CCP RULE NO. 2 :RULES ON MERGERS AND CONSOLIDATIONS
(1986)

Republic of the Philippines

The following rules governing mergers and consolidations (Secs. 76-80 CCP) are hereby promulgated:

SECTION 1. Definition of Term - The following terms shall have the respective meaning when used in these Rules:

  1. MERGER - is the absorption of one or more corporations by another existing corporation, which retains its identity and takes over the rights, privileges, franchises, and properties 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.

  2. CONSOLIDATION - is the union of two or more corporations to form a new corporation, having the combined rights, privileges, franchises and properties of the constituent companies, all combining to lose their corporate existence. Briefly, it is described as the union of two or more corporations into a single new corporation, all the constituent corporations thereby ceasing to exist as separate entities.

  3. ARTICLES OF MERGER OR CONSOLIDATION - refers to the instrument executed by the constituent corporations embodying the following: (1) plan of merger or consolidation; (2) the number of shares outstanding in case of stock corporations, or of members, in case of non-stock corporations; and (3) as to each corporation, the number of shares outstanding or members voting for and the names of stockholders or members voting against such plans, respectively.

  4. CONSTITUENT CORPORATIONS - refers to the absorbed and absorbing corporations in case of merger; and to two or more corporate bodies desiring to unite into a new corporation in the case of consolidation.

SECTION 2.  Procedure and Requirements

  1. Procedure

    1. IN MERGER

      1. Meeting of the Board of Directors or Trustees of the constituent corporations to approve the plan of merger;

      2. Notice of meeting of the stockholders or members of the constituent corporations, sent at least two (2) weeks prior to the date of the meeting, either personally or by registered mail at the post office address of the stockholders or members as appearing in the corporate or membership book, stating the purpose of the meeting and including a copy or a summary of the plan of merger;

      3. Meeting of the stockholder or member of each constituent corporation approving the plan of merger by at least two-thirds (2/3) of the members of non-stock corporations.

    2. IN CONSOLIDATION:

      1. Meeting of the Board of Directors or Trustees of the constituent corporations to approve the plan of consolidation;

      2. Notice of meeting of stockholders or members of the constituent corporations, sent at least 2 weeks prior to the date of the meeting, either personally or by registered mail at the post office address of the stockholders or members as appearing in the corporate-or-member ship book stating the purpose of the meeting and including a copy or a summary of the plan of consolidation;

      3. Meeting of the stockholders or members of each constituent corporation approving the plan of consolidation by at least 2/3 of the outstanding capital stock or at least 2/3 of the members of non-stock corporations.

  2. Requirements

    1. For Merger - Corporations desiring to merge are required to submit to the Commission, in quadruplicate, the following instruments:

      1. Article of Merger signed by the President or Vice-President and certified under oath by the Secretary or Assistant Secretary of the constituent corporations setting forth the following:

        1. The plan of merger;
        2. As to stock corporations, the number of shares outstanding, or in the case of non-stock corporations, the number of members; and
        3. As to each corporation, the number of outstanding shares or members voting for and the names of stockholders or members voting against such plan, respectively.

      2. Copies of the minutes of the board of directors meeting and minutes of the stockholders' or members' meeting of the constituent corporations, approving and ratifying the plan of merger, certified under oath by their respective secretaries or assistant secretaries;

      3. List of creditors of the absorbed corporations, as of the date of approval of the plan of merger with their addresses and the amounts owing to each;

      4. Audited financial statements (Balance Sheet and related statement of income and expenses) of the constituent corporations as of a date not earlier than 120 days prior to the date of filing of the application with the Commission. The financial statements shall be accompanied by a long form audit report of a certified public accountant;

      5. Amended Articles of Incorporation and By-Laws of the surviving corporation, whenever necessary in accordance with the term of the plan of merger such as change of name of the surviving corporation, increase of capital stock, etc.

    2. For Consolidation - Corporation desiring to consolidate are required to submit to the Commission in quadruplicate, the following instruments:

      1. Articles of Consolidation signed by the President or Vice-President and certified under oath by the Secretary

        Assistant Secretary of the constituent corporations setting forth the following:

        1. The plan of consolidation;
        2. As to stock corporations, the number of shares outstanding of the constituent corporations or in the case of non-stock corporations, the number of members; and
        3. As to each corporation, the number of outstanding shares or members voting for and the names of stockholders or members voting against such plan respectively.

      2. Copies of the minutes of the board of directors' meeting and minutes of the stockholders' meeting of each of the constituent corporations, approving and ratifying the plan of consolidation, certified under oath by their respective secretaries or assistant secretaries;

      3. List of the creditors of the constituent corporations as of the date of approval of the plan of consolidation with their addresses and the amount owing to each;

      4. Audited Financial Statements (Balance Sheet and related Statement of Income and Expenses) of each of the constituent corporations as of a date not earlier than 120 days prior to the date of filing of the application with the Commission. The financial statements shall be accompanied by a long form audit report of a certified public accountant;

      5. Articles of Incorporation, By-Laws and supporting documents of the proposed or consolidated corporation.

    3. Rural Banks and other Banking Institutions may submit instead of A(4) and B(4) the following:

      1. The audited financial statements of the constituent banks, together with a long form audit report, as of a date not earlier than 120 days prior to the date of filing of the merger or consolidation with the Central Bank; and

      2. The tentative financial statements of the constituent banks as of a date not earlier than 120 days prior to the date of filing of the merger or consolidation with the Commission. (in case where the filing with the Commission is beyond the period required in paragraph a).

SECTION 3. Appraisal Rights of Dissenting Stockholder in Mergers and Consolidations - A stockholder who voted against the plan of merger or consolidation has the right to demand payment of the fair value of his shares in accordance with the provisions of Section B2 of the Corporation Code of the Philippines.

SECTION 4. Approval of the Merger/Consolidation: When hearing is necessary - The Securities and Exchange Commission shall approve the articles of merger/consolidation and issue the corresponding certificate of Filing of Articles of Merger/Consolidation if it is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of the Corporation Code of the Philippines and existing laws.

However, if the Securities and Exchange Commission has reason to believe, upon proper investigation, that the proposed merger/consolidation is contrary to or inconsistent with the provisions of the Corporation Code of the Philippines and existing laws, it shall set a hearing to give the corporations concerned and other parties affected the opportunity to be heard. Written notice of the date, time and place of said hearing shall be sent to the constituent corporations and other parties affected at least two (2) weeks before said hearing.

If after the hearing, the Commission finds that the requirements of the Corporation Code of the Philippines, its implementing rules and regulations and other pertinent laws have been complied with, and that no valid reason(s) exists for the disapproval of the merger/consolidation, the Commission shall issue the necessary certificate of merger/consolidation, at which time the merger/consolidation shall be effective.

The Commission shall inform the Bureau of Internal Revenue of the approval of the merger/consolidation.

SECTION 5. Filing Fees - An amount equal to 1/10 of one (1%) per centum of the equity of the absorbed corporations which was used as basis of the merger or consolidation but not less than P1,000.00 nor more than P100,000.00 shall be collected by the Commission as filing fees for the articles of merger or consolidation. For non-stock corporations, a fee of P1,000.00 shall be collected for the articles of merger or consolidation.

SECTION 6. Violation of these Rules - Any violation of these rules shall be penalized by a fine of not less than One Thousand (P1,000.00) Pesos nor more than Ten Thousand (P10,000.00) Pesos, and such other sanctions as provided for under Section 144 of the Corporation Code of the Philippines.

SECTION 7. Effectivity - These rules shall take effect fifteen (15) days after their publication in two (2) newspaper of general circulations in the Philippines.

Mandaluyong, Metro Manila, Philippines.

__________________________1986.

MANUEL G. ABELLO
Acting Chairman
Securities and Exchange Commission

Approved:

CESAR E. A. VIRATA
Minister
Ministry of Finance