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The statutory merger of two or more business entities is an extensive process involving due diligence, planning and filing activities. This article highlights key pre-planning actions for public filing requirements.
See Part 2 to learn about filing the primary merger documents and post-merger “clean up”.
Once a merger agreement has been reached and approved by shareholders, the legal teams for the merging entities face the complex process of completing the public records filings that will make the merger legally binding. They must also make sure the records in the relevant states of domestic organization and foreign qualification accurately reflect all of the changes to the business entity caused by the merger.
Neglecting to file any required document or failing to take one of the many other steps involved in this process can result in serious consequences. Incomplete filings may delay the effective date of the merger, cause the new entity to lose its naming rights, result in penalties for doing business without authority, or subject the entities to additional tax liability.
However, with good planning and organization, you can effect a successful merger. The goals of planning are to:
First, know your starting and end points. Establish a clear vision of what the business entity is before the merger, and what will happen to it as a result of the merger. To help understand this, answer the following questions:
THREE MANAGEABLE PHASES OF THE MERGER FILINGSecond, break down the merger into the following three manageable parts and analyze what must be done at each stage in the merger process.
BEST PRACTICES FOR PRE-MERGER PLANNINGAmong the actions that must, or should, be taken before the merger documents are filed, are:
CONCLUSIONLaying the groundwork for a merger helps in-house and outside legal teams handle the myriad details in a timely and effective manner. The pre-merger plan starts with establishing a clear view of both the merging entities’ current statutory characteristics and the desired state of the new entities after the merger. Meticulous planning helps the legal teams both meet merger deadlines and avoid the risks that can result from incomplete and rejected filings.
For best practices for filing the primary merger documents and post-merger considerations, see Part 2 of this series.
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This information is not intended to provide legal advice or serve as a substitute for legal research to address specific situations.
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