Organizational Structure

Question 1

What is a merger?

Answer 1

A merger occurs when one of two existing corporations is absorbed by the other corporation.

Question 2

What is a consolidation?

Answer 2

A consolidation occurs when two existing corporations combine into one new corporation.

Question 3

A merger or consolidation both require…

Answer 3

1. The recommendation of an absolute majority of the board of directors; AND
2. The agreement of each corporation by an absolute majority of shareholders.

Question 4

Are there any exceptions for merger/consolidation requirements for short-form mergers?

Answer 4

Short-Form Mergers. In many states, if a parent corporation owns at least 90% of the stock of a subsidiary, the subsidiary may be merged into the parent without approval from the shareholders of either corporation.

Question 5

After a merger or consolidation takes place, dissenting shareholders opposed to the merger or consolidation may…

Answer 5

… either:
1. Challenge the action; OR

2. Receive payment determined at the fair market value of their shares immediately before the merger/consolidation took effect.

Question 6

What happens to a dissenting shareholders right to challenge an action when they receive fair market value for their shares?

Answer 6

They lose this right, absent a showing of fraud.

A dissenting shareholder who opts to receive fair market value for their shares loses the right to challenge the action absent a showing of fraud.

Question 7

As to to disposition of assets, shareholder approval is required for the corporation to

Answer 7

sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property if the disposal is NOT in the corporation’s usual and regular course of business.

However, if the disposal of assets is in the corporation’s usual and regular course of business, shareholder approval is NOT required (unless otherwise set forth in the articles of incorporation).