MERGER BY ABSORPTION IN THE FIELD OF GAMES

Tuesday, 29 October 2019

Loredana Dumitru

 by Loredana Marlen DUMITRU, Junior Lawyer at L.F. Mihai Cătălin LUCA

 

Considering the importance given in the last years to the reorganization operations of companies, as strategies for achieving the medium and long term objectives, we have proposed in this article to carry out a theoretical study on the merger by absorption of the companies that carry out activities of gambling and bets, trying to determine whether the licenses and authorizations held by the gambling organizers can be part of the universality of goods transmitted from one company to another, as a result of the merger by absorption.

The merger by absorption is defined by art. 238 paragraph (1) letter a) of Law 31/1990 on companies (the Companies Act) and represents the operation whereby a company is dissolved without entering into liquidation and transfers the whole of its assets to another company in exchange for the distribution to the shareholders/associates of the company absorbed by shares/social shares in the absorbing company and, possibly, a cash payment of maximum 10% of the nominal value to the shares thus distributed.

As a result of the merger, the absorbed company disappears, and its shareholders/associates receive, in exchange for the shares/social shares held, titles in the absorbing company, which, in turn, increases its share capital with that of the absorbed company. The absorbing company acquires, as a result of universal succession, the assets of the company that disappears as a result of the merger.

From the above, it appears that the operation has the following main outcomes:

  • cessation of the legal personality of a company as a result of the early dissolution, without liquidation;
  • the universal transmission of its assets to the absorbing company;
  • attribution of shares or social parts of the absorbing company to the shareholders/associates of the disappearing company;
  • increase of the share capital of the absorbing company.

 

Therefore, the merger by absorption of the companies is characterized by extinctive effects of legal personality, translative and modifying effects over rights and also modifying effects over articles of incorporation.

As a legal source, the merger by absorption is a result of agreements concluded between the companies involved, through their legal representatives, based on the express approvals granted for this purpose by the supreme statutory bodies.

In the field of gambling, it is important to determine whether the licenses and authorizations held by the absorbed companies are transferred to the absorbing company within the universal succession transmission operating as a result of the merger or whether the legislation in force imposes an exception from the rule, as defined in that the rights of the absorbed company to carry out the activity cannot be transferred even in the context of the transmission of the entire assets of the absorbed company.

Apparently, our dilemma is easily solved by the provisions of art. 10 paragraph (1) of the Methodological Norms for implementing GEO 77/2009 (…): The gambling license is granted individually, is non-transferable and is valid for a period of 10 years from the date of grant.

Although in practice the opinion that licenses and authorizations are not transmitted as a result of the merger seems to be outlined, as they are closely linked to the absorbed gambling organizer, we consider that is required a systematic interpretation of the provisions of the special legislation in the field of gambling, from a broader perspective, by reference to the provisions of the civil law.

In support of practical opinion stay the provisions of art. 10 paragraph (1) of the Methodological Norms mentioned above, and the solution concerned gravitates around the legal notion of non-transferable right and around the principle of interpretation where the law does not distinguish, nor can the interpreter distinguish.

Thus, it was appreciated that as long as the law does not distinguish between the types of transmission, the prohibition is incidental in all situations in which a transmission operates, including in the case of merger by absorption, when we are in front of a universal succession transmission. Therefore, a legal inalienability would be established as regards the right to carry on the activity, which is understood as a right that belongs to its owner in all cases.

The cessation of the legal personality of the absorbed gambling organizer marks the moment when the gambling license also ceases to have effects. However, such a hypothesis is not provided by the legal provision, which causes us to believe that it is not the will of the legislator.

The reason for imposing an interdiction on the transferability of the license from one gambling organizer to another is found in the content of art. 1 paragraph (2) of GEO 77/2009 regarding gambling: The state may grant the right to organize and operate the gambling activity, based on a gambling license on each type of activity and on gambling authorization.

It follows from the aforementioned provision that the activity is allowed only to companies holding licenses and authorizations issued by the state authority with powers in the field.

From this perspective, the expressis verbis regulation of the non-transmissible character of the license right does nothing but reinforce the idea that granting the right to organize and operate gambling represents the state’s responsibility, through its bodies with powers in the field.

Given this perspective, the license to organize gambling is granted individually and cannot be transmitted on a private basis, since only in the case of such transmissions the finality of the legal text is not achieved, the intention of the legislator being disregarded. Only the authority of the state with attributions in the field has the prerogative to grant the right to exploit gambling, after a prior verification of the conditions imposed by the law to the economic operators for obtaining it. If the law would allow the license to be transmitted from one gambling organizer to another, it would consequently allow the exploitation of the activity without the need for the authority filter, which is indeed forbidden.

In the case of the merger, on the other hand, the rights and obligations of the absorbed legal person are transferred to the absorbing legal entity as a whole, without being viewed independently of the other. All the components of the assets of the absorbed legal person are transmitted to the absorbing legal person.

In order to achieve the purpose of the merger, which is based on economic and of commercial strategy reasons, the prohibition on transmitting the gambling license and operating licenses must be reconsidered, as its application would lead to the unacceptable conclusion that the merger by absorption is not allowed to gambling organizers.

In this case, the prohibition no longer falls within the rationale of the legal text, that of allowing the activity of the activity only to the companies that hold the license and the authorization, the literal interpretation of the provisions of art. 10 paragraph 1) of the Norms leading to the conclusion that art. 238 paragraph 1 of the Companies Act does not apply to all categories of companies.

 

 

In support of the above, we indicate the provisions of art. 12 paragraph (2) of the GEO 77/2009 on the activity of gambling and betting Economic operators gambling organizers will notify ONJN, within 48 hours by submitting online or within 5 working days from the registration date, for submission by mail or at the ONJN registry, about any changes to the initial data based on which the gambling organization license or the gambling authorization, as the case may be, was issued.

Thus, since the law allows, subject to the notification of the authority and the fulfillment of the sine-qua-non conditions for maintaining the validity of the license to organize the gambling and the authorizations to operate the gambling (e.g.: in the case of the appointment of a new administrator, it is necessary for him to obtain the approval of the police, in order for the license to continue to be valid), so that at the level of the structure of the gambling organizers, including changes of substance (change of management/administrative bodies in their entirety, the co-operation of new shareholders/associates, etc.), without questioning the validity of the license or authorizations, for a unitary approach, the same solution should be considered also in the case of merger by acquisition, the more as the provision does not distinguish by reference to the modification made at the level of the initial data on the basis of which the licenses or authorizations were issued.

Even if the initial holder of the licenses and authorizations ceases to exist once it has been absorbed as a result of the merger, in the absorbing company will be found the components of the absorbed company, from its patrimony, to the management bodies. This situation is similar to the changes that can occur anyway within any company, being unjustified, in this case, the application of a differentiated legal treatment, depending on the manner of performing these changes.

The possibility of transmitting the gambling license as a result of the merger between the gambling organizers has equally theoretical and practical importance.

Given the interdependence between the gambling authorizations and the means of gambling, in the absence of the possibility of transferring the authorizations, as a result of the merger, it would be triggered the situation where the gambling means would be transferred to the absorbing company before the exploitation permits to cease as a result of the cessation of the legal personality of the absorbed company. Until the effective termination of its personality, the company would continue to hold operating permits, even if it no longer had the right to use the means of play in the light of which they were issued.

It is doubtless that such a solution cannot be the one pursued by the legislator, but, on the contrary, the purpose envisaged by the legislator is to allow the transfer of licenses and authorizations, if this is done in the context of the universal succession of the patrimony, in the same time while the authority exercising the powers of control of the operation, conferred by the provisions of art. 12 paragraph 2) of GEO 77/2009.

A possible reconsideration of the arguments considered by the organizers and, especially, by the authority, in interpreting the provisions of art. 10 of the Methodological Norms related to the provisions of art. 238 of the Companies Law would, in our opinion, be auspicious for the whole industry, especially in the context where the reorganization of the activity is an increasingly important concern of the governing bodies of the gambling organizers.

Author: Editor

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