Are all corporations allowed to merge or consolidate directly? The answer is NO. Banks and banking institutions,
building and loan associations, trust companies, insurance companies, public utilities, educational institutions shall obtain first favorable recommendation from the appropriate government agency. The following are the effects of merger or consolidation: (1) Singleness. The constituent corporations shall become a single corporation. (2) Separate existence ceases. This means that the separate existence of the constituent corporations shall cease except that of the surviving or the consolidated corporation. (3) Possessions. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all duties and liabilities of a corporation organized under the Corporation Code of the Philippines. (4) Transfer. All property, real and personal, and all receivables due on whatever account including subscriptions to shares … other interest of, or belonging to, or due to each constituent corporation shall be transferred to and vested in such surviving or consolidated corporation without further act or deed. (5) Non-impairment of creditor’s rights. The surviving or consolidated corporations shall be responsible and liable for all liabilities and obligations ( rights of creditors nor any lien shall not be impaired). Generally, when one corporation (transferor) sells or transfer all of its assets to another corporation (transferee) the latter is not liable for the debts and liabilities of the transferor except in the following :
(1) the transactions amounts to merger or consolidation,
(2) purchaser (transferee) expressly or impliedly agrees to assumed such debts,
(3) when the purchasing corporation is merely a continuation of the selling corporation,
(4) transactions were entered into fraudulently inorder to escape liability for such debts Companies or firms do merges or consolidates is to have larger and greater power. The deregulation of oil prices in the case of the Philippines created an environment of insecurities on the part of industries. Companies believed that there is a need to be larger and have greater power. Synergistic effect is another reason why do they merge or consolidates. Perhaps, the greatest management motive for a merger is the possible synergistic effect. Synergy is said to occur when the whole is greater than the sum of the parts. This 2+2=5 effect maybe the result of eliminating overlapping functions in production and marketing as well as meshing together ( become entangled as in a net) various engineering capabilities.