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Mergers between companies: what role do creditors play?

by Raffaele Caso | Jun 9, 2021 | Blog

Although creditors are not part of the corporate structure of the companies involved in the mergers, they play an important role in the success of the operation.

Mergers can be detrimental to creditors to the extent that the extraordinary transaction reduces the possibility of satisfaction of their rights. Although “the company resulting from the merger or the acquiring company assumes the rights and obligations of the companies participating in the merger, continuing in all their relationships, including those of a procedural nature, prior to the merger” (Art. 2504-bis of the Civil Code), with the merger operation there is a mixture of active and passive relationships that can weaken the position of creditors at a time when the pre-merger companies and the post-merger company may present a different financial and equity solidity.

In order to avoid these risks, creditors may file an opposition before the merger is executed, i.e. before it is formalized by public deed before a notary.

The 60-day rule

The Civil Code (Art. 2503) provides that mergers can only be implemented after 60 days from the last registration of the merger’s resolution. Therefore, once the merger’s resolutions are registered in the Chamber of Commerce, the companies’ final intention to merge becomes public knowledge and creditors may file the opposition.

Exceptions to the rule

Is it therefore essential to wait for 60 days? According to the same article (Art. 2503), the merger may be executed before the 60 days if:

  1. the creditors provide their consent;
  2. the creditors who do not provide their consent have been fully satisfied;
  3. the corresponding sums are deposited in a bank, usually by way of escrow in the interest of the creditors.

A further possibility to anticipate the merger is that the report provided for in Article 2501-sexies (i.e. the experts’ report on the fairness of the exchange ratio) is drafted, for all merging companies, by a single auditing firm which certifies, under its own responsibility, that the asset and financial situation of the merging companies makes it unnecessary to provide security for creditors. In this case, the auditing companies play a major role and shall deal with heavy liability as they are liable for damages caused to the merging companies, their shareholders and third parties (including creditors).

Opposition by creditors to the mergers

Unless an exception applies, creditors may file an opposition to the merger within 60 days. As a rule, this opposition is filed in judicial form with the beginning of a civil proceedings. Thus, opposition by only one creditor is sufficient to prevent the public merger deed from being executed.

The judge and the remedies for companies involved in the mergers

Is it possible that every single creditor, even those with smaller claims, can block the merger operation? The judge, notwithstanding the opposition, may decide that the merger may nevertheless take place if:

  1. it considers that there is no danger of prejudice to the creditor;
  2. appropriate security is provided (by one of the companies involved in the merger).

Claims of non-material amounts in relation to the assets of the companies involved cannot therefore hinder the merger operation, but they risk delaying it and obliging the companies, and their professionals, to prepare rapid lawsuit and pleadings to be submitted to the judge’s assessment.

How to prevent penalties and/or delays in the reorganisation operation?

Never forget or underestimate the creditor in mergers operations. And this must be clear, especially to the directors of the companies involved in the merger, who, if they carry out reductions in share capital or mergers with other companies, in violation of the provisions safeguarding creditors and causing them damage, are punishable, on complaint of the victim, with imprisonment from 6 months to 3 years. Before starting a merger operation, it is therefore advisable for all the companies involved to prepare an assessment of the debt situation (based on the nature of the debt, its amount, existing relationships with creditors, etc.) in order to prepare a clear action plan (account or balance payments, issuance of guarantees, collection of prior consents, etc.) to avoid or reduce the risk that the operation itself may suffer unexpected impacts from creditors.


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