Merger of companies is governed by the Commercial Code.
Types of merger
Merger of companies is carried out without a liquidation procedure. Possible types of merger:
- A company (company being acquired) may merge with another company (acquiring company) and the company acquired is dissolved.
- Companies may also merge so that they found a new company and the merging companies are deemed to be dissolved.
Conditions of merger
In order to merge, the representatives of the companies enter into a merger agreement that must be notarised.
Representatives of the merging companies prepare a written report (merger report) in which the merger and the merger agreement, including the share exchange ratio for the companies and the amount of additional payments, if additional payments are made, are legally and economically clarified and justified. In cases provided by law the merger agreement is inspected by an auditor who prepares a written report on the results of the inspection of the merger agreement.
Rights and obligations arise from the merger agreement if the merger agreement has been approved by all the merging companies. The merger agreement has to be in writing.
Buying an existing company, with an already established structure, can be a good way of expanding your business.
If because of the merger, the acquiring company’s capital changes, a new company is formed, the securities are replaced or the company being acquired is dissolved, the company submits documents needed for conducting the relevant corporate event to the Estonian Central Securities Depository.
After the agreement has been approved an application for its registration is sent to the Commercial Register.