Objectives of the merger
The merger is the unification of several companies and is an instrument of business concentration, which aims to expand the size and the market competitiveness of the merged companies.
The merger causes the cessation of the individuality of one or more companies and gives rise to a new legal entity.
In the case of a crisis, a merger with other companies can allow a more rational use of facilities and, as a result, a better distribution of fixed costs. The merger can bring about a redistribution of resources between the participating companies, in order to rebalance the entity created.
The mergers are governed by the articles of the Italian Civil Code, from the 2501 to the 2505 quater.
Types of merger
There are two types of merger under Italian law:
- Merger by incorporation: occurs by way of incorporation of a company into another, whereby the incorporated company ceases to operate. The incorporated company is completely absorbed, increasing the capital of the incorporating company as a result.
- Merger by establishment of a new company: (merger in a strict sense): occurs when two or more companies are merged and, as a consequence, lose their own identities, giving way to a new legal entity.
In merger by incorporation there is the pooling of the assets and the corporate structures of all the companies involved in the transaction.
In both cases, the assets of the merged entity are equal to the sum of the assets of the participating companies and its corporate structure is composed of all of the shareholders of those companies.
Buying an existing company, with an already established structure, can be a good way of expanding your business.
The merger procedure
The merger procedure consists of three essential phases: the merger project, the merger decision and the merger act.
The procedure can be summed up as follows:
- submission to the Business Register, at the location where the companies participating in the merger are based, of the merger project (at least 30 days before the merger decision, and 15 days prior to the mergers in which companies with share capital represented by shares cannot participate);
- publication of the project on the website of the companies involved in the operation, as an alternative registration of the merger project in the Business Register;
- drawing up of the merger project by the boards of the companies concerned, which formalises the agreements reached on the methods and terms of the transaction;
- to enable members to view them, the following documents are submitted at the locations of each of the merging companies: the management report, the experts’ reports, balance sheets of the last three business years and the asset situation (it is possible not to draw up the balance sheet of the company if there is the unanimous consent of the shareholders of the companies involved)
- in the case of joint stock companies participating, it is not necessary to draw up the balance sheet, where not more than 120 days have elapsed between the date of submission or publication of the project and the closing date of the financial statements of the company;
- drafting of the decision in which the merger plan is approved (must be approved by all the companies involved);
- submission of the decision of the shareholders in the Business Register, subject to judicial review by the notary taking the minutes, if the merged company is a limited liability company (the deposit must be made within 30 days from the date of shareholders’ decision);
- drawing up of the merger document, which must be carried out within 2 months of the registration of the merger decision in the Business Register, unless the creditors disapprove;
- submission of the merger document to the Business Register (within 30 days of the stipulation of the merger document).
The Merger document
In practice, the merger is signed by the administrators of the companies involved as part of the role entrusted to them in the shareholders’ meeting.
The content of this document is strictly predetermined. The administrators cannot make changes to what has been decided by the shareholders’ meeting.
The merger document must be drawn up as a public document and submitted for registration to the Business Register where each of the companies involved are based. Registration is carried out by a notary or by the administrators of the company resulting from the merger or incorporation.
Fiscal aspects of mergers
for the purposes of direct taxation, merger operations shall not constitute taxable income, are neutral, in that the balance sheet in question is considered "neutral" for tax purposes.
Merger operations are considered as potentially elusive transactions. These operations, being tax-neutral, could be used in place of other operations which are fiscally relevant and from which could result taxable items (e.g. contributions, sales, etc.).
- The merger is intended to facilitate cross-border mergers between companies of the Member States of the European Union. At Community level, the minimum content of the draft terms of the cross-border merger was determined, and it is implemented at national level by Legislative Decree No 108 of 2008. The project must be published, in accordance with the procedures prescribed by the laws of each Member State (advertising is not mandatory if the company provides the same information on its website).
Tax concessions are available for setting up new businesses and expanding existing ones. Financial aid is also available and is aimed at supporting investment, management, training and technical assistance. The National agency for inward investment promotion and enterprise development provides information and assistance and helps businesses in their evaluation of the various financing opportunities.