Draft Terms of Merger and Public Notice to Creditors

The merger process begins with the draft terms of merger prepared by the Boards of Directors of the companies involved in the merger, which must be submitted to the Trade Register for registration within one month of signature. The draft terms of merger must be accompanied by an auditor’s statement to the merging companies concerning the grounds for setting the merger consideration and the distribution of the consideration, and whether the merger is conducive to compromising the repayment of the acquiring company’s debts. If all the shareholders of the merging companies agree to the same, or if the merger is a subsidiary merger or the merger of subsidiaries, an auditor's opinion on whether the merger is conducive to compromising the repayment of the acquiring company's debts is sufficient.

A merging company, shall submit an application to the registration authority regarding the issuance of a public notice to the company’s known creditors within time frame set out in the Companies Act. If the merger is a subsidiary merger or a merger of subsidiaries, the application for the issuance of a public notice may be made by the acquiring company. A public notice must also be issued on the application of the acquiring company if, according to the auditor’s statement, the merger is likely to conducive to compromising the repayment of the acquiring company's debts. The application for the issuance of the public notice must be made within one month of the registration of the draft terms of merger or the merger shall lapse. The creditors, whose receivables have arisen before the registration of the draft terms of merger, and certain other creditors under the Companies Act are entitled to object the merger. If a creditor objects to the merger, the merger may lapse.  A company may suspend the lapsing by proving that it has brought an action to confirm that the creditor has received payment or security for its receivables.