When a Sale of Assets is not a “Sale-of-Assets Reorganization”

The California General Corporation Law (CGCL) contemplates three different types of reorganizations – a merger reorganization, an exchange reorganization, and a sale-of-assets reorganization. Cal. Corp. Code § 181. Chapter 12 of the CGCL prescribes both board and shareholder approval requirements for reorganizations, including sale-of-asset reorganizations.

Readers of the CGCL, however, will note that Corporations Code Section 1001 also requires approval by the outstanding shares (Corp. Code § 152) of the principal terms of a sale of all or substantially all of a corporation’s assets (unless the transaction is in the usual and regular course of business).

This is not an example of statutory duplication. Every sale of all or substantially all of the assets of a corporation is not a “sale-of-assets reorganization”. Under the CGCL, a “sale-of-assets reorganization” is limited to “acquisitions” of all or substantially all of a corporation’s assets only in exchange in whole or in part for...

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