Mergers and Acquisitions in Florida — Knowing Your Rights
March 14, 2019
Mergers and Acquisitions in Florida – Knowing Your Rights
While “mergers and acquisitions” are usually treated as if they were the same thing, each refers to its own specific process. Both are pretty self-explanatory – a merger combines two separate, already existing businesses into a single new entity, while acquisitions occur when one business purchases another business’s stock or assets. What’s more, mergers and acquisitions also come with their own liabilities and responsibilities.
When purchasing another business’s assets, the buyer won’t be held liable for the seller’s debts and liabilities in most situations. However, there are a number of exceptions that you should be aware of, such as when a buyer willingly takes on the debts of the seller in exchange for a lower sale price. Fraudulent sales and failure to comply with state laws such as the “bulk sales law” will similarly void any protections. Other special cases include “de facto mergers” between two companies attempting to skirt state laws on mergers, as well as situations where the buyer is a “continuation” of the seller. A buyer is considered to be a continuation of the seller when both parties have the same (or largely similar) officers, directors, and shareholders before and after sale.
The other type of acquisition involves taking over a business entity by purchasing most or all of its stock. In these situations, the buyer takes control of the seller’s business and more or less maintains the status quo. All debts, lawsuits, and responsibilities are transferred to the buyer in a stock purchase. Keep in mind that the buyer will be held liable for these debts and other obligations even if they’re unknown at the time of sale.
Some stock purchases will require obtaining the approval of the buyer or seller’s shareholders. The situations that call for the approval of the seller’s shareholders are largely dependent on state laws such as anti-takeover statutes. The buyer’s shareholder approval is required when the transaction will cause a significant shift in voting power and when the transaction will be funded by issuing more of the buyer’s shares than are authorized by the corporate charter.
The company formed by a merger is responsible for all liabilities, obligations, and even criminal penalties incurred by either business before the merger’s effective date. Any pending legal proceedings against the component businesses will be allowed to continue uninterrupted, but this is also the case for any suits filed by the preexisting businesses prior to the merger.
It’s also worth noting that mergers will require the approval of the stockholders and that they can oppose the merger should they so desire.
Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website, www.FLPatelLaw.com, or calling 727-279-5037.
Tyler Thompson is a second generation St. Petersburgian with a passion for reading and writing. In 2018 he finally made his way to FL Patel Law PLLC where he has found a home for himself as Project Manager. He is an unapologetic dog person who enjoys spending what free time he has with his friends and family.
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