Corporate Mergers Can Be Complex

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Mergers and acquisitions are a normal part of the business landscape in California and across the U.S. The State of California defines a merger as …a combining of corporations in which one of two or more corporations survives. Companies decide to merge for a variety of reasons ? including increasing market share and revenue, reducing tax liability and lowering fixed costs by removing duplicate operations.

The definitions of mergers, and the regulations governing them, are provided in the California Corporations Code and they were updated recently by the Business Programs Division in the Office of the Secretary of State. The state categorizes the different types of mergers as follows:

  • Short Form Merger – Certificate of Ownership ? A parent company can merge with a subsidiary when it owns 100% of the outstanding shares of the subsidiary. To complete the merger, a Certificate of Ownership must be filed with the Secretary of State.
  • Merger By Agreement of Merger ? When a California corporation is the survivor of a merger, it must file a copy of the Agreement of Merger with a separate officers’ certificate for the surviving corporation and for each merging corporation.
  • Triangular Merger ? This occurs when the corporation being acquired becomes a subsidiary of the acquiring corporation.

In addition, the Code also addresses regulations for other types of mergers involving non-profit organizations, foreign companies and corporations that acquire other kinds of businesses.

The laws regarding mergers in California are complex. If your company is considering a merger in the near future, you should contact an attorney early on in the process.

Posted in Business Law | Tagged acquisition, business law, merger