The Basics of a Michigan Corporate Merger Transaction
The basic concept of a corporate merger is relatively straightforward. Put simply, when companies are merged, one company is folded into another company. The surviving company takes on all of the assets, liabilities, powers, rights, and obligations of the company that is merged into the surviving company.
To effect a merger, the shareholders and directors of each company to the merger must pass a merger plan under Section 701 of the Michigan Corporation Act. The merger plan must contain the primary terms of the merger. The kind of merger transaction that is used depends on which company will be the surviving entity when the merger is completed. Merger transactions include forward mergers, reverse mergers, forward triangular mergers and reverse triangular mergers.
If a merger transaction is properly structured, it will be treated by the IRS as a tax-free exchange pursuant to IRS Code Section 368.
Merger transactions must be adequately and properly documented. This documentation includes an agreement and plan of merger and a certificate of merger that must be filed with the state authorities. There may be other types of documents such as letters of intent, confidentiality agreements, bills of sale, legal opinions, and employment/consulting agreements.
Completing the legal requirements for a merger transaction requires specialized legal knowledge and skills. Any Michigan business taking part in a merger transaction should have the assistance of a Michigan business attorney to provide the necessary guidance to successfully complete the merger.
