Corporate Merger

Also known as: Merger (TCC), Merger by Absorption, Merger by Formation of a New Company, Simplified Merger, Şirket Birleşmesi

Author Ali Gül

In short

The combination of two or more companies, by one absorbing the other or by forming a new company, in which assets pass as a whole and the absorbed company ends without liquidation.

A corporate merger is the combination of two or more companies into one. The absorbed company’s assets pass as a whole to the absorbing company and the absorbed company ends without liquidation. Mergers are governed by Arts. 136-158 of the Turkish Commercial Code.

Types

Merger by absorption: One company absorbs the other; the absorbed company ends.
Merger by new formation: Two or more companies merge into a new company; all of them end.
Simplified merger: Where the absorbing company holds all (or, under certain conditions, 90%) of the voting shares of the absorbed company, document and approval requirements are relaxed (TCC Art. 155-156). Often used in intra-group restructurings.

Process

Merger agreement: Made in writing by the companies’ management bodies; it sets out the exchange ratio and how membership rights continue.
Merger report and merger balance sheet: Explain the legal and economic rationale.
Inspection right: Shareholders may inspect the documents for thirty days before the general assembly resolution.
General assembly resolution: Adopted with the qualified quorums required by the Code.
Registration: The merger becomes effective on registration with the trade registry; the absorbed company’s assets and liabilities pass automatically to the absorbing company.

Creditors, Shareholders and Employees

Creditors: If they make a request within three months after the merger, their claims are secured (TCC Art. 157).
Shareholders: Their shares and rights are preserved in the absorbing company; a severance payment option may also be provided in the merger agreement. Shareholders who believe the exchange ratio was not properly set may bring a compensation action.
Employees: Employment relationships pass to the absorbing company; employees must be informed (TCC Art. 158).

Competition Law

A corporate merger requires Competition Board approval if the turnover thresholds are met. A merger registered without approval does not become legally valid. For this aspect, see Merger and Acquisition. For transferring part of a company’s assets to another company, see Demerger.

Frequently Asked Questions

What happens to the company's debts in a merger?

All assets and liabilities of the absorbed company pass automatically to the absorbing company on registration of the merger. The absorbing company becomes liable for those debts. Creditors may request security for their claims within three months after the merger takes effect.

Does a corporate merger require Competition Board approval?

Yes, if the turnover thresholds of the merging companies are met. The corporate law merger process and the competition law approval process are separate and should be planned together.

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