In this article I will discuss mergers, a legal point of view. Without further ado:
Legal structure of the Merger Regulation
There are a number of possible legal structures of a merger, but in general. Choose either classic or a merger, Newco merger is based on the facts of the merger.
Here one fusion Corp Corp Corp in the second 2 is the acquiring company. Corp 2 shows the assets of two bodies 1 and 2, and contributes to their mutual activity. Corp. 1 resolves not long after the merger. The shareholders of the Corps 1 and 2 of the second property Corp. [= Corp corporation or LLC]
Corp 2 inherits all contracts and liabilities Corp 1 and holds its own old contracts and liabilities. This creates risks for each side, the merger will take the responsibilities of the other unknowns. Parties to mitigate the risk of pre-merger due diligence Corps 1 and 2 shareholders Corp 1 as freely reversed shareholders Corp 2 pre-merger debt, and.
The IRS treats a classical fusion as a tax-free reorganization, which is good. Regarding value contracts (eg contracts with customers), Corp 2 automatically takes care contracts without the need to obtain the consent of the other party. Note: Look for “buy” on sale clauses in certain contracts, such as leases and loan documents – you may be the owner or bank approval for these contracts.
The alternative to a conventional melting is a new company called Corp 3 (aka Newco) to start. 1 and 2 3 Corps transferred its assets (but not their claims or liabilities) Corp. This transfer can be directly Corp 3 or via a distribution to shareholders, which will bring the third active Corp shareholders contribute cash Corp. 3 the period of the startup sequence post-merger revenues come, shareholders divide the property of others Corp.
The main advantage of Newco is limited. Body dissolve 1 and 2 and 3 and shareholders Corp. argument that the old debt with the former body death. These responsibilities may include, for example, bad contracts, tax inspections, claims work, etc. If this argument holds, the shareholders of body 1 and 2 can feel safe that no new company acquired the old debt, including other debt Corp. merger. This limitation of liability does not fully apply to the test, however, and creditors have a argument against. Creditors can not pursue debt Body Corp 3 1 and 2 on the grounds Corp. 3 is the successor body 1 and 2. The facts of the merger will tell you the strength of the argument creditors.
Regarding taxes, the IRS as a taxable sale to characterize the transfer of assets from the former three bodies Corp 1 and 2 This can be painful. Bodies 1 and 2 must also assign their customer contracts and other contracts of value Corp 3, which can be painful, depending on the number and type of contracts.
The hardest part of a merger is to understand how the shareholders of bodies 1 and 2 split ownership of the new merged company. In any merger should spend the majority of the bargaining problem.
The problem is the difference between the 1 and 2 accounts Corp. so that you can distribute the property of the new company in a fair manner. It is rare that body 1 and 2 have the same value, that voting rights are translated directly in front of the old to the new. One way to solve this dilemma, a dollar value is to contribute to all the assets of the new company, and define the basis of new shares to shareholders on the value directly. The parties may collect ignoring asset value / shareholder percentages.
Sometimes a party wants a merger did not work out an exit clause in the case of a merger. Usually in the first year Starting with the party receives the return of his property, as well as customer lists, phone numbers, offices, personnel, equipment, and company names and unity. Please note that items purchased at the same time (post-merger) a special mechanism for a buy-out must ensure fair value.
Some additional questions to consider when merging:
* How to divide control of companies, including members of the Board, the vetoes and super-majority vote.
* What is the formula for the set of shareholder remuneration, including salary.
* Creation of an agreement of purchase and sale to shareholders.
* Transfer of insurance of the former body in the new year.
* Transfer of licenses in the new year.
I hope this article helps you. For more information on mergers and acquisitions, see buying and selling a business, and examination questions in the purchase and sale of a business. They think this is complex stuff. Above all, obtain legal advice to assist you.