Merger of a company and transformation of its type
Merger of a company and transformation of its type are separate paths organised by Companies Law No. 21 of 1997, as amended, in articles 148 to 157. Each of them is a decision of the general assembly by the majority or the unanimity article 98 lays down, after which the amended or new contract is authenticated by the Registrar. The frame is on company registration. Amending the contract is on its page. The types are on their page.
Article 147 counts merger or transformation among the causes of the company's ending, while rights and obligations in a merger pass as article 152 provides.
When a merger is allowed, and when it takes effect
Article 148 allows one or more companies to be merged into another, or two or more companies to be merged to form a new company. A merger is allowed, under article 149, only if it does not cause a joint-stock company to lose its legal personality in favour of a limited company or a partnership; or a limited company to lose its personality in favour of a partnership; or a joint-stock company, a limited company, a partnership or a sole proprietorship to lose its personality in favour of a simple company. It is also a condition that the merger must not increase the number of members in the company into which the merger is made, or in the company that results from it, above the limit prescribed for its type.
The steps article 150 lists are taken to complete the merger, including a general-assembly decision, the amended or new contract, and the publication and authentication the text requires before the Registrar. The merger takes effect on the date of the last publication of the amended or new contract, as the case may be, and on that date the legal personality of the companies merged into another, or merged to form a new company, comes to an end, under article 151. All rights and obligations of the merged company pass to the company into which it is merged or to the company that results from the merger, under article 152.
Whether a merger or a transformation takes effect is read from the text after the procedures and publication it requires have been completed.
Transformation of the company's type
Article 153 allows a company to be transformed from one type to another of the types the Law provides for, with exceptions, including that a joint-stock company, a limited company, a partnership or a sole proprietorship may not be transformed into a simple company. The company prepares an economic and technical study setting out the aims and grounds of the transformation, and submits it to the general assembly, under article 154. If the Registrar decides, within fifteen days of receiving the transformation decision and the amended contract, that they are in conformity with the Law, the Registrar authenticates them without delay and notifies the company, under article 155. The transformation takes effect on the date of the last publication of the transformation decision and the amended contract, under article 156.
Where a partnership or a sole proprietorship is transformed into a joint-stock or limited company, the members remain under unlimited personal liability for obligations that arose before the transformation, and that liability is joint where the text so requires, under article 157. That limit preserves the rights of earlier creditors, and is not dropped merely by a change of type.
How transformation relates to a transfer of shares
A transfer of the share in a sole proprietorship to more than one person, or a transfer of part of that share, is effected only by transforming the company into another type provided for by the Law, under article 69, second paragraph. The detail of a transfer is on the amendment page. If the enterprise ends by liquidation rather than by transformation, the path is on the disputes and liquidation page.
The Law Office of Ali Barakat follows this reading of merger and transformation from Baghdad, al-Yarmouk.
Legal basis and sources
Frequently asked questions
May a joint-stock company be merged into a limited company so that the joint-stock company loses its personality?
No. Article 149 does not allow a merger to cause a joint-stock company to lose its personality in favour of a limited company or a partnership, and also does not allow those forms or a sole proprietorship to lose their personality in favour of a simple company.
When does a merger take effect?
Article 151 makes the merger take effect on the date of the last publication of the amended or new contract, as the case may be, and on that date the legal personality of the companies that have been merged comes to an end.
Is a general partner released from liability after a transformation into a limited company?
Not for obligations that arose before the transformation. Article 157 keeps the members under unlimited personal liability for those obligations, and that liability is joint where the text so requires.
Related topics and articles
- 01Company forms under the Iraqi Companies LawCompany types under Companies Law No. 21 of 1997 as amended: joint-stock, limited, partnership, simple, sole proprietorship and holding.
- 02Amending the company contract, changing the managing director and transferring sharesAmending the company contract, changing the managing director and transferring shares under Companies Law No. 21 of 1997 as amended.
- 03Partner disputes, a request for liquidation, and a challenge to general-assembly decisionsPartner disputes: causes of liquidation, and a 5% objection to general-assembly decisions before the Registrar and then the Court of First Instance.
- 04Obligations that recur after a company is recordedFinal accounts, the audit, the general-assembly meeting and copies sent to the Registrar, distinct from post-incorporation steps and from branch duties.
- 05The address of a company or branch, a lease and a title deedThe company's address in its contract, before the Registrar and in the commercial register; a lease or deed may evidence it. Not a real-estate page.