MERGER AND CONSOLIDATION

A and B transferred all their respective assets, rights and properties to C

C issued certificates of stocks to both A and B

What is the effect? What do you call this?

C survived while A and B are dissolved. This is merger

NOTE:
If only two corporations merged, only one shall survive while the other shall be dissolved. Thus,
if A and B merged, either one of them shall survive while the other is dissolved.

A and B transferred all their respective assets, rights and properties to C (still to be formed)
C issued certificates of stocks to both A and B

What is the effect? What do you call this?

C is created while A and B are dissolved. This is consolidation

When do merger and consolidation become effective? What if the SEC fails to act on it
without fault attributable to the corporation involved?
It will never become valid until and unless the SEC gives its stamp of approval. It will be up to
the constituent corporation to follow it up. It will never take effect until the SEC gives its
approval and issues the articles of merger

Could there be liquidators and winding up with respect to the corporation in consolidation
and merger?
No, there is none. No assets, properties, or rights to collect as they are transferred. No debts and
liabilities to pay because they become the liabilities of the surviving corporations. No properties
transferred because they will be the properties of the surviving corporations.

REMINDER:
1. "without further act or deed" in Sec. 80(4) means automatic
2. Employees of the absorbed or dissolved corporation are automatically absorbed by the
surviving corporation even in the absence of a resolution to that effect because it is more
in keeping with social justice and full protection to labor. Nevertheless, the surviving
corporation has the right to terminate the empployment of the absorbed employees for a
lawful or authorized cause. In the same way, the absorbed employees have the right to
resign, retire or otherwise sever their employment with the surviving corporation even
before or after the merger or consolidation, subject to existing contractual obligations.
(BPI v. BPI Employees Union)

TRUE OR FALSE:
1. The dissolved constituent corporation in a merger should necessarily liquidate its
corporate affairs.
2. All corporations dissolved necessarily undertake liquidation and winding up of their
corporate affairs.
ANSWERS:
1. False. Although there is a liquidation of the absorbed corporations, there is no winding up
of their affairs or liquidation of their assets because the surviving corporation
automatically acquires all their rights, privileges and powers as well as liabilities
(Associated Bank v. CA)
2. False. In mergers, although there is a liquidation of the absorbed corporations, there is no
winding up of their affairs or liquidation of their assets because the surviving corporation
automatically acquires all their rights, privileges and powers as well as liabilities
(Associated Bank v. CA)

Enumerate:
Effects of merger and consolidation.

ANSWER:
1. There will only be a single corporation. In case of merger, the surviving corporation or
the consolidated corporation in case of consolidation;
2. The termination of the corporate existence of the constituent corporations, except that of
the surviving corporation or the consolidated corporation;
3. The surviving corporation or the consolidated corporation will possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and liabilities of a
corporation organized under the Code;
4. The surviving or consolidated corporation shall possess all the rights, privileges,
immunities and franchises of the constituent corporations, and all property and all
receivables due on whatever account, including the interest of, or belonging to or due to
the constituent corporations shall be deemed transferred to and vested in such surviving
or consolidated corporation without further act and deed; and
5. The rights of creditors or any lien on the property of the constituent corporations shall not
be impaired by the merger or consolidation.