Meaning
Legal combining of two or more entities into one is facilitated by a procedure that follows the requirements of a state’s corporate code. The statutory merger results in the surviving company automatically acquiring all the property, rights and obligations of the merging firms. This eliminates the need for individual title transfers or contract assignments for every asset.
It is a common way to finalize a large scale acquisition. The procedure is not available for combinations with entities from jurisdictions that do not recognize this specific legal form.
Legal Consolidation
Administrative burden is high during the filing process. A statutory merger requires the preparation of a plan of merger and the approval of the board and the shareholders. The founder spends many hours reviewing these documents to ensure the legacy of their firm is protected.
Asset Succession
Minority rights are protected through appraisal statutes in these cases. If a shareholder disagrees with the terms of a statutory merger, they may have the right to receive the fair value of their shares in cash. This provides a safety valve for dissenters.
Regulatory Compliance
Operational continuity is maintained because the surviving entity steps directly into the shoes of the predecessor. A statutory merger ensures that the business does not pause its work while the legal papers are filed. This seamlessness is the primary advantage of the method.
