13. March 2018

New restrictions applicable to merger or division of the company

The latest amendment to the Commercial Code No. 264/2017 Coll. introduces several new obligations and restrictions applicable to mergers or divisions of the company. The objective of these provisions (effective from January 1, 2018) is to improve the protection of the rights of creditors and shareholders of companies involved in mergers or divisions.

The amendment stipulates general conditions that a company must meet in order to be able to participate in a merger or division. The company should be in a good shape to secure the economic objective of the transaction which is the transfer of capital and the subsequent continuation of business by the successor company. Mergers or divisions can no longer involve the companies that do not have a sufficient proportion of the value of assets and liabilities, companies in bankruptcy or restructuring proceedings, in liquidation process or being in proceeding on dissolution.

For the purpose of certification that the value of successor company’s liabilities does not exceed the value of its assets the company is obliged to provide an auditor’s report which has to be attached to the petition for the registration of merger or division into the commercial register.

The amendment also imposes an obligation to submit a notification to the competent Tax Office that draft of the merger agreement was prepared. If shareholdings in a non-surviving company are pledged, even respective pledgee must be notified accordingly.