Sometimes business owners wish to combine multiple business entities into one entity. There are many different scenarios that can occur. For example, a business owner who owns two different limited liability companies may want to consolidate them with each other so that they are under one roof so to speak or multiple business owners may want to partner up and consolidate their businesses together. How is all of this legally accomplished? The answer is through a legally binding merger.
A merger is defined as the combination of two things into one. On the surface, the same definition applies in the world of business law and entity formation: a business or “corporate” merger occurs when two or more business entities are combined into one existing or newly formed entity, known as the “surviving” entity, while the other entity (or entities), called the “merging” entity, ceases to exist. While this may seem simple to the average person, the reality is that many more pieces are involved which are critical to the welfare of the businesses and their owners.What Laws Control the Process of a Merger?
Mergers are born from and governed by the states in which the entities are located. The statutes provide numerous requirements that must be met for a valid merger to occur. The failure to follow these requirements can have many consequences from a simple rejection by a secretary of state’s division of corporations to an owner being divested of his or her interest in the company completely.What Must be Done to Effect a Merger?
One of the key pieces to a merger is the contract amongst the entities to the merger commonly known as the “merger agreement”. This agreement is critical to merger to ensure that all parties receive their intended and lawful rights and interests in the new post-merger venture. Just a few of these rights include:
- The distribution of ownership interests (commonly referred to as “shares” or “units” depending on the type of entity);
- The post-merger value of each share or unit;
- The voting rights and managerial duties of the surviving entity; and
- The rights of owners in the event of death, disability of bankruptcy by other owners or the company itself.
While Florida does not require that the merger agreement be filed with the secretary of state, many other states do require some form of an agreement to process the merger. Regardless of the filing requirements, the agreement and the corresponding forms and exhibits, are paramount to the merger process. One can easily overlook key elements at various stages of the merger if they do not have legal representation by a competent and experienced business lawyer.How to Protect Yourself and Your Business During a Merger
There is no one-size fits all approach when it comes to business mergers. If you are considering an opportunity to either grow your business – as either the “surviving” or “merging” party to a merger – an experienced Miami business lawyer should handle these important procedures so that you can be assured that your rights and financial interests are not placed in jeopardy.