Things to Consider During Company Merger Processes

Company mergers can occur through one company acquiring another or by merging under a new corporate structure. A merger by acquisition is when one company incorporates another, with the acquiring company being called the "acquiring company" and the merging company being called the "acquired company." As a result of the merger, all assets of the acquired company are exchanged for shares of the acquiring company according to an exchange ratio, and the shareholders of the acquired company become owners of shares in the acquiring company. Once the merger is complete, the acquiring company takes over all assets of the acquired company, while the acquired company ceases to exist and is removed from the commercial registry.

Capital companies can merge with other capital companies, cooperatives, and partnerships and limited partnerships, provided they are the acquiring company. Sole proprietorships can merge with other sole proprietorships, capital companies (provided they are the acquired company), and cooperatives. Cooperatives can merge with other cooperatives, capital companies, and sole proprietorships, provided they are the acquiring company.

During a merger, shareholders of the transferring company have the right to claim shares and rights in the acquiring company equivalent to the value of their existing shares and rights. This right is calculated taking into account the value of the assets of the companies participating in the merger, the distribution of voting rights, and other important factors. When determining the exchange ratios of shares, an equalization payment may be made to the shareholders of the transferring company, provided that it does not exceed one-tenth of the actual value of the shares allocated to them. Non-voting shareholders of the transferring company are given non-voting or voting shares of equal value. The preferential rights in the transferring company must be matched with equivalent rights in the acquiring company. Furthermore, the acquiring company is obliged to grant equivalent rights to the holders of usufruct certificates of the transferring company or to purchase the usufruct certificates at their actual value as of the date of the merger agreement.

Another important element in company mergers is the merger agreement. The management bodies of the companies involved in the merger prepare a report on the merger. In mergers through the incorporation of a new company, the articles of association of the new company are also attached to the merger report. The merger agreement must be in writing and signed by the management bodies of the companies involved in the merger, and then approved by the general assemblies. The mandatory information that the merger agreement must contain is as follows:

– The trade names, legal types, and registered offices of the companies participating in the merger; in the case of a merger through the establishment of a new company, the type, trade name, and registered office of the new company.
– The exchange ratio of company shares and, if foreseen, the equalization amount; explanations regarding the shares and rights of the shareholders of the transferring company in the acquiring company.
– The rights granted by the acquiring company to preferred and non-voting shareholders and holders of usufruct certificates.
– The method of exchanging company shares.
– The date on which the shares acquired through the merger become entitled to the balance sheet profit of the acquiring or newly established company, and all characteristics related to this claim.
– If necessary, the severance payment in accordance with Article 141 of the Turkish Commercial Code.
– The date on which the transactions and actions of the transferring company will be deemed to have been carried out on behalf of the acquiring company.
– Special benefits granted to the management bodies and managing partners.
– If necessary, the names of the partners with unlimited liability.

Company mergers are processes that require careful management, both legally and operationally. Proper planning and legal advice ensure a successful and smooth merger. It is crucial for companies to fulfill all legal requirements during this process and protect the rights of their stakeholders.