Short-Form Merger could be happening here......(Is Saean trying to acquire up to 90% of the total float???)
In addition to a standard merger, many states allow for what is known as a “Short-Form Merger”. A short-form merger occurs in the case of a parent corporation who is merging with a subsidiary company of its own. The parent company is typically required to have an extremely large stake in the subsidiary – a typical requirement is that the parent own 80% or 90% of each class of stock issued by the subsidiary. See Code of Ala. § 10-2B-11.04.
If both of the above criteria are met, then a short-form merger is allowed. What a short-form merger allows the parent to do is to merge the subsidiary into itself – combining all of its financial statements, legal rights, and business operations – without a vote of the remaining shareholders of the subsidiary. The premise behind the short-form merger is that the parent company owns such a large percentage of the subsidiary, that they have control of the subsidiary. The remaining shareholders in the subsidiary are either holding their shares and fighting the sale just to hold out for more money before selling, or they are simply disinterested in the transaction.
EXAMPLE: Big Co. had invested in Small Time, Inc. largely on the basis of the research that Small Time’s team – consisting of only four people – had been conducting. The terms of the relationship between the two companies was such that Big provided Small with a substantial amount of research funding in exchange for a 90% ownership stake in the firm. After Small Time’s research finally yielded positive results, Big Co. decided to conduct a short-form merger that merged Small Time into Big’s operations. The merger was completed without a vote of Small’s remaining shareholders because of Big’s 90% ownership.
The benefits of a short-form merger to the parent company are obvious. First, the short-form merger allows the parent to save the huge expense that may be required to solicit proxies or votes from the few outstanding shareholders. Additionally, the process can be completed quickly as all that is required is a vote of the parent company’s board and a filing with the state. The requirements to carry out the short form merger vary from state to state, but the common thread is that the merger will certainly be simpler than would be a merger between two unrelated companies. See Cal Corp Code § 1110.
Note, however, that just because a pair of companies merge via a short-form merger (as opposed to a regular merger), that does not change the legal rights or responsibilities of the parent company. The parent still takes on all of the benefits and obligations – including any elements of civil liability – that attach to the now merged subsidiary.
AI
