Year-End Checklist for Mergers or Consolidations of Delaware Corporations

What this is: These handy checklists will help ensure all required provisions are included when you are drafting merger documents to file in Delaware. 
 
What this means: Merger documents can be complicated. This article can help you avoid rejection and ensure the merger is filed in a timely manner.

Yes, it is that time of year again. Merger agreements are being drafted and finalized in preparation for the year’s end, and it is highly likely that one (or all) of the companies will be a Delaware domestic corporation. 

A quick refresh on Delaware’s filing guidelines for mergers, acquisitions and consolidations couldn’t hurt as you prepare documents for submission to the Delaware Division of Corporations. 

Merger or Consolidation of Domestic Corporations 

Your domestic corporation merger or consolidation filing should contain: 

• The names of the corporations. 
• The name of the surviving corporation.
• Statement that the Agreement of Merger has been approved, adopted, executed and acknowledged by each of the constituent corporations, in accordance with Section 251 of the Delaware Code.
• Any amendments required to the Certificate of Incorporation for the surviving corporation.
• If you are filing a consolidation, rather than a merger, attach a Certificate of Incorporation for the new entity being created.
• If there are no amendments for a Delaware survivor, include a statement that the Certificate of Incorporation of the surviving corporation will be its Certificate of Incorporation. (You cannot use the Certificate of Incorporation of the non-survivor.)
• Statement that the Agreement of Merger is on file at an office of the surviving corporation, along with that office’s address.
• Statement that a copy of the Agreement of Merger will be provided using this exact language: A copy of the agreement of merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.
• Execution by the surviving corporation. 

Merger or Consolidation of Domestic and Foreign (Out-of-State) Corporations 

Before submitting filings for a domestic and foreign corporation merger/consolidation, check that you’ve included: 

• The names of the corporations.
• The states/jurisdictions of incorporation.
• A statement that the Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations, in accordance with Section 252.
• Name of the surviving corporation and its state of incorporation.
• If the Delaware corporation will be the survivor, any amendments required to the Certificate of Incorporation for the surviving corporation.
• If a consolidation is creating a new Delaware corporation, attach a Certificate of Incorporation for that entity.
• If there are no amendments for a Delaware survivor, include a statement that the Certificate of Incorporation of the surviving corporation will be its Certificate of Incorporation. (You cannot use the Certificate of Incorporation of the non-survivor.)
• A statement that the Agreement of Merger is on file at an office of the surviving corporation, along with the office’s address and a statement that the agreement will be provided upon request. 
• If the Delaware corporation survives, the authorized stock and par value or no par value of each merging non-Delaware corporation.
• If the Delaware corporation does not survive, appointment of the Secretary of State to accept service of process and provision of a mailing address to which the office can send any process received. 
• Execution by surviving corporation. 

Our team provides expert handling and coordination of your merger and conversion filings. To learn more, visit our page on Mergers & Conversions.

Merger of Parent Corporations and Subsidiary or Subsidiaries 

Per Section 253 of the Delaware Code, check that your parent and subsidiary merger filings include: 

• The parent corporation name. 
• The name(s) of the subsidiary corporation(s). 
• The states of incorporation for each corporation.
• The name of surviving corporation, specifying the state of incorporation if it’s not clear.
• If the Delaware corporation does not survive, appointment of the Secretary of State to accept service of process and provision of a mailing address to which the office can send any process received. 
• Attach or set forth a resolution of the parent approving the merger, including date of adoption.
• If the parent is not the surviving corporation, the resolution shall include provisions for the pro rata issuance of stock of the surviving corporation to the shareholders of the parent corporation, upon surrender of their share certificates.
• Execution by parent.
• If the parent Delaware corporation is not the survivor, a vote of stockholders of the parent corporation is necessary and must be referenced. 
• If the parent corporation is a non-Delaware corporation and is not the surviving corporation, it should state that it has been approved by the stockholders or approved in accordance with the laws under which it’s incorporated.
• If subsidiary corporation survives anything can be amended; however, if parent survives, they can only amend the name of the corporation.
• Non-stock corporations that own 90% of the outstanding shares of a subsidiary may file an Ownership under § 253 as long as the non-stock parent is the survivor. 

Merger-Related Delaware Annual Report Requirements 

While annual reports for all Delaware corporations are normally due on March 1, Delaware requires the filing of annual reports and payment of franchise tax when a corporation merges out of Delaware.   

These merger-related annual report requirements are often overlooked and can hold up mergers that need to be completed by the year’s end.    

If a Delaware corporation will not be the survivor in a merger effective on or before December 31, 2023, the corporation must file their 2023 annual report and pay the associated franchise tax at the time of the merger. 

If the merger is effective on or after January 1, 2024 and the Delaware corporation will not be the survivor, then annual reports and franchise taxes due for both 2023 and 2024 must be filed and paid at the time of the merger.  

Delaware now requires that all annual reports are filed online. These final annual reports can be submitted up to 30 days in advance of the merger filing, as long as the date of filing is in the same calendar year as the merger. When possible, we recommend filing the annual report prior to the day of the merger filing as it is not uncommon for the annual report filing to create delays. 

Delaware Preclearance Service 

The above information can be used as a brief but helpful checklist when reviewing your merger documents. Keep in mind that the Delaware Division of Corporations provides a document preclearance service. This service is recommended when working on important, time-sensitive deals that must take place without any obstacles. 

With the right preparation (and perhaps, assistance from a trusted service company), you can enjoy a seamless transaction and a good night’s sleep during an otherwise stressful time of the year! 

FAQs 

My corporation has to pay franchise tax quarterly. How does that work? 

Taxpayers owing $5,000 or more pay estimated taxes in quarterly installments with 40% due June 1, 20% due by September 1, 20% due by December 1 and the remainder due March 1. Taxpayers subject to the quarterly payment requirement will receive a reminder notice each quarter. 

Note that only one Delaware annual report is required to be filed by March 1, even for corporations paying quarterly franchise taxes. You can read more on this topic by visiting our article, FAQs About Delaware Corporation Annual Reports and Franchise Taxes. 

How can I ensure that my complex transaction gets accepted? 

For more complex transactions, such as a merger filing, pre-clearance can help ensure your filing is accepted when it really matters. While not available in every state, it can be an excellent option when you are faced with a situation where you are unsure whether the document will be considered acceptable. Typically, you submit an unsigned copy of the document, requesting pre-clearance with the appropriate fee. A filing officer will review the document and indicate whether there are any problems that would cause them to reject it. Be aware, however, that this review does not always include verifying whether a chosen name is available or the company listed in the filing is in good standing. Read our article, 7 Surefire Paths to Corporate Filing Approval, for more information. 

Are there any recent changes to Delaware Law in this area I should be aware of?  

As a matter of fact, yes! Delaware amends its corporate statutes every year, and 2023 was no exception. Some of these recent changes could impact certain aspects of a merger transaction, such as changes to laws governing members/stockholders consent in lieu of meeting. Another recent change concerns the powers of the corporation surviving or resulting from the merger or consolidation or upon domestication or conversion to issue bonds or other obligations to provide for required payments and obligations to effect the change. For more information, refer to our article, Delaware Business Law Changes Part 1: Delaware General Corporation Law.

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.