CONTENTS
- 1. Background of the M&A Consulting Request
- - A Merger by Absorption Initiated by the Need for Internal Organizational Restructuring
- 2. M&A Consulting, the Procedure for a Merger by Absorption
- 3. Scope of M&A Consulting Assistance
- - Reviewing FI Investor Rights and Securing Consent
- - Advisory on Merger by Absorption Procedures and Business Combination Reporting
- 4. M&A Consulting Outcome, a Successful Merger by Absorption
- - If You Are Considering a Merger by Absorption
1. Background of the M&A Consulting Request
The client who requested M&A consulting was a digital platform company operating domestic IT-related affiliates.
To resolve the inefficiency of overlapping businesses and workforce operation among the affiliates, with the assistance of an M&A attorney with relevant experience, it was able to successfully address even the procedural risks and the coordination of stakeholders.
A Merger by Absorption Initiated by the Need for Internal Organizational Restructuring
The client was a mid-sized digital platform company operating 3 domestic IT-related affiliates.
Each affiliate operated similar services separately, with personnel and resources dispersed, which led to higher operating costs and delays in decision-making.
In particular, after COVID-19, demand for non-face-to-face services increased sharply, raising the need for rapid decision-making and service integration.
Accordingly, the client conceived a merger-by-absorption strategy to consolidate the existing separate affiliates into a single principal business entity.
However, with interests intertwined, such as securing the consent of the FI investors who had participated in each affiliate, the situation required the assistance of professional M&A consulting.
The client therefore requested M&A consulting from an attorney with extensive practical experience in corporate mergers and acquisitions, seeking to block the legal risks of the restructuring and to pursue a smooth merger process.
2. M&A Consulting, the Procedure for a Merger by Absorption
An absorption-type merger is a procedure in which two corporations merge, after which one corporation survives and the remaining corporation is liquidated and dissolved.
The following are the basic procedures required when carrying out an absorption-type merger.
① Preparation of the merger agreement
This agreement must include the mandatory matters prescribed in Article 523 of the Commercial Act, and it must contain core matters such as the share exchange ratio, the merger date, and the surviving company and the dissolving company.
② Disclosure of the merger agreement
Under Article 522-2 of the Commercial Act, it must be kept available from two weeks before the date of the general meeting of shareholders until the day six months from the merger date.
③ Approval by the general meeting of shareholders
Approval by the general meeting of shareholders is made through a special resolution of the general meeting of shareholders.
However, in the case of a small-scale merger or a simplified merger, it may be replaced by a resolution of the board of directors, but even where the board of directors passes a merger resolution, a procedure for notifying the shareholders of this is required.
④ Creditor protection procedure
The notice must include a statement that, for a period of at least one month, any creditor of the company that has an objection to the merger should submit that objection.
⑤ Consolidation or split of shares
Under Article 440 of the Commercial Act, when consolidating shares the company must give public notice for the submission of share certificates by setting a period of at least one month, and it must give individual notice to shareholders and pledgees.
⑥ Merger report
Exceptionally, a small-scale merger under Article 527-3 of the Commercial Act may replace the general meeting of shareholders with a resolution of the board of directors.
⑦ Merger registration
The registration includes the following.
▪ The change registration of the surviving company
▪ The dissolution registration of the dissolving company
▪
This registration must be completed at the location of the head office within two weeks after the general meeting reporting the merger.
3. Scope of M&A Consulting Assistance
In the client's merger by absorption, securing the merger consent rights of the FI investors was the most significant issue, and the coordination of rights among the individual investors was complexly intertwined.
Securing the legal validity of the merger procedure by thoroughly complying with all procedures under the Commercial Act was also an important task.
Maintaining fairness among shareholders and managing the operational risks arising from organizational integration after the merger also served as key issues.
▷ The issue of fairness among shareholders and interested parties
▷ Risks arising from integrated operations after the merger
In response, the M&A lawyer carefully reviewed the contents of the FI investors' contracts and focused on establishing a negotiation strategy to protect each investor's rights and secure consent to the merger.
In addition, the lawyer concentrated on providing tailored legal advice and risk management measures to secure the legality of the merger procedure and resolve the issue of fairness among shareholders.
Reviewing FI Investor Rights and Securing Consent
The M&A attorney carefully analyzed the contract terms of the FI investors participating in each affiliate and clearly identified each investor's merger consent rights and rights protection clauses.
On this basis, the attorney systematically established a negotiation strategy with the FI shareholders and prepared the relevant contracts reflecting the merger terms and rights protection.
Through this, potential sources of dispute were minimized, and amicable consent to the merger could be obtained.
Advisory on Merger by Absorption Procedures and Business Combination Reporting
We supported thorough compliance with the procedures under the Commercial Act, from drafting the merger agreement to disclosure, approval by the general meeting of shareholders, the creditor protection procedure, and registration of the merger.
We also provided overall advice on legal issues related to the business combination notification procedure, helping the transaction proceed smoothly while minimizing legal risk.
4. M&A Consulting Outcome, a Successful Merger by Absorption
Through Daeryun Law Firm's strategic assistance, the client succeeded in consolidating 3 affiliates into a single corporation.
The negotiations with the FI investors were concluded without dispute, and the merger procedure also proceeded smoothly without any legal defect.
As a result, the client was able to secure a structure allowing concentrated input of personnel and resources, and to reduce operating costs by integrating overlapping services and infrastructure.
If You Are Considering a Merger by Absorption
A merger by absorption is not a simple corporate integration but involves a complex web of interests.
This is because specialized knowledge across various areas such as law, finance, taxation, and regulation is required, and unless these are managed in an integrated manner, unexpected legal disputes or financial risks may arise.
Given such a complex structure, smooth progress of the merger by absorption process is very difficult without specialized M&A consulting.
Based on extensive practical experience in corporate mergers and acquisitions, Daeryun LLC has established a task force system in which not only specialized attorneys but also experts in each field, such as accountants, tax accountants, and patent attorneys, participate.
We design customized solutions for each business and provide comprehensive legal services ranging from advisory work to contracts and litigation.
If you need legal assistance ahead of a corporate merger or acquisition, please request assistance at any time through a 🔗legal consultation appointment.
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