In Japan, mergers seldom involve the establishment of a new entity. Most take the form of a merger by absorption. This is because the establishment of a new company requires the carrying out anew of many complex procedures.
In contrast, in a merger by absorption, which company survives is chosen on the basis of such matters as the approvals that the parties to the merger already have, and accounting and tax matters.
Partner
Anderson Mori and Tomotsune
Cash mergers
A “cash merger” is a merger by absorption in which cash, rather than shares of the surviving company, is paid to the shareholders of the company that is dissolved.
Pursuant to the Company Law, which was passed in 2006, it has been possible to use cash, rather than shares, as consideration since May 2007. By this method, with the surviving company paying cash to the shareholders of the dissolved company, the 100% parent-subsidiary relationship between the surviving company and its current shareholders can be maintained.
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Hiroshige Nakagawa is a partner at Anderson Mori and Tomotsune and chief representative of its Beijing Office
Beijing Fortune Bldg., Room 809
No. 5, Dong San Huan Beilu
Chao Yang Qu, Beijing, China
Postal code: 100004
Tel: +86 10 6590 9060
Fax: +86 10 6590 9062
Email: hiroshige.nakagawa@amt-law.com
