How do you structure a merger?

A merger is a process whereby two companies statutorily cease to exist and combine into one of the two or into a new entity.  The surviving company or new company absorbs all the assets and liabilities of the merged company.

Each state’s corporate law will determine the requirements for merger.  If the merger includes a foreign entity, the laws of that entity’s jurisdiction must allow the merger.

In Florida, articles of merger and a plan of merger must be filed with the state, which describes among other things how the stock or interests of each merging entity will be converted into the stock or interests of the surviving entity.   

The effect of a merger is that the merging entities cease to exist and their assets and liabilities are deemed to belong to the surviving entity.  No transfers or assignments take place, and no winding up or dissolution is required.

Internal consents to a merger will usually be required by both companies, in the form of board or manager resolutions and shareholder or member ratification.  With regard to LLCs, in FL the default rule is a majority of the voting membership interests.  Of course, an LLC’s operating agreement may provide for different voting rights than the default rule.

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Last Modified: April 28, 2016