When two or more businesses want to combine and move forward as a single entity, it is possible for those entities to merge or consolidate under state law. Businesses may consider merging for various reasons including obtaining economies of scale and/or possible tax benefits. To accomplish a merger, the parties need to negotiate, prepare and execute a Merger Agreement, the Merger Agreement needs to be approved by the Board of Directors and/or shareholders of each constituent company, and a Certificate of Merger must be filed with the Secretary of State’s office.
In a typical Merger, one corporation will be merged with and into the surviving corporation, and the surviving corporation will, without any other act or deed, automatically own all the assets and have all the liabilities of both of the constituent corporations. The owners of the surviving corporation and the other corporation may receive stock of the surviving corporation and/or cash or assets as part of the Merger. The Merger Agreement will describe how the Merger is to be accomplished and what the owners of the constituent corporations receive.
Under state law, Mergers generally have to be approved by a corporation’s Board of Directors and a super-majority of the shareholders. But if the corporation’s organizational documents so provide, a lesser percentage may be sufficient to approve the Merger. If you need assistance with negotiating or drafting a Merger Agreement, or have questions about selling or buying a business, please give me a call. Jsenney@pselaw.com or 937-223-1130 .
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Excellent article, although I think it would be helpful Jeff to broaden the reach of this article. For example, a lot of business now operate as LLC's, and many people might be curious about the differences between them and corporations in terms of mergers, etc. I assume this is Ohio-based, and is definitely a good introduction for those in Ohio pondering taking that big step in business.
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