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- Smiciklas, Martin
(författare)
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Fusion enligt ABl 14:8 - en skatte-, bolags, och redovisningsrättslig studie
- 1993
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Bok (övrigt vetenskapligt/konstnärligt)abstract
- Summary in English This dissertation bears the title "Fusions as defined by the Swedish Companies Act 'ABL' of 1975 (14:8) - a study of tax, corporation and accountancy legislation". The dissertation constitutes a study of fusions from the perspective of (as the title suggests) taxation, corporation and accountancy legislation. The Swedish Companies Act (ABL) includes rules concerning two forms of fusion. Fusions can take place through either 'absorption' or 'combination'. In turn, absorption is possible in two variants. One variant is the absorption of a wholly owned subsidiary company into the parent company (ABL 14:8) while the other variant is absorption involving companies where such a relationship does not exist (ABL 14:1). Combination is a form of fusion whereby two or more companies (assigning companies) are unified through the establishment of a new company which inherits their assets and liabilities in return for shares in the acquiring company (ABL 14:2). The rules in the act are relatively complicated and detailed. By means of a formalized procedure, creditors and other interested parties are granted protection against inappropriate behaviour. This dissertation deals mainly with fusions between public companies as described in ABL 14:8. Fusions are characterized by the dissolution of one or more companies. The dissolution takes place according to an established procedure whereby the company (or companies) that is being dissolved (assigning company) transfers all of its assets and liabilities to the company which inherits these (the acquiring company). The dissolution takes place without the liquidation of assets and liabilities. The capital is transferred intact and the acquiring company represents the dissolved company in relation to its rights and obligations. The transfer of capital is total and the dissolved company ceases to exist as an independent legal entity. Fusion is a juridical process by which two companies can amalgamate. In questions concerning the actual merger from civil and corporate legal points of view, the process is regulated by ABL. In addition to these aspects, the fusion also raises other matters. The companies must keep a full account of the fusion and they must also pay tax in conjunction with the fusion. The purpose of this dissertation is to highlight those issues which may become relevant with regard to the legal rules concerning accountancy, corporate organization and taxation. Thus, fusions are business events involving a number of different actions which are, in turn, regulated by different systems of rules. The various rules which concern issues involved in fusions are closely related to one another. The companies in a fusion must take into account rules of corporate law, they must keep accounts of the fusion in accordance with the rules concerning accountancy and they must fulfil the terms of the taxation laws so that the correct amount of tax is paid. The corporate legal procedures for fusions are contained in ABL. The taxation rules are spread among various statutes in the taxation legislation. There are, however, no particular rules for the accounting of fusions. In this presentation, I have chosen to prioritize the issues concerning the tax costs for companies involved in fusions and the distribution of the parent company's own capital. Capital transfer and amalgamation Fusions are carried out for various reasons. From the point of view of business economics, fusions might be carried out in order to reorganize the business of a concern. Fusions, like other actions, are normally evaluated on the basis of cost. On the basis of such an evaluation, fusions will not take place if they are too costly or if the cost can be reduced if a different action is taken. The effect brought about by a fusion of merging the business of two or more companies can, namely, be brought about in other ways. The companies in a group might, for example, take such organizational actions that they in effect act as one company. Furthermore, the companies can, within the framework of the concern, fulfil co-operation if the parent company transfers the business of the subsidiary to itself thereby eaving the subsidiary an empty shell. When companies consolidate without fusing, they must take into account the various stipulations of company law which regulate the procedures undertaken. From the point of view of corporate law, the rules which mainly come into play are those which protect creditors from misuse of company capital. In the alternative procedures to fusion, parent companies can empty the assets of a subsidiary to the detriment of the creditors of the subsidiary. Such actions are in principle prevented by the rules concerning payments to shareholders. Parent companies are shareholders in their subsidiaries and as such must respect the rules which apply to the distribution of profits and other dispositions of the funds of the subsidiary companies. The rules contained in corporate law for the protection of creditors are, to a large extent, in the form of definite rules of procedure dictating how the transfer of funds between companies and their shareholders is to take place. All transfers which are of benefit to the shareholders fall under the regulations found in chapter 12 of ABL. This means that companies may only pay out funds in the form of dividends, payments in conjunction with reductions of the share capital or reserve fund or in conjunction with the liquidation or fusion of the company. In these standardized procedures, the company making payments must respect the established protection rules. In the case of fusions and related procedures, the most relevant payments are distribution of dividends or the distribution of remaining equity as part of the actual fusion procedure. In the case of alternative procedures (for example by group benefits whereby the parent company takes over the entire equity of a subsidiary), the parent company may not control a greater degree of funds than those designated as payable funds. In ABL, the payable funds are limited by the regulations concerning the distribution of the company's equity. Only that capital which comes under free equity is payable. The free equity is determined by how the total equity is accounted. In turn, the fusion is an event which may affect the capital distribution of the parent company. It is, therefore, important that the accounting of the fusion takes into account the fact that the equity of the parent company may be altered to the detriment of the creditors of the parent company. In connection with the adaptation of certain Swedish legislation to comply with EC regulations, changes to the regulations concerning fusions in the companies act have been suggested. These suggested changes would imply that the fusion process as such would remain. After the adaptation to the EC, it will still be possible to carry out fusions in the form of combination and absorption between independent companies and between parent companies and their subsidiaries. Even after the introduction of the EC-adapted regulations, an important function of ABL will be to protection for creditors. With this in mind, my presentation would seem relevant even with regard to those regulations which will apply after adaptation to the EC. The protection of creditors For the protection of creditors, it is important that the acquisition of assets and debts is correctly accounted for by the parent company after the fusion. The regulations in corporate law which provide protection for company creditors are based on accountancy regulations. For the creditors of a company, the capital of the company is the only source of recompense against any claims they may have. The regulations of corporate law protect creditors from improper use of company funds on the part of shareholders. The shareholders shall not control more than the non-restricted equity of the company. The remaining funds, the restricted equity, is to remain within the company as security for the creditors. The shareholders may only use restricted equity under specially regulated conditions. These conditions include great demands on publicity. It must be made clear to the creditors how much of the company's equity is bound and therefore protected, to a certain extent, from use by the shareholders. The capital of a company consists primarily of accountancy entries. The rules in company law concerning protection of equity depend, therefore, upon the company keeping correct accounts of its assets and debts. It is the accounted capital which is the object of protection in accordance with the regulations of corporate law. In the occurrence of a fusion, the accounting of the assets of the mother company is altered. In some cases, assets may have been accounted for in one manner in the subsidiary in order to be accounted for in a different manner in the -parent company after fusion. The parent company may, for example, take over the fixed assets of the subsidiary which, according to general accountancy regulations, are to be accounted for as turn-over assets by the parent company. This alteration can imply changes in the capital composition of the parent company. In order that accountancy should fulfil the demand in civil regulations for the protection of creditors, it should be adapted to the same objectives as those of the regulations for the protection of capital. A fusion involves two companies. The creditors of the assigning company are protected from improper use of funds by the actual procedure involved in the fusion. They may demand security for their claims. According to present rules, the creditors of the parent company are not given an opportunity to state their views concerning the fusion. In order to protect them from use of company funds by the parent company in a manner which is to the creditors' detriment but to the advantage of the shareholders, the accountancy procedures should be desig
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