Corporation Law: The Revised Corporation Code of the Philippines - Secs 75, 76, 77, 78 & 79

  THE REVISED CORPORATION CODE  OF THE PHILIPPINES 

Republic Act No. 11232 

TITLE IX - MERGER AND CONSOLIDATION

Section 75. Plan of Merger or Consolidation. 

Two (2) or more corporations may merge into a single corporation which shall be one of the constituents corporations or may consolidate into a new single corporation which shall be the consolidated corporation.

The board of directors or trustees of each corporation, party to the merger or consolidation, shall approved a plan of merger or consolidation, shall approved a plan of merger or consolidation, shall approve a plan of merger or consolidation setting forth the following:

(a) The names of the corporations proposing to merge or consolidate hereinafter referred to as the constituent corporations;

(b) The terms of the merger or consolidation and the mode of carrying the same into effect;

(c) A statement of the changes, if any, in the articles of incorporation of the surviving corporation in case of merger; and, in case of consolidation, all the statements required to be set forth in the articles of incorporation for corporations organized under this Code; and

(d) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable.

Section 76. Stockholders' or Members' Approval.

Upon approval by a majority vote of each of the board of directors or trustees of the constituent corporations of the plan of merger or consolidation, the same shall be submitted for approval by the stockholders or members of each of such corporations at separate corporate meetings duly called for the purpose. Notice of such meetings shall be given to all stockholders or members of the respective corporations in the same manner as giving notice of regular or special meetings under Section 49 of this Code. The notice shall state the purpose of the meeting and include a copy or a summary of the plan of merger or consolidation.

The affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of each corporation in the case of stock corporations or at least two-thirds (2/3) of the members in the case of nonstock corporations shall be necessary for the approval of such plan. Any dissenting stockholder may exercise the right of appraisal in accordance with this Code: Provided, That if after the approval by the stockholders of such plan, the board of directors decides to abandon the plan, the right of appraisal shall be extinguished.

Any amendment to the plan of merger or consolidation may be made: Provided, That such amendment is approved by a majority vote of the respective boards of directors or trustees of all the constituents corporations and ratified by the affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members of each of the constituents corporations. Such plan, together with any amendment, shall be considered as the agreement of merger or consolidation.

Section 77. Articles of Merger or Consolidation.

After the approval by the stockholders or members as required by the preceding section, articles of merger or articles of consolidation shall be executed by each of the constituent corporations, to be signed by the president or vice president and certified by the secretary or assistant secretary of each corporation setting forth

(a) The plan of the merger or the plan of consolidation;

(b) As to stock corporations, the number of shares outstanding, or in the case of nonstock corporations, the number of members;

(c) As to each corporation, the number of shares or members voting for or against such plan, respectively;

(d) The carrying amounts and fair values of the assets and liabilities of the respective companies as of the agreed cut-off date;

(e) The method to be used in the merger or consolidation of accounts of the companies;

(f) The provisional or pro forma values, as merged or consolidated, using the accounting method; and

(g) Such other information as may be prescribed by the Commission.

Section 78. Effectivity of Merger or Consolidation. 

The articles of merger or of consolidation, signed and certified as required by this Code, shall be submitted to the Commission for its approval: Provided, That in the case of merger or consolidation of banks or banking institutions, loan associations, trust companies, insurance companies, public utilities, educational institutions, and other special corporations governed by special laws, the favorable recommendation of the appropriate government agency shall first be obtained. If the Commission is satisfied that the merger or consolidation of the corporations concerned is consistent with the provisions of this Code and existing laws, it shall issue a certificate approving the articles and plan or merger or of consolidation, at which time the merger or consolidation shall be effective.

If upon investigation, the Commission has reason to believe that the proposed merger or consolidation is contrary to or inconsistent with he provisions of this Code or existing laws, it shall set a hearing to give the corporations concerned the opportunity to be heard. Written notice of the date, time, and place of hearing shall be given to each constituent corporation at least two (2) weeks before said hearing. The Commission shall thereafter proceed as provided in this Code.

Section 79. Effects of Merger or Consolidation.The merger of consolidation shall have the following effects:

(a) The constituent corporations shall become a single corporation shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; and in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation;

(b) The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;

(c) The surviving or the consolidated corporation shall possess all the right, privileges, immunities and franchises of each constituent corporation; and all real or personal property, all receivables due on whatever account, including subscriptions to shares and other choses in action, and every other interest of, belonging to, or due to each constituents corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation as though such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any constituent corporation may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of such constituent corporations shall not be impaired by the merger or consolidation.

1. Concept of Merger and Consolidation. 

• Merger is one where a corporation absorbs another corporation, where the former corporation remains in existence while the latter is dissolved. 
• Consolidation is one where a new corporation is created, and the consolidating corporations are extinguished.
• Consolidation signifies a union that necessarily results in the creation of a new corporation and the termination of the constituent ones, whereas a merger signifies the absorption of one corporation by another which retains its name and corporate identity with the added capital, franchises and powers of a merged corporation
• Merger or consolidation does not become effective by mere agreement of the constituent corporations. 
• Since a merger or consolidation involves fundamental changes in the corporation, as well as in the rights of stockholders and creditors, there must be an express provision of law authorizing the same. 
• In this jurisdiction, for a valid merger or consolidation, the approval of the SEC is required.
• Section 78 of the RCCP provides that the merger or consolidation shall be effective upon the issuance by the SEC of a certificate of merger or consolidation. 
•  However, it was also opined by the SEC that Section 78 of the RCCP does not prevent the parties from agreeing on the effective date of the merger. 
• In other words, the parties may stipulate the effective date of merger.
• Courts cannot take judicial notice of the fact and effects of merger. 
• The fact and effects of merger must be established by the person who makes allegations in relation thereto.

1.01. Triangular Merger. 

• One form of merger that is allowed in other jurisdictions is the so-called "triangular merger." This type of merger is described as follows: 
• "The purchasing corporation ('P Corp.') creates a subsidiary corporation ('New Co.') and transfers to the subsidiary shares in the parent company which will be used for the share exchange that will be provided for in the merger plan. 
• The subsidiary is sometimes referred to as 'phantom' corporation because it may exist only long enough to consummate the merger; hence, at one time, the triangular merger was sometimes called a 'phantom' merger or a "reverse phantom merger."
• The actual merger is not between the acquiring corporation and the acquired/target corporation but rather between the newly formed subsidiary and the target corporation.
• The acquiring corporation may resort to this type of merger if it wants to keep the business of the target/ acquired company separate from the acquiring company. This may also facilitate the future sale of the acquired company.7

1.02 Foreign Corporation. 

• The opinion of the SEC is to the effect that a foreign corporation can merge with a domestic corporation.
•  The merger is allowed provided that the foreign corporation can prove that there is a similar authoring law in its home jurisdiction. 
• The surviving corporation shall be the domestic corporation and the merger is governed by the Corporation Code (now the RCCP) and special laws.
• Special laws include applicable nationalization laws. 
• The statutory basis is Section 132 of the Corporation Code (now Section 149 of the RCCP).

2. Rationale. 

• Merger or consolidation may be resorted to for economic reasons. These include:

1. Economies of scale, meaning, a combination of two production units enlarges the production output over which the fixed cost of production is spread and thereby reducing the average fixed cost per unit of the output;
2. Economies of scope, meaning, the costs - and even management talent - are spread across a broader range of related activities; and
3. Costs are reduced through vertical integration, meaning there is a merger with a supplier or a customer.

3. Distinguished from Transfer of Property. 

• A simple sale of property by one corporation to another is not a merger or consolidation. 
• Unless there is an evident intention, a mere purchase or acquisition of another corporation's assets or property does not constitute merger or consolidation even though it is advertised as such by the parties or there is an assumption of liability on the part of the purchasing corporation especially where the selling corporation still retains its franchise.

4. Distinguished from Combinations. 

• Combination is used to designate an alliance or confederation or sale or other transaction between two or more corporations, by virtue of which will not necessarily result in the loss of the separate existence of the corporations.
• This may include stock acquisition, execution of a voting trust agreement, formation of a holding company, or even transfer of the assets from one corporation to another. In a broad sense, combinations include merger and consolidation.
• A partnership can enter into a combination with a corporation but a partnership cannot merge or consolidate with a corporation. 
• A partnership may not be involved because Section 75 of the RCCP distinctly requires the presence of two or more corporations. 
• However, combination is allowed in the sense that a partnership may be allowed by the SEC to transfer all its assets and liabilities to a corporation. 
• The corporation will in turn issue its shares of stocks to the partners for the net assets that are transferred.

5. Effects. 

• The effects of merger and consolidation provided for in Section 79 of the RCCP may be summarized as follows: 

1. The constituent corporations shall become a single corporation; 
2.  The separate existence of the constituents shall cease, except that of the surviving corporation (in merger) or the consolidated corporation (in consolidation);
3. 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; 
4. The surviving or the consolidated corporation shall possess all rights, privileges, immunities and franchises of each constituent and properties shall be deemed transferred to the surviving or the consolidated corporation; and 
5. All liabilities of the constituents shall pertain to the surviving or the consolidated corporation.

• Although there is dissolution of the absorbed corporations, there is no winding up of their affairs or liquidation of their asset because the surviving corporation automatically acquires all their rights, privileges and powers as well as their liabilities. 
• Upon the effectivity date, the merged or absorbed corporation ceases to exist and its rights, privileges, properties as well as liabilities pass on to the surviving corporation.
• In merger, the properties of the non-surviving corporation are not sold to the surviving corporation. 
• These properties are absorbed by operation of law and these properties are automatically transferred and vested in the surviving corporation without further act or deed.
• Thus, for example, the applicable documentary stamp tax on sale of real property is not applicable because there is in fact no sale.
• In merger, the receivables of the dissolved corporation are transferred to the surviving corporation. 
• Thus, the surviving corporation has the power to file an action to recover any debt that pertains to the other corporation.
• In the case of merger of two banking corporations, although one banking corporation was dissolved, no winding up of its affairs or liquidation of its assets, privileges, powers and liabilities took place. 
• The surviving banking corporation simply continued the combined businesses of the two banks and absorbed all the rights, privileges, assets, liabilities and obligations of the dissolved bank. 
• These include the dissolved corporation's obligation over the garnished deposits of a judgment debtor. The notice of garnishment duly served on the dissolved corporation binds the surviving corporation.

6. Effect on Employees.

• The surviving corporation in the case of merger shall absorb the employees of the dissolved corporation; the employees of the constituent corporations shall become the employees of the new corporation in consolidation. 
• The tenure of such employees should be treated as having started when they started with the dissolved or the constituent corporation as the case may be.
• In one case, the surviving entity in a merger was held answerable for the liabilities of the corporation that was absorbed, including the solidary liability of the absorbed corporation for constructive dismissal. 
• Any retirement benefit of the employees of the absorbed corporation should be computed on the basis of their employment starting from their employment with the dissolved or constituent corporations as the case may be. 
• By the fact of merger, a succession of employment rights and obligations has occurred. 
• Merger is not by itself a ground to dismiss the employees; the surviving corporation assumes all the liabilities to the employees.
• However, although the surviving corporation is deemed to have absorbed all the employees and all employment contracts of the non-surviving corporation, the surviving corporation is nevertheless given the right to terminate employees for lawful or authorized cause such as redundancy. 
• The employees likewise have the right to retire or resign whether before or after the merger.

7. Outline of Procedure.

• The procedure for merger and consolidation prescribed under the Code may be summarized in this wise:

1. The Board of each corporation shall draw up a plan of merger or consolidation;
2. The plan of merger or consolidation shall be approved by majority vote of the Board of each of the corporations party to the merger or consolidation at separate meetings; 
3. The plan of merger or consolidation shall be approved by 2/3 of the Outstanding Capital Stock of each constituent corporation or 2/3 of the members for non-stock corporations in separate meetings duly called for the purpose; 
4. Articles of Merger or Articles of Consolidation shall be executed by each of the constituent corporations, signed by the President or Vice-President and certified by the Secretary or Assistant Secretary;
5. Four copies of the Articles of Merger or Consolidation (together with favorable recommendation of the pertinent government agency in certain cases) shall be submitted to the SEC for approval; 
6. The SEC shall issue a certificate approving the Article and Plan of merger or consolidation if it is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of this Code and existing laws; and 
7. If, upon investigation, the SEC has reason to believe that the proposed merger or consolidation is contrary to or inconsistent with the provisions of the RCCP or existing laws, it shall set a hearing to give the corporations concerned the opportunity to be heard. Written notice of the date, time, and place of hearing shall be given to each constituent corporation at least two weeks before said hearing. 

• The plan of merger or consolidation may still be amended before the same is filed with the SEC. 
• However, any amendment to the plan must be approved by the majority vote of the Board of each of the constituent corporations and ratified by the affirmative vote of 2/3 of the outstanding capital stock or 2/3 of the members of each of the constituent corporations. 
• The Articles of Merger or Consolidation to be filed with the SEC shall be accompanied by a favorable recommendation of the government agency concerned if the corporations involved are banks or banking institutions, loan associations, trust companies, insurance companies, public utilities, educational institutions, and other special corporations governed by special laws. 
• Section 76 of the RCCP provides that the notice of meeting for the approval by stockholders/members of the plan of merger or consolidation shall be given in the same manner as giving of notice under Section 49 of the RCCP. 
• This means that there must be a prior 21-day notice (in case of a regular meeting) or one-week notice (in case of a special meeting). 
• Section 76 requires that the notice shall state the purpose of the meeting, which is the approval of the plan of merger or consolidation. 
• The notice must also include a copy of or at least a summary of the plan of merger or consolidation. 

7.01. Layers of Protection.

• From the procedure outlined above, it is clear that the RCCP provides layers of protection in merger or consolidation. These include the approval by the directors and approval by the stockholders. 
• Dissenting stockholders are also accorded the right of appraisal.
• With respect to the approval of the shareholders, the additional information in the Articles of Merger help stockholders arrive at an informed decision. These information include:

1. the carrying amounts and fair values of the assets and liabilities of the respective companies as of the agreed cut-off date;
2. the method to be used in the merger or consolidation of accounts of the companies; and 
3. the provisional or pro-forma values, as merged or consolidated, using the accounting method.

• The law requires transparency which is important in order to show fairness in the merger. Part of fair dealing is the obvious duty of candor. 
• One possessing superior knowledge may not mislead any stockholder by use of corporate information to which the latter is not privy.
• "The concept of fairness has two basic aspects: fair dealing and fair price. The former embraces questions of when a merger transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained. The latter aspect of fairness relates to the economic and financial considerations of the proposed merger, including all relevant factors: assets, market value, earnings, future prospects, and any other elements that affect the intrinsic or inherent value of a company's stock."

8. Effect of Philippine Competition Act. 

• The passage of Republic Act No. 10667 or the Philippine Competition Act brought about new rules on mergers and acquisitions. 
• Section 20 of the law provides that "merger or acquisition agreements that substantially prevent, restrict or lessen competition in the relevant market or in the market for goods or services as may be determined by the Commission [referring to the Philippine Competition Commission] shall be prohibited." 
• Although generally, the prohibition applies if the merger or consolidation is horizontal (as in the case of merger of competitors), it also applies to vertical mergers (like those involving the merger of a client and customer). 
• Relevant market refers to the market in which a particular good or service is sold and which is a combination of the relevant product market and the relevant geographic market, defined as follows: 

1. A relevant product market comprises all those goods and/or services which are regarded as interchangeable or substitutable by the consumer or the customer, by reason of the goods and/or services' characteristics, their prices and their intended use; and 
2. The relevant geographic market comprises the area in which the entity concerned is involved in the supply and demand of goods and services, in which the conditions of competition are sufficiently homogenous and which can be distinguished from neighboring areas because the conditions of competition are different in those areas.

8.01. Notice and Review. 

• The Philippine Competition Act provides for review by the Philippine Competition Commission (PCC) of mergers, consolidation, acquisitions and joint ventures either motu proprio or upon notice. 
• The law provides for compulsory notification to the PCC by the parties to a merger that meets the thresholds within thirty (30) days from signing of definitive agreements relating to the merger ("notified merger"). 
• The agreement is void if the parties do not comply with the notice requirement.  

Rationale.

• The rationale for setting the threshold for notification is to ensure that mergers and acquisitions that are more likely to substantially lessen competition in the market for goods and services are subject to compulsory notification, and to exclude those that are less likely to pose competition concerns. Ensuring that certain mergers and acquisition be subject to compulsory notification cannot be left to the discretion of persons or entities within those market for goods and services.

8.02. Concurring Tests. 

• In determining if the merger or acquisition falls beyond the threshold imposed by law and the PCC, it is necessary to apply both the:
1. Size of Entity Test and 
2. The Size of the Transaction Test.

a. Size of Entity Test. 

• The aggregate annual gross revenues in, into or from the Philippines, or value of the assets in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities, including that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds Five Billion Pesos (Php5,000,000,000.00).

b. Size of Transaction Test. 

• The value of the transaction exceeds Two Billion Pesos (Php2,000,000,000.00).

1. With respect to a proposed merger or acquisition of assets in the Philippines if either: 
1. the aggregate value of the assets in the Philippines being acquired in the proposed transaction exceeds Two Billion Pesos (Php2,000,000,000.00); or 
2. the gross revenues generated in the Philippines by assets acquired in the Philippines exceed Two Billion Pesos (Php2,000,000,000.00). 
2. With respect to mergers outside the Philippines the following must concur:
1. the aggregate value of the assets in the Philippines of the acquiring entity exceeds Two Billion Pesos (Php2,000,000,000.00); and 
2. the gross revenues generated in or into the Philippines by those assets acquired outside the Philippines exceed Two Billion Pesos (Php2,000,000,000.00).
3. With respect to mergers inside and outside the Philippines, the following must concur: 
1. the aggregate value of the assets in the Philippines of the acquiring entity exceeds Two Billion Pesos (PhP2,000,000,000.00); and 
2. the aggregate gross revenues generated in or into the Philippines by assets acquired in the Philippines and any assets acquired outside the Philippines collectively exceed Two Billion Pesos (Php2,000,000,000.00).

8.03. PCA Provisions. 

• Other pertinent provisions of the special law are here.

9. Religious Corporations.

• A religious corporation may be merged with another religious corporation. 
• This may involve a religious society and a corporation sole. 
• However, for practical reasons, the merged corporations must belong to the same religious denomination, sect or church.

10. Reorganization. 

• It should be noted that merger and consolidation are included in the different forms of corporate reorganizations that are resorted to by corporations in weak financial conditions. 
• Reorganization is also a term used for taxation purposes. 
• Thus, the different developments in a corporation that are considered included in the broad concept of reorganization are as follows: 

1. Statutory merger or consolidation;
2. The acquisition by one corporation of the stock of another corporation, solely in exchange for its voting stock or the voting stock of its parent, if the acquiring corporation has control of the acquired corporation immediately after the acquisition;
3. The acquisition by one corporation of substantially all of the assets of another in exchange for the voting stock of the acquiring corporation or its parent;
4. A transfer by a corporation of all or part of its assets to another corporation if immediately after the transfer, the transferor or one or more of its shareholders or any combination thereof is in control of the corporation to which the assets are transferred; 
5.  Recapitalization; 
6. A mere change in identity, form or place of organization however effected, including reincorporation m another State; and
7. A transfer by a corporation of all or part of its assets to another corporation in a bankruptcy or insolvency case or similar proceeding.

11. Quasi-Reorganization. 

• Reorganization is different in the sense that quasi-reorganization refers to the accounting procedure or principle whereby:
1. reappraisal surplus is used to wipe out the deficit or 
2. the articles of incorporation is amended reducing the capital and the reduction of the capital stock is used to wipe out the deficit.
• Under SEC rules, only companies that are financially in distress may be allowed to undergo quasi-reorganization. 

12. De Facto Merger and Consolidation. 

• In other jurisdictions, de facto merger or consolidation is taken to mean a reorganization involving at least two corporations which has the effect of merger or consolidation and which entitles the dissenting stockholders to an appraisal right. 
• Thus, in one case, a transaction between two corporations has the following effects: one corporation is dissolved, its liabilities are assumed by the survivor, its executives and directors take over the management and control of the survivor and, as consideration for the transfer, the stockholders of the dissolved corporation acquire a majority of the shares of stock of the survivor. 
• The transaction is no longer a mere purchase of shares of stock of the survivor but it functionally amounts to merger.
• In Bank of Commerce v. Radio Philippines Network, Inc., the Supreme Court adopted the following definition of de facto merger:  
• "A de facto merger can be pursued by one corporation acquiring all or substantially all of the properties of another corporation in exchange of shares of stock of the acquiring corporation. The acquiring corporation would end up with the business enterprise of the target corporation; whereas, the target corporation would end up with basically its only remaining assets being the shares of stock of the acquiring corporation."
• The Supreme Court ruled that no de facto merger took place where there was merely sale with assumption of liabilities, that is, the owners of one corporation did not get in exchange for the said corporation's assets and liabilities an equivalent value in another corporation's stocks.
• In this jurisdiction, there have been cases where the transactions involved amounted to a de facto merger.
• In those cases, liability was imposed under the rubric of piercing the veil of corporate fiction. 
• The said cases involve corporations that stopped their operation and all the businesses and assets were assumed by or transferred to a new or an existing corporation. 
• Hence, the Supreme Court ruled that the "surviving'' corporation is a mere continuation of the life of the corporation that stopped its operation.
• This situation is referred to by Dean Villanueva as a business entity transfer (as distinguished from asset-only transfer and equity transfer).
• It is also to be noted that the same assumption of liability was imposed by the Supreme Court when the business of another form of business organization was taken over by the corporation. 
• Thus, all the liabilities of a sole proprietorship were assumed by the corporation that was organized to take its place. 
• The same results if a partnership is organized into a corporation. 
• The new corporation will be liable for the obligations of the partnership.
•  If the corporation assumes the business and assets of a single proprietorship or partnership, there is deemed to be a de facto merger between the business organizations and therefore the effect is the same at least as to liabilities. 
• In fact, the SEC requires an express assumption of liabilities in those cases. 
• However, it is believed that the de facto merger rule is not necessary for the assumption of liability when assets are transferred from corporation to another. 
• The question concerning assumption of liability can be addressed using the doctrine of piercing the veil of corporate fiction. 
• While the focus of the doctrine of piercing the veil of corporate fiction is protection of creditors, the more important aspect of the rules on de facto merger is shareholder protection. 
• In other jurisdictions, if the sale of asset has the effect of merger, the shareholders receive protection that is similar to merger such as appraisal right.
• In this jurisdiction, it can be reasonably argued that the right of appraisal under Section 80 of the RCCP applies if there is de facto merger. 
• If the appraisal right will not be given to the shareholder, there is substantial breach of their right as shareholder through circumvention. 
• The appraisal right is present not only under paragraph (c) of Section 80 but also under paragraph (b) for the transfer or disposition of all or substantially all of the assets of the corporation.

PROBLEM: 

Q: Two corporations agreed to merge. They then executed an agreement specifying the surviving corporation and the absorbed corporation. Under the agreement of merger dated November 5, 1998, the surviving corporation acquired all the rights, properties and liabilities of the absorbed corporation. 

a. What would happen to the absorbed corporation? Must the absorbed corporation undertake dissolution and winding up procedures? Explain your answer.

No. It is not necessary for the absorbed corporation to undertake dissolution and winding up procedure. Once the merger is approved by the SEC, the absorbed corporation is automatically dissolved and its assets and liabilities are acquired and assumed by the surviving corporation.

b. Pending the approval of the merger by the SEC, may the surviving corporation already institute suits to collect all receivables due to the absorbed corporation from its customers? Explain your answer. 

No. The approval of the SEC is the operative act that makes the merger effective. Before approval by the SEC of the merger, the two corporations involved in the merger are still separate and distinct from each other.

c. A case was filed against a customer to collect on the promissory note issued by him after the date of the merger agreement. The customer raised the defense that while the receivables as of the date of the merger agreement were transferred to the surviving corporation, those receivables which were created after the merger agreement remained to be owned by the absorbed corporation. These receivables would be distributed to the stockholders conformably with the dissolution and liquidation procedures under the RCCP. Discuss the merits of this argument.

The argument is not meritorious. The receivables pertain to the surviving corporation whether or not the same were incurred by the absorbed corporation before or after the merger agreement, or before or after the approval thereof by the SEC. Section 79 of the RCCP does not make any distinction as to the assets and liabilities of the absorbed corporation that the surviving corporation would inherit. (1999 Bar)