Merger: Executive Summary

A merger brings together two or more companies:
- Assets and liabilities of the merging companies are combined by operation of law.
- According to the principle of membership continuity, the partners and shareholders of the merging entities become partners or shareholders of the surviving company.
- Specific terms of a merger may provide a cash-out option on behalf of former partners or shareholders and - with a supermajority vote - minority shareholders can even be forced to give up their equity in the target company and to sell their interest for cash.
The new Swiss Merger Law allows mergers between any two (or more) business entities such as corporations, limited liability companies, general partnerships, corporations with unlimited partners as well as cooperatives, associations, foundations, and even institutions of public law. In addition, the new Merger Act allows mergers between entities of different corporate forms, e.g., between a corporation and a limited liability company, as well as cross-border mergers. In principle, only the simple partnership (Art. 530 CO) is prohibited from merging with other entities.

The Merger Act provides two forms of merger:
- In what is referred to as an absorption, a target company merges into an acquiring company. By operation of law, the acquirer not only becomes the owner of the assets of the target but also becomes subject to the actual and contingent liabilities of the target. Upon finalizing the transaction, the target company disappears, and its dissolution is registered in the Commercial Register. Thus, it ceases to exist while the acquiring company continues to exist. Characteristic of this form of merger is that, prior to the merger, the acquiring company has previously existed as a legal entity.
- In what is referred to as a combination, two (or more) companies merge on equal terms and form a newly established entity. It is the characteristic of this merger that the acquiring company originates from the transaction itself.


Apart from a few exceptions, the same legitimacies apply to both forms of merger.

Regarding the merger procedure, the Merger Act requires a number of documents and resolutions:
- Based on recent financial reports, the merging companies must sign a written merger agreement.
- The board of directors of the merging companies must issue either a combined or two separate merger statements, setting out the reasons for and the objectives of the transaction.
- Balance sheets, merger agreement, and merger statement(s) must be audited by a specially qualified auditor.
- Merger agreement, merger statement, the financial reports of the merging companies, and the audit report must be disclosed to the partners and shareholders and must be made available for inspection at the corporate domiciles.
- Finally, at a general meeting, the shareholders of the merging companies must approve the transaction.
- After the shareholders’ approval by the required quorum, the merger transaction takes effect through its entry in the Commercial Register. At the same time, the dissolution(s) of the transferring company(ies) is (are) being registered.

The Merger Act stipulates specific guidelines regarding mergers between companies that are in a control relationship to each other as well as for mergers between small and medium enterprises. On the other hand, additional legal constraints apply if one of the merging firms is in liquidation or if one company is over-indebted or reports that half of its equity (share capital and legal reserves) is no longer covered. Furthermore, specific rules apply to mergers between foundations of pension funds and institutions of public law.

The provisions on merger can be found in Arts. 3 – 28 Merger Act.



Suggested citation:
Hans Caspar von der Crone / Andreas Gersbach / Franz J. Kessler / Martin Dietrich / Claudia Fritsche / Katja Berlinger, www.fusg.ch - die Internetplattform zu Fragen des Transaktionsrechts, <http://www.fusg.ch/en/trans/merger/index.php?datum=2003-08-22>, status: Aug. 22, 2003, visited May. 18, 2012.