The Legal Mechanics of a Crypto Company M&A
The acquisition and merger of a crypto company is carried out under the reorganization rules of the Georgian Law on Entrepreneurs: the permissible forms — transformation, merger (absorption or consolidation) and division (split or separation) — are defined by Article 59; the procedure of merger and division by Article 65; the content of the merger/division plan by Article 67; registration by Article 73; and the protection of creditors by Article 74. In the crypto sector this mechanics is supplemented by a sectoral check: an assessment by the supervisory organ of the fitness and propriety of the managing persons, where the transaction requires the consent of a state or other competent organ.
Two Paths of Merger and Two Paths of Division
In absorption, one or more entrepreneurial societies, without commencing liquidation, are absorbed by the acquiring society with the full transfer of assets and liabilities, in exchange for which the partners of the absorbed society receive shares in the acquirer. In consolidation, two or more societies unite by founding a new society to which assets and liabilities are transferred by force of law. Division is likewise twofold: split by foundation or by acquisition, and separation by foundation or by acquisition — the difference being whether a new society is created and whether a part of the assets passes to an existing one.
Besides shares, partners may receive cash compensation where maintaining the share-exchange proportion is impossible; in a joint-stock society the cash compensation must not exceed 10 percent of the nominal value of the shares to be issued. The rule of successor liability is also clear: on merger the consolidated/acquiring society is liable for all obligations of the merged societies; on division the new/acquiring society is liable for the divided society's obligations solidarily, but that liability is limited to the amount of net assets attributed to it by the division.
The Plan, the Decision and the Registration
The merger/division plan is elaborated by the governing organs of the participating societies; the plan must contain, among other things, the identification data of the participants, the share-exchange proportion and the amount of any cash compensation, the conditions of issuing shares, the date from which the shares carry the right to participate in profit, an exhaustive description of the assets and liabilities to be transferred, and the benefits provided to governing persons.
The application for registration is submitted to the registering organ 1 month after publication of the plan — a term that is not mandatory where all partners waive the corresponding right in writing. The application is accompanied by the plan, the charter or its amendments, the general meeting's decision and, where they exist, the auditor's report and the consent of a competent organ. The merger/division enters into force from the moment of registration, and after registration it is impermissible to invoke the invalidity of the society's decision on the merger/division — which is why every error must surface before registration.
Protection of Creditors
Creditors of societies participating in the reorganization have the right, within 3 months from the registration of the reorganization, to demand the securing of their claims if they prove that the reorganization threatens their satisfaction; this right belongs to creditors whose claims arose before publication of the decision or the plan. For crypto transactions this means that the positions of service providers and investors must be factored into the structure of the deal in advance.
In the acquisition scenario for a crypto company the qualification of sectoral control must be written into the calendar of the deal from the outset: where the company carries on a supervised activity, the change of management and the structure receiving the controlling stake are subject to prior review, and this requirement sits above the general rules of reorganization. The documentary sequence therefore runs: review and consent first, then approval and publication of the plan, then the deadlines allowed to creditors, and only afterwards registration — since after registration the invalidity of the decision can no longer be invoked, every one of these links works irreversibly.
Frequently Asked Questions
In which forms may reorganization take place?
Transformation, merger (absorption or consolidation) and division (split or separation).
What happens to obligations on merger?
The consolidated/acquiring society is liable for all obligations of the merged societies; on division liability is solidary and limited to the attributed net assets.
When does the merger take effect?
From the moment of registration; the application is filed within 1 month of publication of the plan, unless the partners have waived this right in writing.
What right do creditors have?
Within 3 months of registration to demand securing of their claims, if they prove that the reorganization threatens their satisfaction.
How We Help on Legal.ge
A crypto company M&A deal is honed legally: the choice of form, the content of the plan, the creditors' position and the pre-registration review. On the Legal.ge platform you can find an experienced corporate and finance law lawyer who will help you structure the deal, prepare the documentation and work with sectoral consents. Choose a specialist and carry out the acquisition with full legal control.