are not paid on time, creditors can declare their preliminary repayment after the publication of the announcement of the merger in the “Bulletin of State Registration” – this is a special magazine in which legal entities and entrepreneurs report on reorganization, liquidation and bankruptcy. Otherwise, the debt on obligations is issued to the newly created company.

6. Entering into new contracts with employees or changing the terms of existing employment contracts. Moreover, an employee may not agree to work in a new company.

7. Publication of a message in the “Bulletin of State Registration” about the procedure being carried out. This should be done once a month.

8. A transfer act is drawn up, on the basis of which assets and property are transferred to the legal successor of the companies. To do this, you also need to create a commission.

9. Preparation of a package of documents and its submission to the registration authority after 30 days from the date of the last publication in the media about the beginning of the merger.

10. Procedure for entering information about a new company in the Unified State Register of Legal Entities after its registration.

11. Transfer of employees of the merged companies to a new organization without prejudice to their rights in accordance with labor legislation.

12. The day before making an entry on the creation of a new legal entity, all participating companies form final accounting statements with the closing of profit and loss accounts. By the date of registration of a new legal entity, all the data of the transfer act are transferred to the accounting statements, called the introductory.

Objectives of the merger

As we noted earlier, when conducting M&A transactions, the new company has certain rights and obligations. The firm receives them from each participant of this procedure. Often a merger becomes an alternative to liquidation. However, with professional management, M&A transactions become an excellent tool for business development. As a result of the procedure, the assets of enterprises are combined and the shares of their founders in the new company are distributed.

The merger of companies gives:

  • Growth of total assets.
  • Cost savings due to lower costs.
  • Reduction of competition in the market.
  • An alternative to bankruptcy during the crisis.

Advantages and disadvantages of merging

The main advantages include:

  • The growth of positions in the market due to the entry into new regions.
  • Increasing the range of services and customer base.
  • Combining technologies, personnel and resources.

The main disadvantages are:

  • The need for stricter control over the actions of the companies being absorbed.
  • The presence of possible conflicts among the founders.
  • High costs for the implementation of the procedure.
  • Loss of profitable customers and quality of service.
  • The risk of leaving qualified employees.
  • Change in corporate culture.

VALEN specialists have extensive experience in conducting M&A transactions among various companies. To find out more, use the advice of our professionals. We will study all the documents and provide an optimal reorganization plan.

Question and answer

Is it possible to deduct VAT when merging?

The new firm can deduct VAT, which the predecessor company did not have time to deduct before the merger. The right must be confirmed by an invoice and primary transaction documents. It is also important that the goods are registered, and the predecessor handed over the documents confirming the payment. The company can also deduct VAT, which the legal representatives accrued upon receipt of the advance payment after the sale of the prepaid goods or after the termination of the transaction and the refund of the advance.


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