Decision on the acquisition of company and its legal effect

Provisions of the Companies Act shall regulate concept and types of status changes, as well as procedures for conducting status changes, registration, and legal consequences of registration of status changes.

A company in a status change – the transferring company reorganizes itself to the effect that it transfers assets and obligations to another company – the recipient company, while its members acquire shares, i.e. stocks in that company.

The acquisition represents a type of status change.

One or more companies may be acquired by another company by transferring all assets and obligations to that company, whereby the acquired company dissolves without undergoing liquidation procedure.

Decision on the Acquisition of Company

In a decision on the acquisition of company, the general meeting approves:

The contract on status change, if such a contract was concluded up to the date of holding of a session of the shareholders’ meeting
The draft agreement on status change, if such an agreement was not concluded up to the day of holding of a session of the shareholders’ meeting.

In case of a joint stock company, the decision on the acquisition of company is passed by a three-quarter majority of votes of the stockholders present, unless a higher majority is prescribed by the articles of association.

If, as a result of the status change, certain members of the transferring company are becoming the members of the recipient company, jointly and severally liable for its obligations, the decision on the acquisition of company may be rendered only with their consent.

The general meeting shall, concurrently with rendering the decision on the acquisition of company:

Adopt the amendments of the memorandum of association, i.e. articles of association in case of a joint stock company, if the company continues to operate
Adopt the memorandum of association of a company which is created in the status change, as well as the articles of association of that company, if it is a joint stock company
Adopt a resolution on the share capital increase, i.e. decrease depending on the type of the status change.

If the exchange of share, i.e. stocks in a different proportion is effected by a status change, the decision on the acquisition of company must contain a provision that it enters into force by issuing a written statement by the chairman of the board of directors, i.e. the chairman of the company’s supervisory board, if the company has a two-tier management system, that all obligations of the company related to repurchase of stocks of dissenting stockholders have been executed in full in accordance with Articles 475 and 476 of the Company Act, i.e. that there were no dissenting stockholders, that each member of the transferring company agreed that the exchange of the shares, i.e. stocks in a different proportion is effected by the status change, except for the members of the transferring company that use their right to payment instead of acquiring shares, i.e. stocks in the recipient company in accordance with Article 508 of the Companies Act.

In case of a joint stock company, the decision on the acquisition of company shall contain a provision that it enters into force upon giving of a written statement by the chairman of the board of directors, as well as the chairman of the supervisory board, if the company has a two-tier management system, that all of the dissenting stockholders were fully paid up for the value of their stocks in accordance with Article 475 of the Companies Act.

An agreement on status change enters into force when the general meetings of all the companies participating in the status change adopt a decision on the acquisition of company approving it, i.e., on the day of the conclusion of that contract, if that date comes later unless the agreement envisages that it enters into force on a later date.

Contesting the Decision on the Acquisition of Company

Provisions of Articles 376 through 381 of the Companies Act apply when contesting the decision on the acquisition of company.

In the proceeding upon the action for annulment of the decision on the acquisition of company, the court shall set an appropriate period in which the respondent company shall eliminate the reasons for annulment, if such reasons can be eliminated.

The competent court shall serve the decision on annulment of the decision on the acquisition of company, after it becomes final, on the register of business entities for publication in accordance with the registration act. This judicial decision produces no effects to the rights and obligations of the recipient company in connection to status change which arose after entering into force of the legal consequences of the status change, and up to the day of publication of the final judicial decision in the register of business entities, and all the companies participating in the status change are jointly and severally liable for those obligations.

The decision on the acquisition of company may not be contested on the grounds of the determined ratio of the exchange of shares, i.e. stocks.