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ü A and B combine such that both cease to exist and a new corporation C emerges which has all the rights and obligations previously held by A and B.
ü The articles of consolidation for C take the place of the original articles of A and B.
Merger and Consolidation Procedures
PBoard of Directors of each corporation involved must approve the merger plan.
P Next shareholders of each corporation must approve.
P Then, articles filed with Secretary of State who issues a certificate of merger to the surviving corporation or a certificate of consolidation to the newly consolidated corporation.
P When allowed by state statute, a shareholder has the right to dissent and be “bought out” of his/her shares (shareholder’s appraisal right).
P In cases of: merger, consolidation, sale of most of corporation’s assets not in the ordinary course of business, adverse amendments to the articles of incorporation.
P Certain procedures must be followed.
ü For “Parent-Subsidiary” Merger.
ü No approval of shareholders needed.
ü Parent must own at least 90% of each class of stock of the subsidiary corporation.
ü Board of parent corporation approves.
ü New articles filed.
ü Copy of merger sent to each shareholder of subsidiary corporation.
ü Dissenting shareholder gives written notice of dissent prior to vote on proposed transaction. The notice shows what dissenters stock will cost corporation if action takes place.
ü If approved, shareholder must make a demand for payment of shares at fair market value (calculated on day prior to the date on which the vote was taken -- or court will determine).
ü Corporation must:
ü Make written offer to purchase a dissenting shareholder’s stock, accompanied by current balance sheet and income statement for the corporation.
ü States differ as to whether dissenting shareholder loses his status as a shareholder during appraisal process.
Purchase of Assets
ü The acquiring corporation extends its ownership and control over the physical assets of another company.
ü Acquiring corporation shareholders do not need to approve:
Unless acquiring corporation is paying for assets with its own stock and there is not enough stock authorized or
An acquiring corporation sells on a national exchange, is paying with its own stock, and newly issued stock = 20% or more than the outstanding shares.
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