Company merger: how the process between companies works at the notary’s office

A merger is an extraordinary transaction whereby two or more companies are combined into a single organisation. Article 2501 of the Civil Code provides for two forms of merger: a merger by formation, involving the establishment of a new company, and a merger by absorption, in which one company (the absorbing company) absorbs one or more companies being absorbed. Under Article 2504-bis of the Civil Code, the company resulting from the merger or the acquiring company assumes the rights and obligations of the participating companies, continuing all their relationships, including those relating to legal proceedings, prior to the merger: there is therefore full continuity of legal relationships. As regards the nature of the transaction, case law has long characterised it as an evolutionary and transformative event involving the same legal entity; the Joint Divisions of the Court of Cassation (judgement no. 21970/2021) have, however, clarified that a merger by incorporation results in the dissolution of the incorporated company, with effects akin to succession, without prejudice to the automatic continuation of all relationships by the acquiring company.

The entire merger process requires the involvement of a notary, acting as a public official, to record the shareholders’ decisions and to draw up the merger deed in public form. The law prescribes a sequence of formal steps to protect shareholders, creditors and third parties, in order to ensure the transparency of financial valuations and the correct determination of the share exchange ratio.

The following paragraphs analyse the stages of the standard procedure, the documentation required and the exemptions provided for simplified mergers.

The ordinary proceedings provided for in the Civil Code and their stages

The ordinary merger procedure involves a series of planning, information and decision-making steps involving the governing bodies and shareholders of all the participating companies.

The key stages of the process are as follows:

• Merger plan (Article 2501-ter of the Civil Code): the administrative bodies of all the participating companies shall draw up a joint plan containing, amongst other things, the articles of association of the resulting or acquiring company, the share exchange ratio with any cash adjustment (which, in the ordinary procedure, may not exceed ten per cent of the nominal value of the shares allocated), the methods for allocating the shares and the date on which the accounting effects take effect.
• Publication of the scheme: the scheme must be entered in the Companies Register of the place where the participating companies have their registered offices or, alternatively, published on the company’s website (Article 2501-ter, paragraph 3, of the Civil Code). A period of at least thirty days must elapse between the entry or publication and the date of the shareholders’ resolution, unless this time limit is waived by unanimous consent of the shareholders.
• Information documents: during the thirty days preceding the decision, the draft merger plan, the financial statements for the last three financial years, and the up-to-date balance sheet of each company (Article 2501-quater of the Civil Code, referring to a date no more than one hundred and twenty days prior to the filing of the draft plan) must remain on file at the company’s registered office (or published on the website), the report by the administrative body on the legal and economic grounds for the transaction (Article 2501-quinquies of the Civil Code) and the experts’ report on the fairness of the exchange ratio (Article 2501-sexies of the Civil Code), subject to the exemptions and unanimous waivers permitted by law (Article 2501-septies of the Civil Code) .
• Merger resolution (Article 2502 of the Civil Code): a merger is decided by each company through the approval of the relevant plan: in limited companies, by the majorities required for amendments to the articles of association; in partnerships, unless otherwise agreed, by the consent of a majority of the partners calculated according to each partner’s share of the profits, with a right of withdrawal for any partner who has not given their consent. The decision is recorded by a notary and entered in the Companies Register (Article 2502-bis of the Italian Civil Code).
• Objections by creditors (Article 2503 of the Civil Code): the merger deed may only be executed sixty days after the last of the merger decisions has been registered; this is the deadline by which creditors whose claims arose prior to the publication of the merger plan may lodge an objection. If no companies with share capital are involved in the merger, the period is reduced to thirty days (Article 2505-quater of the Civil Code). Early conclusion is possible in the cases set out below.
• Deed of merger (Article 2504 of the Civil Code): once the period for lodging an objection has expired, or where the conditions for proceeding in advance are met, the notary draws up the deed of merger by way of a public deed. The deed is filed for entry in the Companies Register, and the merger takes effect upon the last of the required entries (Article 2504-bis, paragraph 2, of the Civil Code).

Mergers by incorporation of wholly-owned companies

The Civil Code introduces significant procedural exceptions where the transaction involves specific shareholding relationships. The most common scenario is the merger of wholly-owned companies, governed by Article 2505 of the Civil Code.

Where the acquiring company holds all the shares or units of the company being acquired, the transaction merely serves to bring the legal situation into line with an economic reality that is already unified: as there are no minority shareholders to protect, there is no need to determine an exchange ratio.

In this scenario, the following do not apply:

• the provisions of the scheme relating to the exchange ratio and any cash adjustment, the procedures for the allocation of shares and the date from which they become entitled to profits (Article 2501-ter, paragraph 1, points 3, 4 and 5, of the Civil Code);
• the report of the administrative body (Article 2501-quinquies of the Civil Code);
• the experts’ report on the fairness of the exchange ratio (Article 2501-sexies of the Civil Code).

However, unless waived by unanimous consent of the members, the statement of assets and liabilities (Article 2501-quater of the Civil Code) and the filing of documents provided for in Article 2501-septies of the Civil Code remain mandatory.

According to prevailing notarial practice, full ownership of the shareholdings must be in place at the time the merger deed is executed, whilst it is permissible to approve the merger plan at an earlier stage, subjecting the execution of the deed to the subsequent acquisition of the remaining shareholdings. The memorandum of association or the articles of association may also provide that the merger is to be decided upon, by a resolution recorded in a public deed, by the respective governing bodies, provided that, for each company, paragraphs 3 and 4 of Article 2501-ter are complied with and, for the acquiring company, Article 2501-septies of the Civil Code is complied with. This is without prejudice to the right of shareholders of the acquiring company who represent at least five per cent of the share capital to request, by means of an application addressed to the company within eight days of the filing or publication of the draft plan, that the decision be adopted by the shareholders in accordance with Article 2502(1) of the Civil Code.

In addition to the incorporation of a wholly-owned direct subsidiary, prevailing legal doctrine and the guidelines issued by notarial councils permit the extension, by analogy, of the simplifications – in particular the exemption from the requirement for an expert’s report – to cases where the transaction does not result in any change in the relative value of the shareholders’ holdings:

• ‘cascading’ merger: the parent company wholly owns a second company, which in turn holds 100 per cent of a third company;
• merger of ‘sister’ companies: two or more companies wholly and directly owned by the same sole shareholder or by the same parent company;
• merger between ‘mirror’ companies: the companies involved have the same shareholder structure, with identical shareholdings and identical rights;
• reverse merger: the parent company is absorbed into its wholly-owned subsidiary.

As these are analogous applications not expressly provided for in the legislation, their practical feasibility must be assessed on a case-by-case basis with the appointed notary.

The incorporation of companies in which at least 90 per cent of the shares are held

Article 2505-bis of the Civil Code extends the simplified procedure to the merger of companies in which the merging company holds a stake of ninety per cent or more. In such cases, the provisions concerning the statement of financial position (Article 2501-quater of the Civil Code), the report of the administrative body (Article 2501-quinquies of the Civil Code), the experts’ report (Article 2501-sexies of the Civil Code) and the filing of documents (Article 2501-septies of the Civil Code) do not apply, provided that the other shareholders of the company being absorbed are granted the right to have their shares or quotas purchased by the absorbing company for a consideration determined in accordance with the criteria laid down for withdrawal.

Unlike the scenario set out in Article 2505, the exchange ratio remains necessary here, as there are minority shareholders of the company being absorbed to whom shares in the absorbing company must be allocated, unless they exercise their right of sale. The time limit and procedures for exercising this right are not laid down in the Civil Code and must therefore be set out in the draft merger agreement; for public limited companies, notarial practice considers Article 2437-ter, paragraph 5, of the Civil Code to be applicable, whereby shareholders are entitled to be informed of the valuation of the shares within the fifteen days preceding the general meeting. According to the prevailing view, any dispute regarding the value of the consideration does not prevent the merger from being completed, without prejudice to the shareholder’s right to compensation.

Where provided for in the memorandum of association or the articles of association, the resolution to merge may be adopted by the administrative body of the acquiring company alone, by means of a resolution recorded in a public deed, provided that Article 2501-septies of the Civil Code is complied with and that the acquiring company’s merger plan is published at least thirty days before the date set for the resolution of the company being acquired; in the company being acquired, where there is a minority, the decision must instead be taken by the shareholders. In this case too, shareholders of the acquiring company representing at least five per cent of the share capital may request that the decision be referred to the shareholders.

Shortened time limits in mergers not involving limited companies

A further simplification is provided for in Article 2505-quater of the Civil Code, which applies where the merger does not involve public limited companies, limited partnerships with share capital or co-operative societies with share capital: this is the typical case of a merger between limited liability companies and/or partnerships.

In such cases, the law provides for the main time limits in the proceedings to be halved:

• the thirty-day period between the publication of the proposal and the shareholders’ decision is reduced to fifteen days (Article 2501-ter, paragraph 4, of the Civil Code);
• the thirty-day period for the prior filing of documents at the registered office is reduced to fifteen days (Article 2501-septies, paragraph 1, of the Civil Code);
• The sixty-day period for creditors to lodge an objection is reduced to thirty days (Article 2503(1) of the Civil Code).

The same provision also stipulates that neither the prohibition on shareholdings by companies in liquidation that have commenced the distribution of their assets (Article 2501(2) of the Civil Code) nor the ten per cent limit on cash adjustments (Article 2501-ter(2) of the Civil Code) applies to such mergers.

The reductions in time limits can be combined with the exemptions from documentation requirements provided for companies that are wholly-owned or 90 per cent-owned, enabling small and medium-sized enterprises to complete the merger swiftly and with a minimum of paperwork.

Summary table: procedural deadlines and required documents

The first table summarises the terms of the merger procedure and the relevant options for derogation; the second table summarises the documents required in the various scenarios, both ordinary and simplified.

Table 1 – The terms of the merger process

Term	General rule	Mergers not involving public limited companies (Article 2505-quater of the Civil Code)	Possible exemptions
Between the publication of the proposal and the shareholders’ decision (Article 2501-ter, paragraph 4, of the Civil Code)	30 days	15 days	This provision may be waived with the unanimous consent of the shareholders of each company
Filing of plans, financial statements, balance sheets and reports at the registered office or on the website (Article 2501-septies of the Civil Code)	30 days prior to the decision	15 days prior to the decision	May be waived with the unanimous consent of the shareholders; not required by law in the circumstances set out in Article 2505-bis of the Civil Code.
Between the date of the final registration of the merger resolutions and the signing of the deed (Article 2503 of the Civil Code)	60 days	30 days	The merger may be concluded in advance provided that: prior consent is obtained from prior creditors; non-consenting creditors are paid; the corresponding sums are deposited with a bank; and a single audit firm certifies the transaction in accordance with Article 2501-sexies of the Civil Code. In the event of an objection, the court may nevertheless authorise the merger subject to the provision of appropriate security (Article 2503(2) of the Civil Code)

Table 2 – Documents required: standard procedure and simplified mergers

Document	Ordinary procedure	Merger of a wholly-owned company (Article 2505 of the Civil Code)	Acquisition of 90 per cent or more (Article 2505-bis of the Civil Code)*
Guidance on the project regarding the exchange ratio, adjustment, allocation and profit-sharing (Article 2501-ter, paragraphs 3–5, of the Civil Code)	Required	Not required	Requests (there are minority shareholders)
Statement of Financial Position (Article 2501-quater of the Civil Code)	Request; may be waived by unanimous decision	Request; may be waived by unanimous decision	Not required by law
Report by the administrative body (Article 2501-quinquies of the Civil Code)	Request; may be waived by unanimous decision	Not required	Not required by law
Experts’ report on the fairness of the exchange ratio (Article 2501-sexies of the Civil Code)	Request; may be waived by unanimous decision	Not required	Not required by law
Filing of documents at the registered office or on the website (Article 2501-septies of the Civil Code)	Required; this requirement may be waived by unanimous decision	Required	Not required by law; it remains necessary if the merger is decided by the administrative body of the acquiring company (Article 2505-bis, paragraph 2, of the Civil Code)

* The exemptions under Article 2505-bis of the Civil Code apply provided that the minority shareholders of the company being absorbed are granted the right to have their shareholdings purchased by the absorbing company at a price determined in accordance with the criteria laid down for withdrawal.

Common errors and issues that slow down mergers in practice

When planning a merger, failure to take certain technical aspects into account may compromise the validity of the documents or slow down the notary’s work:

• Confusion regarding a merger following a leveraged buy-out: where a company has incurred debts to acquire control of another company and, as a result of the merger, the assets of the latter constitute a general security or a source of repayment for those debts, Article 2501-bis of the Civil Code applies, which expressly excludes the simplifications provided for in Articles 2505 and 2505-bis and requires specific, enhanced disclosure obligations (disclosure of financial resources, reports by the board of directors and experts, and the auditor’s report).
• Failure to comply with time limits in the absence of unanimity: reducing the time limits for publication or filing without the unanimous consent of the shareholders of all participating companies – duly recorded in the minutes – exposes the transaction to challenges and to the refusal to accept the document.

The effects of the merger on contracts, employment relationships and debts

The merger takes effect from the time of the last entry of the merger deed in the Companies Register (Article 2504-bis, paragraph 2, of the Civil Code). Only in the case of a merger by absorption may a later effective date be set; for accounting purposes and the distribution of profits, however, backdating is also permitted. From that moment, the company resulting from the merger or the acquiring company assumes the rights and obligations of the participating companies, continuing all their relationships, including legal proceedings, prior to the merger.

The consequences are evident in three main areas:

• Contracts and commercial relationships: succession to the contractual positions of merged or absorbed companies is automatic and does not require the consent of the counterparties, unless change-of-control clauses or other provisions to the contrary have been agreed.
• Employment relationships: a merger constitutes a transfer of undertaking within the meaning of Article 2112 of the Civil Code: employment relationships continue without interruption with the resulting or acquiring company, with all accrued rights retained; in companies with more than fifteen employees, the trade union information and consultation procedure set out in Article 47 of Law No 428/1990 also applies.
• Debts and legal proceedings: the resulting company or the acquiring company assumes all the pre-existing liabilities of the participating companies; any ongoing legal proceedings continue without interruption against the company resulting from the transaction.

Companies in liquidation that have already commenced the distribution of their assets are not permitted to take part in a merger (Article 2501(2) of the Civil Code); however, this prohibition does not apply to mergers in which no companies with share capital are involved (Article 2505-quater of the Civil Code). For third-sector organisations intending to carry out a merger, the process involves compliance with the requirements of the Single National Register: for further details, please consult the guide on third-sector organisations and the RUNTS.

FAQ – Merger procedures and corporate compliance requirements