Advantages & Disadvantages of Mergers in Bangladesh

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Mergers & Amalgamation Advantages, Disadvantages & process in Bangladesh


Ordinarily amalgamation means merger. Merger is a combination of two or more companies into a single company where one survives and the others lose their corporate existence. The survivor acquires the assets as well as liabilities of the merged company or companies.


Advantages

  1. Mergers result in a large tax benefit to the companies. A merged company gets tax benefits when a profit-making company takes over a loss-making company.
  2. Merger of companies can increase production. The merged company may be able to capture more consumers than they would as individual entities.
  3. As in merger one company acquire all the assets of the merged company.
  4. “Amalgamation” is defined in the law and it is a very straight forward process. 
  5. In merger all shares are transferred to the merged company. This way merger protects interests of the shareholders. 
  6. Net capital of the merged company is increased.
  7. The merged company can make use of the very best minds from both companies and make up for shortfalls in the individual companies' skill-sets.
  8. In merger the goodwill, intellectual properties, licenses, bonds are transferred to the merged company. 


Disadvantages:

  1. Costs and expenses for merger may be higher than liquidation.
  2. In order to merge companies, approval from the court is needed. 
  3. In merger creditors approval is mandatory. Hence, the creditors can protest the merger of companies. 
  4. The merged company may face employee issues.


As per section 12 of the Companies Act 1994, a company by special resolution may alter the provisions of its memorandum with respect to the objects of the company, so far as may be required to enable it to amalgamate with any other company. Companies are required to file joint petition to the Court under section 228 showing that the compromise or arrangement has been proposed for the purposes to amalgamate companies. Where an order under Section 229 of Companies Act 1994 provides for the transfer of property or liabilities, that property shall be virtue of the order, be transferred to and vest in, and those liabilities shall be virtue of the order transferred to and become the liabilities of the transferee company. Finally this confirmation of alteration is to be certified by the Registrar of the Joint Stock Companies and Firms of Bangladesh.

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