Multi level up-stream merger

Bibliogr. s. 24-25

The article concerns a (statutory) upstream merger of commercial companies under the rules set forth in the Polish Code of Commercial Companies (the "CCC"). The article argues for a model for a simplified merger by acquisition (within the meaning of Article 492 of the CCC) when the parent company simultaneously merges with a group of its subsidiaries in one procedure. In this situation, all subsidiaries are entirely controlled by their parent, either directly or indirectly through another subsidiary. For example, assume Company A merges with Companies B and C. All shares in Company C are owned by Company B, and accordingly all shares in Company B by Company A. Under the literal interpretation of provisions governing mergers, simplified merger should not be allowed in such a case. Therefore, the acquiring company should follow ordinary merger procedure including the increase of its share capital. The author presents an opposing view. The article argues that, in such case, the increase of the acquiring company's share capital is not permissible because it would lead to the infringement of Article 514 § 1 of the CCC. Additionally, contrary to its definition laid out in the CCC, such a multilevel upstream merger should be regarded as a merger with its entirely-owned subsidiary within the meaning of Article 516 § 6 of the CCC. Therefore, the acquiring company should be allowed to proceed with a simplified merger procedure instead of an ordinary one because it is faster and less cumbersome for the merging companies in regard to the formalities prescribed by the law. The functional interpretation of the underlined provisions along with the need of trading practice advocates for the solution proposed by the author.