Building of Holding Structures in Mergers: Resolution of Deadlock Situations

01.10.2005, Andrey M. Gorodissky
Building of Holding Structures in Mergers: Resolution of Deadlock Situations
In modern business practice approaches to the creation of a corporate structure in merger are founded, in the majority of cases, on three main concepts: 1. Formation of a holding company on the basis of one of the companies involved. 2. Reorganization of the companies involved by way of merger. 3. Formation of a new holding company. Each of the options has its merits and demerits. Therefore a decision as to the legal architecture of a merger should be based on a thorough and comprehensive assessment of industry and other risks, as well as of negative sides of each option, with regard for the specifics of a particular industrial production or other commercial activity, taking into consideration a huge stratum of legal, tax and financial issues, and all aspects of the merging parties’ operations, including creation of a new system of governance of the combined business. It being practically impossible to cover all of those issues or even the majority of them in one article, the author focuses on certain problematic aspects of deadlock resolution in the setting up of holding companies.