Practice Areas
Corporate Merger
A corporate merger refers to the combination of two companies into a single company by contract, without going through liquidation procedures.
1. Corporate Merger | Concept

A corporate merger refers to a situation in which, through procedures under the Commercial Act, part or all of a company is dissolved, and its assets, rights, and obligations are comprehensively transferred to the surviving company or the newly established company.
Along with this, the members of the company are also incorporated as members of the surviving company or the newly established company.
Cases in Which a Merger Is Restricted
The Commercial Act and special statutes restrict mergers in the following cases.
▷ An act of merging with another company that substantially restricts competition in a particular field of trade is prohibited. (Monopoly Regulation and Fair Trade Act Article 9 (1) 3)
▷ A company undergoing rehabilitation proceedings may merge by providing for matters concerning the ‘merger’ in its rehabilitation plan. (Debtor Rehabilitation and Bankruptcy Act Articles 193, 210, and 211)
▷ If a stock-listed company (excluding a special purpose acquisition company) intends to merge with its affiliate, or if a stock-listed company that is a special purpose acquisition company intends to merge with another company, it must submit to the Financial Services Commission a report describing the details of the merger by the day following the date on which the merger occurs. (Financial Investment Services and Capital Markets Act Articles 161 and 165-4, and Article 176-5 of the Enforcement Decree)
2. Corporate Merger | Types

Corporate merger methods can be broadly divided into merger by absorption and merger by new incorporation.
Merger by Absorption
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.
Merger by Establishment
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.
Small-Scale 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.
Short-Form Merger
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.
3. Corporate Merger | Procedure

The corporate merger procedure is as follows.
Execution of the Merger Agreement
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.
Resolution on the Merger
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))
Procedure for Objections by Company Creditors
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))
However, an administrative fine is not imposed where a criminal penalty is imposed. (Commercial Act Article 635 (1) proviso, subparagraph 2 and subparagraph 14)
4. Corporate Merger | Merger Registration
Once a corporate merger is completed, the following registrations must be made within 2 weeks at the location of the head office.
② Registration of dissolution for the company extinguished by the merger
③ Registration of incorporation for the company newly established through the merger
The documents that must be submitted together with the registration application when applying for merger registration are as follows.
Registration of Change
▷ Written consent of all members
▷ Certificate of public notice and peremptory notice
▷ Receipt of repayment or written statement of no objection
▷ Certified copy of resident registration
▷ Receipt confirming payment of registration license tax
▷ Receipt confirming payment of the registration application fee
▷ Power of attorney (where an agent files the application)
Registration of Dissolution
▷ Receipt confirming payment of the registration application fee
▷ Power of attorney where an agent files the application
Registration of Incorporation
▷Written consent of all members of the extinguished company
▷ Merger agreement
▷ Certificate of qualification of incorporation committee members
▷ Certificate of public notice and peremptory notice
▷ Receipt of repayment or written statement of no objection
▷ Written consent of all members of the newly established company
▷ Certified copy of resident registration
▷ Resolution by a majority of the executive members
▷ Written acceptance of appointment (including the seal certificate, the certificate of personal signature, or the issuance certificate of the electronic personal signature certificate)
▷ Seal report of the representative member
▷ Receipt confirming payment of registration license tax
▷ Receipt confirming payment of the registration application fee
▷ Power of attorney (where an agent files the application)
5. Corporate Merger | Effects of the Merger
A corporate merger takes effect when the company surviving the merger or the company established through the merger completes the merger registration at the location of the head office. (Commercial Act Articles 269 and 234)
The company surviving or newly established after the merger comprehensively succeeds to all rights and obligations of the extinguished company.
Response Strategy
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.
If You Need Assistance
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.
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