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If you are a working professional working in a corporate sector it is vital that you are aware of some of the important company or corporate law. The knowledge will not only help you conduct your business in a better way by adhering to the laws but also it would help you deal with any mitigation situation that you may face. Although there are specialist corporate lawyers who assist the business person with various legal issues pertaining to the business, it is advisable that you too have a good understanding of the basics of the corporate law.
Some of the important aspects you must be aware of are discussed below:
The term is quite self explanatory. Merger is a term used to explain the process when two companies choose to unite together and form a new company. During the process, the assets and liabilities of both the companies are pooled together to create a better market share. Usually, in a merger situation both the companies have equal rights in the newly formed company. The companies share the assets and both take equal responsibilities of the liabilities.
Merger often takes place between two companies that operate in the same niche and are competitors. The companies join forces together to beat the intense competition in the market and be a new force to reckon with. Mergers are essentially of two types – Horizontal and Vertical merger. The merger of two companies operating at the same level is referred as horizontal merger. A vertical merger happens when two companies operating at different levels combine together; for instance a car manufacturing company merging with the suppliers of the car components.
An acquisition is a process in which one company takes over the operations of another company. If the company is public listed company, the process is referred to as ‘takeover’. The company that is being taken over is referred as the ‘target’. The acquisition can be two types – hostile or friendly. In a hostile acquisition, the purchasing company deny taking over the board of the target company.
In a friendly acquisition, the purchasing company prepares takeover terms that are negotiated by both the companies and they reach a mutual agreement. Once the process is completed, the two companies are consolidated into one (depending on the takeover terms agreed by the companies). However, in usual cases, the company that takes over has the complete control over the target company and the companies are maintained as spate entities.
As the terms itself suggests, it is a process when two or more companies combine together to form a new company by contributing a certain share of investment (either in cash or in material form). The JVs are usually formed for a specific period and during the course of the venture, all the companies involved in the partnership share a common goal. Once the target is achieved, the joint venture is dissolved and the earnings are distributed as per the initial agreement signed by the participating companies.
Thus, by being aware of these fundamentals would help you conduct your business in a better way.
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