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Friday, April 05, 2024 5:55:26 PM
Subsection 368(a)(2)(E) Reorganizations – The Reverse Triangular Merger
Finally, the third merger variation is the “reverse triangular merger” under subsection 368(a)(2)(E). In this variation, the acquiring corporation merges its own subsidiary with the target company, leaving the target company as the surviving entity. As with the forward merger, this variation also allows the acquiring corporation to be insulated from the target company’s liabilities, but it comes with the added benefit of preserving all non-transferable assets of the target company. By contrast, sometimes, in forward triangular mergers, certain non-transferable assets of the target company may be lost as it is absorbed by the subsidiary of the acquiring corporation.
Importantly, in a reverse merger, at least 80% of the total consideration paid to the target company must take the form of acquirer voting common or preferred stock.
Again, it’s not at all difficult to see why corporations must utilize the services of an experienced and qualify tax attorney to navigate through these transactions. Understanding and complying with all these rules and regulations are not easy tasks, so it’s in your best interest to hire experienced counsel to help you with Sec. 368 reorganizations. A NYC tax attorney at Mackay, Caswell & Callahan, P.C., has a wealth of expertise with these and other types of transactions. Don’t hesitate to contact us if you need assistance!
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