The merger of capital companies, as a case of merger of commercial companies, involves the transfer of the assets (assets and liabilities) of the company acquired to another company (the acquiring company) already existing or the transfer of the assets of the merging companies to the newly created company.
To date, the shareholders (shareholders) of the company being acquired or of the companies merging by the formation of the new company receive shares (shares) of the acquiring or newly bound company for the transferred assets. A company acquired or merged by a new company loses its legal status.
In an effort to explain the reasons for the merger of capital companies, a number of objective and subjective factors can be identified, including:
- • the use of synergies for capital concentration,
- • strengthening market position,
- • elimination of competition by hostile takeover,
- • taking advantage of the possibility of survival with uncertain market position or poor financial performance,
- • the need to restructure the capital group for financial, organisational, logistical or tax reasons [1] .
When considering alternative merger procedures, in order to achieve a similar economic effect, the following may be indicated:
- • procedures for the exchange of shares,
- • joint-ventures,
- • strategic alliances,
- • venture capital programmes,
- • License agreements.
This paper will present a legal analysis of:
- trade law: Article 491-527 k,s.h., Poland has not yet implemented Council and Parliament Directive No. Directive 2005/56 of 26 October 2005 on cross-border mergers of capital companies. This directive should be implemented into the legal system of EU Member States to 15 December 2008,
- balance sheet law: Article 44a-44d u.o.r. (from 1 January 2002 Regulations on the settlement of a merger of units subject to the regulations of u.o.r., including capital companies, have been introduced),
- tax law: Corporate Income Tax Act, Tax Ordinance. The provisions contained in the adoption on the taxation of income on mergers of capital companies are a consequence of the implementation of the Council Directive of 23 July 1990 No 90/434/EEC on a common system of taxation for mergers, divisions, transfers of assets and exchanges of shares between companies of different EU Member States. The Accession Treaty defines that in relation to Poland, the regulation of this directive applies to corporation tax, and a possible taxpayer may be a public limited liability company or limited liability company. Poland has not yet implemented Directive 2005/19.
It is assumed that the legal procedure for mergers consists of the following steps:
- • The management phase includes, among others, the following preparatory activities: drawing up merger plans and reports of the boards of merging companies, drawing up an expert opinion, announcing the merger plan,
- • Ownership phase - includes, among other things, the adoption of a resolution of a meeting of shareholders (a voluntary meeting of shareholders) to merge the company with another company (other companies),
- • Judicial phase - includes filing a call to the register and making a merger announcement.
In considering the tax implications of the merger process, it must be concluded that Article 10 updop, the legislature has distinguished in terms of eligible income as a result of the share of profits of legal persons certain taxable assets relating to the specific situation in the operation of companies, i.e. mergers.
The special emphasis of the merger throughout the corporate income tax law is on the fact that these are exceptional steps in the activities of those entities, which constitute forms of asset, financial or organisational restructuring and are linked to transfers of assets between separate entities, which requires a specific tax approach.
However, it should be stressed that however Article 10 Updop points to merger tax rules, both in content section 1 (points 5 and 6), as well as section 2 and 4-5, it is, however, not a comprehensive regulation of taxation. The rules on mergers are also laid down in other parts of the Corporate Income Tax Act, among others:
- • Article 7 updop - in terms of settlement of tax loss,
- • Article 12 update - precise rules for taxation of division and mergers,
- • Article 16g updop - to establish the initial value of fixed assets and intangible assets for tax depreciation purposes.
Distribution of the rules on the taxation of mergers, both in substance and in substance Article 10 as well as other provisions of the Act, is dictated by the need to address issues regulated in detail in other parts of that law (tax loss, depreciation), second However, it follows from the fact that in the merger process a separate tax assessment should be made against:
- • the acquired company,
- • the shareholders of the acquired company,
- • the acquiring company (newly bound),
- • the shareholders of the acquiring company (newly tied).
The tax rules apply to each of these categories of entities, but regulations in this respect, due to the split of the adoption into defined chapters, occur at different locations of the law.
The current rules on mergers of capital companies, in principle providing for tax neutrality in mergers and divisions, are partly aligned with EU recommendations [2] , and in part in response to the demands of doctrine and tax practice [3] . The introduction of references to participation in mergers between companies from other EU countries was the result of Poland's accession to the European Union and the possible participation of these companies in the presented transformation activities [4] .