Must A Parent Of A Constituent Corporation Sign The Agreement Of Merger? – Securities

In California practice, a merger reorganization will typically
involve two agreements – one short, the other not. The Corporations
Code refers to the shorter agreement as the “agreement of
merger”. At a minimum it must include all of the
following:

1. The terms and conditions of the merger.




2. The amendments, subject to Sections 900 and 907, to the
   articles of the surviving corporation to be effected by the merger,
   if any. If any amendment changes the name of the surviving
   corporation the new name may be the same as or similar to the name
   of a disappearing domestic or foreign corporation, subject to
   subdivision (b) of Section 201.




3. The name and place of incorporation of each constituent
   corporation and which of the constituent corporations is the
   surviving corporation.




4. The manner of converting the shares of each of the constituent
   corporations into shares or other securities of the surviving
   corporation and, if any shares of any of the constituent
   corporations are not to be converted solely into shares or other
   securities of the surviving corporation, the cash, rights,
   securities, or other property which the holders of those shares are
   to receive in exchange for the shares, which cash, rights,
   securities, or other property may be in addition to or in lieu of
   shares or other securities of the surviving corporation, or that
   the shares are canceled without consideration.




5. Other details or provisions as are desired, if any, including,
   without limitation, a provision for the payment of cash in lieu of
   fractional shares or for any other arrangement with respect thereto
   consistent with the provisions of Section 407.

Cal. Corp. Code § 1101(a). The longer agreement is not
required by the code and thus has no official name. To avoid
confusion, practitioners will often refer to it as the “plan
of reorganization”. In addition to the foregoing, the plan of
reorganization commonly includes representations and warranties,
indemnities, hold back and other “deal points”. The
agreement of merger must be filed with the California Secretary of
State’s office, the plan of reorganization is not filed with
that office. Cal. Corp. Code § 1103.

The California General Corporation Law defines a
“constituent corporation” as a corporation which is
merged with or into one or more other corporations or one or more
other business entities and includes a surviving corporation. A
triangular merger involves a third party – a parent corporation of
one of the constituent corporations. While the parent corporation
will typically be a party to the plan of reorganization, it is not
required to be a party to the merger agreement. This is stated
explicitly in Section 1101(a) which provides “The constituent
corporations shall be parties to the agreement of merger and other
persons, including a parent party (Section 1200), may be parties to
the agreement of merger”.

Section 1103 requires that an officers’ certificate of each
constituent corporation be filed with the agreement of merger. If
If equity securities of a parent of a constituent corporation are
to be issued in the merger, the officers’ certificate of that
constituent corporation must state either that no vote of the
shareholders of the parent was required or that the required vote
was obtained. Id. Note that the statute does not require
that an officers’ certificate of the parent corporation be
filed. Rather, the required statement must be included in the
subsidiary constituent’s officer certificate.

In practice, many agreements of merger include the parent
corporation as a party and thus also include an officers’
certificate of the parent corporation.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.