Statutory Mergers: Four Basic Steps Involved

Stated simply, a statutory merger occurs when two corporations join together but only one of them continues to exist as a legal entity. While the steps to creating a statutory merger are not complicated, they must be precisely followed, in keeping with each specific state’s governing legislation.                                                                                                                                              

In general, notice is owed to certain parties, most of whom normally have a right to vote on a merger after a corporation’s board of directors have studied the matter and issued their own resolution concerning the merger.

Here’s a bit more information about each of the four steps involved.

How to Move Forward with a Standard Statutory Merger

  1. The board of directors of the two corporations involved will need to meet and issue resolutions indicating whether or not they are in favor of the merger. If they both desire it, they must then set forth the terms and conditions under which they are willing to merge – and attempt to work out any differences regarding those terms. One or both boards will also need to carefully examine their articles of incorporation to see if they must be officially amended in order to make the proposed merger possible;

  2. All shareholders, regardless of whether their personal shares entitle them to vote, must be given notice of the meeting when a vote will be taken regarding the proposed merger. The shareholders also deserve to be given a general outline of the proposed merger plan prior to the vote. This notice is necessary because some shareholders may want to exercise their appraisal rights. (Note: While this notice is only required when a merger must be approved by the shareholders, nearly all mergers require their approval);

  3. A specific statutory percentage must be obtained. While this percentage may vary, most states require the shareholders to approve of a merger with two-thirds of all outstanding shares – or a majority of such shares;

  4. Specific articles must be drafted, detailing how the merger will be carried out. Of course, such articles are only necessary if the shareholders have voted to approve the merger. As is commonly reported in the news, shareholders do not approve of every proposed merger. Each corporation’s charter and the governing state statutes will then dictate what types of future negotiations can be pursued. Should a merger be finally approved by the shareholders, the articles of merger must then be filed with the appropriate state office.

To obtain help with handling all of your Georgia business planning needs, please contact Shane Smith Law today.  You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (980) 246-2656.