Sections 678 to 686 of the new CO allow two or more companies to be amalgamated and continue as one company without involving court procedures in the following cases:
- A holding company may amalgamate with one or more of its wholly owned subsidiaries (a vertical amalgamation) and continue as one company (amalgamated company).
- Two or more wholly-owned subsidiaries of a holding company may amalgamate (a horizontal amalgamation) and continue as one company (amalgamated company).
In a vertical amalgamation, the shares of each of the amalgamating subsidiaries will be cancelled (section 680). In a horizontal amalgamation, the shares of all but one of the amalgamating companies will be cancelled (section 681) with only the shares of the amalgamated company remaining. Section 678(2) of the new CO states that "A cancellation of shares under this Division is not a reduction of share capital for the purposes of Part 5."
Section 685(3) states that on the effective date of an amalgamation each amalgamating company ceases to exist as an entity separate from the amalgamated company and the amalgamated company succeeds to all the property, rights and privileges, and all the liabilities and obligations, of each amalgamating company. Regarding the share capital, there is no requirement under Division 3 of Part 13 of the new CO for an amalgamated company to increase its share capital upon amalgamation. If the directors of the amalgamated company decide to increase the share capital, for example by capitalizing any reserves in the amalgamated company, then this would be an increase in share capital in accordance with section 170. Under section 171, the company will have to deliver a notice of alteration of share capital to the Registrar of Companies for registration within one month.