In accordance with the provisions of the General Law of Commercial Companies, any company may be merged with another as long as it complies with the requirements established by the same law.
In order for one company to merge with another, it is an essential requirement that each of them decide it in the terms that correspond to its legal nature. For example, when it comes to merging a corporation, an extraordinary general meeting of shareholders must be called so that the merger agreement is reached.
These agreements must be registered in the public register of commerce and must be published in the Official Gazette of the Federation (DOF) and all the merging companies must publish their latest balance sheet and the company that ceases to exist must publish the form of payment of your liabilities.
After 3 months of registering the merger in the public registry of the property, it will take effect in the event that any creditor does not agree with the merger, they may legally object within the aforementioned period, in case of not doing so, the companies may merge and the society that subsists will take charge of their extinction.
The merger may take effect when it is found in the following cases:
In the event that all the debts of the companies are paid.
In the event that the amount of the liability is deposited in a credit institution, the certificate in which the deposit is recorded must be published in the official newspaper of the town.
In the event that there is the express consent of each and every one of the creditors of the companies to be merged.
In the event that the merger results in the extinction of the companies and the creation of a new one, it must be established in accordance with the principles that govern the company whose gender it is to belong to.
2 companies of the same species may merge and form a different one, for example: two corporations and be part of a limited liability company.
Accounting aspect:
When a company acquires the shares that represent the capital of another, there is no merger since they continue to have legal personality, each one independent, however this does not mean that they are independent in their financial and economic structure, but rather that they form a economic entity composed of a set of companies.
This economic entity is made up of various companies with independent legal personality, but as regards the relationships between them, we can classify them as follows:
Holding companies: are those that own 100% of the capital of the others.
Subsidiary companies: they are those that at least 51% of their capital correspond to the controlling company.
Subsidiary companies: they are those whose total capital is subscribed and exhibited by a controlling company.
When there is a merger, the companies that are grouped into one lose their independent legal personality, with only one legal entity arising, which may be one of the existing companies or a new one, according to the above, we can say that the merger involves the dissolution of one or more companies that are absorbed by others.
With regard to the accounting aspect, we must definitely find the similarity on the date of preparation of the financial statements and create the union of these, and in this way the consolidated financial statements emerge.
In accordance with the laws in the legal part, we can summarize the pre-merger requirements as follows:
Express agreement of each and every one of the companies to be merged.
Payment to creditors or their express consent.
Formulation and preparation in each of the companies of a statement of financial position that serves as the basis for the merger.
The General Law of Mercantile Companies imposes the obligation to publish the balance sheet of each and every one of the companies that are going to merge.
These balance sheets must reasonably reflect the financial situation of the companies at the merger date, for which it is convenient that a balance audit be formulated in order to achieve the aforementioned objective.
When practicing this audit, generally accepted practices must be followed, but special care must be taken in the systems that are followed in the valuation of the items that form the assets of the companies to be merged.
Although the law does not expressly establish when imposing the obligation on the companies to be merged to publish their latest balance sheet, it must be understood that the balance to be published is the one that shows the situation of the company in which the merger, that is, after the appropriate adjustments have been made.
Therefore, these balances will serve as the basis for the merger of companies, that is, in order for the subsisting company to correctly show the balance sheet items it suffers from arising from the merger.
Once recorded in the accounting books of each and every one of the companies involved, the necessary adjustments entries will proceed to settle the various asset, liability and capital accounts using for this purpose the special account called the MERGER ACCOUNT.
MERGER ACCOUNT: It is charged for the amount of the balance of each and every one of the asset accounts of the company to be merged. It is paid for the amount of the balances of each and every one of the liability accounts of the company to be merged. The balance of this account may be debtor or creditor depending on the amount of the assets or liabilities of the company.
Generally, the balance of this account should be debtor since it is considered that a company should have more assets than liabilities in its balance sheet.
Once the previous movements have been made, the merger account must be left with a debit balance that represents the net amount that that company is going to contribute to the merger and that must correspond to the sum of the company's stockholders' equity.
Finally, once the merger is completed, the stockholders 'equity accounts will be settled by crediting the merger account, and the stockholders' equity will be fully settled.
As a result of the merger, whether a company subsists or a new one is created, the asset, the liability and the capital must be the sum of the various concepts that appear in each and every one of the companies to be merged.
For this purpose, a worksheet must be prepared in which the data of each and every one of the companies must be obtained.
On some occasions the merging companies have had commercial relationships before, in this case it is necessary to carry out necessary eliminations so that the assets and liabilities that arise from the merger are not “inflated”.
Let us suppose that company A and B are to be merged and that in the assets of the first there is a credit for the latter and consequently in the books of company B a liability appears in favor of the Company. A. If we add the various concepts of accounts receivable and accounts payable, we find that the assets arising from the merger are increasing with the amount charged to the Company. B and on the other hand the liability is also added by the previous amount, to avoid this situation an elimination entry must be formulated, charging the liability accounts with credit to the asset accounts.
These elimination entries do not affect the stockholders' equity that the merged companies will have, since the assets and liabilities are decreased by the same amount.
It can also happen the case that one or more companies that are going to merge pass shares, shares, etc, of other companies, in this case the company that owns the shares of others has an asset that may correspond totally or partially to the capital of Therefore, the amount of the stockholders 'equity that arises from the merger will not be the sum of the stockholders' equity of each and every one of the companies involved and this amount will be reduced by the amount of the investments in shares, since by law the Merge two companies can not be part of the asset, investments in shares of companies.
