LAW 18B Chapter Ch. 41 Mergers & Takeovers:

70 views6 pages
CH. 41 MERGERS & TAKEOVERS
41-1 MERGER, CONSOLIDATION, & SHARE EXCHANGE
41-1A MERGER
Merger: the legal combination of 2 or more corporations, after which only one of the
corporations continues to exist
ONE OF THE FIRMS SURVIVES
Articles of merger: a document setting forth the terms & conditions of the merger
IT INHERITS ALL LEGAL RIGHTS & OBLIGATIONS OF THE OTHER FIRM
After the merger, the surviving corporation possesses all of the rights, privileges, &
power of itself and the other firm.
Becomes liable for all of the other firm’s debts & obligations, & inherits their preexisting
legal rights
41-1B CONSOLIDATION
Consolidation: two or more corporations combine in such a way that each corporation ceases to
exist & a new one emerges
A NEW CORPORATION IS FORMED
Consolidated corporation: only one company remains--but is a completely new entity
Newly formed corporation will issue shares or pay some fair consideration to the
shareholders of the disappearing corporations
IT INHERITS ALL RIGHTS & LIABILITIES OF BOTH PREDECESSORS
Corporation C inherits all of the rights, privileges, powers, debts, & obligations
previously held by A & B.
Title to any property & assets owned by A & B passes to C without a formal transfer.
41-1C SHARE EXCHANGE
Share exchange: some or all of the shares of one corporation are exchanged for some or all of the
shares of another corporation, but both corporations continue to exist
Holding companies: companies that own part or all of other companies’ outstanding
stock
Parent corporation: if one corporation owns all of the shares of another corporation
Subsidiary corporation: the wholly owned corporation
41-1D MERGER, CONSOLIDATION. & SHARE EXCHANGE PROCEDURES
All states have statutes authorizing mergers, consolidations, & share exchanges for
domestic (in-state) & foreign (out-of-state) corporations.
The Revised Model Business Corporation Act (RMBCA) sets forth the basic
requirements for mergers & share exchanges:
1. The board of directors of each corporation involved must approve the merger or
share exchange plan.
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 6 pages and 3 million more documents.

Already have an account? Log in
2. The plan must specify any terms & conditions of the merger; must state how the
value of the shares of each merging corporation will be determined & how they
will be converted into shares or other securities, cash, property, or additional
interests in another corporation.
3. The majority of the shareholders of each corporation must vote to approve the
plan at a shareholders’ meeting. If any class of stock is entitled to vote as a
separate group, the majority of each separate voting group must approve the plan.
4. Once the plan is approved by the directors & the shareholders of each corporation,
the surviving corporation files the plan (articles of merger, consolidation, or share
exchange) with the appropriate official; usually with secretary of state.
5. When state formalities are satisfied, the state issues a certificate of merger to the
surviving corporation or a certificate of consolidation to the newly consolidated
corporation.
41-1E SHORT-FORM MERGERS
Short-form merger: a short-form merger can be accomplished without the approval of the
shareholders of either corporation
Can be used only when the parent corporation owns at least 90% of the outstanding
shares of each class of stock of the subsidiary corporation.
Once the board of directors of the parent corporation approves the plan, it is filed with the
state, & copies are sent to each shareholder of record in the subsidiary corporation.
41-1F SHAREHOLDER APPROVAL
Mergers & other combinations are extraordinary business matters so the board of
directors must normally obtain the shareholders’ approval & provide appraisal rights.
A transaction can be structured in such a way that shareholder approval is not required,
but if the shareholders challenge the transaction, a court might require shareholder
approval.
41-1G APPRAISAL RIGHTS
The law will not force a dissenting shareholder to become an unwilling shareholder in a
corporation that is new or different from the one in which the shareholder originally
invested.
Appraisal right: The statutory right that dissenting shareholders have to be paid the fair value of
the shares they held on the date of the merger or consolidation
The “fair value of the shares” normally is the value on the day prior to the date on which
the vote was taken.
WHEN APPRAISAL RIGHTS APPLY
Normally extend to mergers, consolidations, share exchanges, & sales of substantially all
of the corporate assets
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 6 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Merger: the legal combination of 2 or more corporations, after which only one of the corporations continues to exist. Articles of merger: a document setting forth the terms & conditions of the merger. It inherits all legal rights & obligations of the other firm. After the merger, the surviving corporation possesses all of the rights, privileges, & power of itself and the other firm. Becomes liable for all of the other firm"s debts & obligations, & inherits their preexisting legal rights. Consolidation: two or more corporations combine in such a way that each corporation ceases to exist & a new one emerges. Consolidated corporation: only one company remains--but is a completely new entity. Newly formed corporation will issue shares or pay some fair consideration to the shareholders of the disappearing corporations. It inherits all rights & liabilities of both predecessors. Corporation c inherits all of the rights, privileges, powers, debts, & obligations previously held by a & b.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents