Merger: practical guides and steps

A merger combines two or more companies into a single entity. It can simplify a group, bring activities together or prepare a handover. This page helps managers and shareholders understand the possible forms, the procedure and its sensitive points.

Forms of restructuring

The Code of Companies and Associations provides for several operations. Here are the main ones.

• Merger by absorption: one company absorbs the assets of another.
• Merger by formation: several companies create a new entity together.
• Demerger: a company divides its assets among several companies.
• Partial demerger: a company transfers one business line without disappearing.

In an absorption, the absorbed company disappears without liquidation. Its shareholders receive shares in the absorbing company. Its entire estate, assets and liabilities, passes as a whole to the receiving company.

Belgian law also provides simplified operations. For example, a company can absorb a subsidiary it wholly owns. Some reports then become unnecessary, since no share exchange takes place. The full timetable often stretches over several months. So fix the accounting effective date in the proposal itself.

The merger procedure step by step

The operation follows a strict timetable. The main stages run as follows.

The proposal must appear at least six weeks before the general meeting. This period gives shareholders and creditors time to inform themselves. You can consult publications on the Belgian Official Gazette website. Our article on company mergers in Belgium covers each stage.

Points to watch beforehand

Several issues call for special care. First, the exchange ratio sets each shareholder's stake. A debatable valuation quickly fuels conflict. Second, ongoing contracts in principle pass to the absorbing company. Still, check any change of control clauses.

In addition, employees keep their rights during the transfer. Finally, tax treatment deserves prior analysis. The operation can qualify for tax neutrality, subject to conditions. So have a tax adviser validate the structure before starting the procedure.

Merger, sale or conversion?

This operation does not suit every goal. To sell an activity to a third party, a sale often works better. In that case, discover the stages of selling a business. To change only the legal framework, a conversion suffices. Then read our article on converting the legal form.

The deal also changes governance and the split of capital. An updated shareholders' agreement then prevents many tensions. Finally, the notary steps in at the decisive moment. Our file on amending the articles explains the checks involved. Careful preparation thus creates a simpler and stronger structure.