Corporate Merger

The Commercial Act and special statutes restrict mergers in the following cases.

A merger by absorption is a form in which, when two companies combine, one company continues to exist while the other is dissolved and ceases to exist.

In this process, the shareholders, assets, rights, and obligations of the dissolving company are all transferred to the surviving company.

A merger by establishment is a form of merger in which all of the existing companies are extinguished, and their rights and obligations are transferred comprehensively to a newly established company.

The newly established company succeeds to all of the assets, liabilities, rights, and obligations of the companies subject to the merger.

A small-scale merger is a method of merger that may proceed without shareholders' meeting procedures where the number of shares that the merging company will exchange with the shareholders of the merged company is 10% or less of the total number of issued shares.

In general, a merger requires holding a shareholders' meeting and purchasing shares from dissenting shareholders at a fair price, but a small-scale merger does not involve such procedures, so the merger process is simpler.

A short-form merger is a system under which, where all shareholders of the extinguished company consent to the merger, or where the surviving company already owns 90% or more of the total number of issued shares of the extinguished company, the merger procedure proceeds with board of directors approval instead of approval by the extinguished company's shareholders' meeting.

Once a merger agreement is executed between the representative bodies of the companies seeking to merge, the merger procedure proceeds in accordance with that agreement.

If a limited partnership company merges, there are no separate provisions on the matters to be stated in the merger agreement, so the agreement may state the following matters.

However, where a limited partnership company merges with a stock company or a limited company, a merger agreement must be prepared.

If a limited partnership company carries out a merger, the consent of all members is required. (Commercial Act Articles 269 and 230)

If a new company is established through a merger by establishment, each company appoints incorporation committee members in the merger resolution, and the appointed incorporation committee members carry out the work relating to incorporation, such as preparing the articles of incorporation. (Commercial Act Article 175 (1))

Within 2 weeks from the date on which the merger resolution is made, the company must give public notice requiring creditors who have objections to the merger to submit their objections within a fixed period, and must separately notify known creditors of this.

This period must be at least one month.

If a creditor does not submit an objection within the period, the creditor is deemed to have approved the merger.

For a creditor who has submitted an objection, the company must make repayment, provide reasonable security, or entrust property to a trust company for the purpose of providing security. (Commercial Act Articles 269 and 232 (3))

To carry out a corporate merger smoothly, it is first necessary to clearly identify the purpose and form of the merger.

Next, a response strategy must be prepared that covers the integration of business divisions, the adjustment of governance structure, and the protection of shareholder interests, as well as personnel and labor, financial, and legal issues.

It is also important to build trust by maintaining steady communication with the relevant stakeholders and sharing information transparently throughout the entire merger process.

A corporate merger brings various benefits, such as not only an increase in the scale of the company but also the securing of technological capabilities, the strengthening of market position, and improved management efficiency, but disadvantages also exist, so a careful approach is required.

In corporate merger cases, our firm has experts from each field, such as certified public accountants, tax accountants, and labor attorneys, work together to conduct due diligence on the target company of the merger and review whether there are any legal risks.

In addition, through preparing contracts on behalf of clients at the time of the merger and reviewing special terms, our firm prevents in advance legal issues that may arise for the client.

If you are experiencing difficulties with a corporate merger, please feel free to request assistance from a mergers and acquisitions attorney at Daeryun Law Firm at any time.