All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

The term merger refers to the operation by which two or more companies decide to come together to form only one. There are two forms of mergers.
In the first case, one of the two companies absorbs the other: this is a merger by absorption, a preferred method of restructuring corporate groups. The merger by absorption can be carried out in either direction: the parent company or the subsidiary can  …

Typology of mergers

BERTRE and JEANTIN, Acquisitions and mergers of commercial companies, Litec, 1991; ROUTIER, Mergers of commercial companies, Prolegomena for a new law of consolidations, LGDJ, 1994; ATTALI and LEVY, The practice of mergers, ed. Foucher, 1995; CHADEFAUX, Mergers of companies, legal and tax regimes, Groupe Revue Fiduciaire, 8th ed., 2016; LAGRANGE, Legal nature of company mergers, Thesis Paris II, 1999; VILLEMOT, The new definition of mergers and spin-offs, JCP N 2002, 47, 1641.

The term merger refers to the operation by which two or more companies decide to come together to form only one. There are two forms of mergers.

In the first case, one of the two companies absorbs the other: this is a merger by absorption, a preferred method of restructuring corporate groups. The merger by absorption can be carried out in either direction: the parent company or the subsidiary can be either the absorbing or the absorbed company .

In the second case, the existing companies transfer all their assets to a company created for this purpose before disappearing: this is a merger by creation of a new company. In this scenario, the parties must comply with the constitutive rules of the chosen corporate form . This lack of flexibility, combined with the higher tax cost compared to a merger by absorption, relegates this mode of restructuring to the background .

The operation results in the dissolution without liquidation of the companies that disappear and the universal transfer of their assets and liabilities to the beneficiary companies, in the state they are in on the date of the definitive completion of the operation. It simultaneously results in the acquisition, by the partners of the disappearing companies, of the status of partners in the beneficiary companies, under the conditions determined by the merger agreement . However, this transfer cannot be equated with a contribution of business assets . Finally, the operation consisting of a transfer of real estate assets to another company, accompanied by the payment of social liabilities and the reimbursement of shareholders' contributions and followed by the allocation by the ordinary assembly of any surplus assets to other cooperatives or unions of cooperatives and to works of general or professional interest, does not constitute a merger .

Paris, 28 December 1992, LawLex202300002856JBJ, for an example of a parent company being absorbed by its subsidiary.

However, the hypothesis is encountered in the banking sector when it comes to merging several regional banks, See Cass. com., 25 September 2019, LawLex202200009730JBJ; 17 July 2011, LawLex202200009725JBJ; 13 September 2011, LawLex202200009729JBJ.

Cass. com., 9 November 2010, LawLex202200001376JBJ; Dr. sociétés 2011, comm. 1, obs. COQUELET; RTD civ. 2011, 139, obs. GAUTIER; Defrénois 2011, 185, obs. RANDOUX, holding that the merger by absorption, which results in the dissolution without liquidation of the absorbed company and the universal transfer of its assets and liabilities to the absorbing company and does not involve the allocation to the absorbed company of ownership interests within the absorbing company, does not constitute a contribution of business assets made in violation of the preemption clause granted on the leased premises in the event of sale, exchange, or contribution of business assets.

Cass. com., 3 November 1975, LawLex202200009496JBJ.

Company Law (en cours)

221. Typology of mergers(1)

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221. Typology of mergers(1)

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