TITLE IX.

MERGER
AND CONSOLIDATION
SECTION 75 OF
THE RCCP

PLAN OF MERGER OR
CONSOLIDATION
SEC. 75. Plan of Merger or Consolidation. – Two (2) or
more corporations may merge into a single corporation
which shall be one of the constituent corporations or may
consolidate into a new single corporation which shall be
the consolidated corporation.
The board of directors or trustees of each corporation,
party to the merger or consolidation, shall approve a plan
of merger or consolidation setting forth the following:
(a) The names of the corporations proposing to merge or
consolidate, hereinafter referred to as the constituent
corporations;
(b) The terms of the merger or consolidation and the
mode of carrying the same into effect;
(c) A statement of the changes, if any, in the articles of
incorporation of the surviving corporation in case of
merger; and, in case of consolidation, all the statements
required to be set forth in the articles of incorporation for
corporations organized under this Code; and

(d) Such other provisions with respect to the proposed

merger or consolidation as are deemed necessary or
desirable.
SECTION 76 OF
THE RCCP

STOCKHOLDERS’ OR
MEMBERS’ APPROVAL
SEC. 76. Stockholders’ or Members’ Approval. – Upon
approval by a majority vote of each of the board of directors
or trustees of the constituent corporations of the plan of
merger or consolidation, the same shall be submitted for
approval by the stockholders or members of each of such
corporations at separate corporate meetings duly called for
the purpose. Notice of such meetings shall be given to all
stockholders or members of the respective corporations in
the same manner as giving notice of regular or special
meetings under Section 49 of this Code. The notice shall
state the purpose of the meeting and include a copy or a
summary of the plan of merger or consolidation.
The affirmative vote of stockholders representing at least
two-thirds (2/3) of the outstanding capital stock of each
corporation in the case of stock corporations or at least
two- thirds (2/3) of the members in the case of non- stock
corporations shall be necessary for the approval of such
plan.
Any dissenting stockholder may exercise the right of
appraisal in accordance with this Code: Provided, That if
after the approval by the stockholders of such plan, the
board of directors decides to abandon the plan, the right of
appraisal shall be extinguished.
Any amendment to the plan of merger or consolidation may
be made: Provided, That such amendment is approved by a
majority vote of the respective boards of directors or trustees
of all the constituent corporations and ratified by the
affirmative vote of stockholders representing at least two-
thirds (2/3) of the outstanding capital stock or of two-thirds
(2/3) of the members of each of the constituent corporations.
Such plan, together with any amendment, shall be considered
as the agreement of merger or consolidation.
SECTION 77 OF
THE RCCP

ARTICLES OF MERGER
OR CONSOLIDATION
SEC. 77. Articles of Merger or Consolidation. – After the
approval by the stockholders or members as required by
the preceding section, articles of merger or articles of
consolidation shall be executed by each of the constituent
corporations, to be signed by the president or vice
president and certified by the secretary or assistant
secretary of each corporation setting forth:
(a) The plan of the merger or the plan of consolidation;
(b) As to stock corporations, the number of shares
outstanding, or in the case of non-stock corporations, the
number of members;
(c) As to each corporation, the number of shares or
members voting for or against such plan, respectively;
(d) The carrying amounts and fair values of the assets
and liabilities of the respective companies as of the
agreed cut-off date;
(e) The method to be used in the merger or consolidation
of accounts of the companies;
(f) The provisional or pro forma values, as merged or
consolidated, using the accounting method; and
(g) Such other information as may be prescribed by the
Commission.
SECTION 78 OF
THE RCCP

EFFECTIVITY OF MERGER
OR CONSOLIDATION
SEC. 78. Effectivity of Merger or Consolidation. – The
articles of merger or of consolidation, signed and certified
as required by this Code, shall be submitted to the
Commission for its approval: Provided, That in the case
of merger or consolidation of banks or banking
institutions, loan associations, trust companies, insurance
companies, public utilities, educational institutions, and
other special corporations governed by special laws, the
favorable recommendation of the appropriate government
agency shall first be obtained. If the Commission is
satisfied that the merger or consolidation of the
corporations concerned is consistent with the provisions
of this Code and existing laws, it shall issue a certificate
approving the articles and plan of merger or of
consolidation, at which time the merger or consolidation
shall be effective.
If, upon investigation, the Commission has reason to
believe that the proposed merger or consolidation is
contrary to or inconsistent with the provisions of this Code
or existing laws, it shall set a hearing to give the
corporations concerned the opportunity to be heard.
Written notice of the date, time, and place of hearing shall
be given to each constituent corporation at least two (2)
weeks before said hearing. The Commission shall
thereafter proceed as provided in this Code.
SECTION 79 OF
THE RCCP

EFFECTS OF MERGER OR
CONSOLIDATION
SEC. 79. Effects of Merger or Consolidation. – The merger
or consolidation shall have the following effects:
(a) The constituent corporations shall become a single
corporation which, in case of merger, shall be the surviving
corporation designated in the plan of merger; and, in case of
consolidation, shall be the consolidated corporation
designated in the plan of consolidation;
(b) The separate existence of the constituent corporations
shall cease, except that of the surviving or the consolidated
corporation;
(c) The surviving or the consolidated corporation shall
possess all the rights, privileges, immunities, and powers and
shall be subject to all the duties and liabilities of a
corporation organized under this Code;
(d) The surviving or the consolidated corporation shall
possess all the rights, privileges, immunities and franchises
of each constituent corporation; and all real or personal
property, all receivables due on whatever account,
including subscriptions to shares and other choses in
action, and every other interest of, belonging to, or due to
each constituent corporation, shall be deemed transferred
to and vested in such surviving or consolidated
corporation without further act or deed; and
(e) The surviving or consolidated corporation shall be
responsible for all the liabilities and obligations of each
constituent corporation as though such surviving or
consolidated corporation had itself incurred such liabilities
or obligations; and any pending claim, action or
proceeding brought by or against any constituent
corporation may be prosecuted by or against the surviving
or consolidated corporation. The rights of creditors or
liens upon the property of such constituent corporations
shall not be impaired by the merger or consolidation.
 WHAT IS A MERGER?
“Merger is a re-organization of two or more corporations that
results in their consolidating into a single corporation, which is
one of the constituent corporations, one disappearing or
dissolving and the other surviving. To put it another way,
merger is the absorption of one or more corporations by
another existing corporation, which retains its identity and
takes over the rights, privileges, franchises, properties, claims,
liabilities and obligations of the absorbed corporation(s). The
absorbing corporation continues its existence while the life or
lives of the other corporation(s) is or are terminated.”

(Bank of Commerce vs Radio Philippines Network, Inc. et al,

G.R. No. 195615, April 21 2014)
WHAT IS CONSOLIDATION?
“Consolidation is the union of two or more corporations
into a single new corporation, called the consolidated
corporation, all the constituent corporations thereby
ceasing to exist as separate entities. The consolidated
corporation shall thereupon and thereafter possess all the
rights, privileges, immunities, franchises and properties,
and assume all the liabilities and obligations of each of the
constituent corporations in the same manner as if it had
itself incurred such liabilities or obligations.”

(Bangko Sentral ng Pilipinas)

 RATIONALE
1. Economies of scale, meaning, a combination of two
production units enlarges the production output over which
the fixed cost of production is spread and thereby reducing
the average fixed cost per unit of the output;
2. Economies of scope, meaning, the costs - and even
management talent - are spread across a broader range of
related activities; and
3. Costs are reduced through vertical integration, meaning
there is a merger with a supplier or customer
PROCEDURE FOR EFFECTING A PLAN OF
MERGER OR CONSOLIDATION
1. Draw up a plan
2. Approval of plan by the BOD/Trustees
3. Submission to stockholders or member for approval
4. Execution of formal contract
5. Submission to SEC for approval
6. Conduct of hearing by SEC
7. Issuance of certificate by SEC
 LEGAL EFFECTS OF MERGER OR
CONSOLIDATION
1. The constituent corporations shall become a single
corporation;
2. The separate existence of the constituents shall cease,
except that of the surviving corporation (in merger) or the
consolidated corporation (in consolidation);
3. The surviving or the consolidated corporation shall possess
all the rights, privileges, immunities and powers and shall be
subject to all duties and liabilities of a corporation;
4. The surviving or the consolidated corporation shall possess
all rights, privileges, immunities and franchises of each
constituent and properties shall be deemed transferred to
the surviving or the consolidated corporation; and
5. All liabilities of the constituents shall pertain to the surviving
or the consolidated corporation.
 QUASI-REORGANIZATION
A procedure organized in accounting by which the
accounts of the corporation may be restated to the
same extent they would be if a new corporation were
created and acquired the business of the existing
corporation; a new basis for accountability of assets,
liabilities, and capital is established.
 DE FACTO MERGER OR
CONSOLIDATION
A reorganization involving at least two corporations
which has the effect of merger or consolidation and
which entitles the dissenting stockholders to an
appraisal right.