You asked whether the General Assembly considered legislation that would have allowed corporations to merger with other business entities.

SUMMARY

The General Assembly considered legislation that would have allowed corporations to merge with other business entities. The Judiciary Committee conducted a public hearing on March 22. The committee favorably reported sHB 5676, File 449, An Act Concerning Professional Service Corporations, Business Corporations, Nonstock Corporations, Limited Partnerships, Limited Liability Companies and Partnerships. The House did not take the bill up.

The bill allows stock corporations to merge with partnerships, limited partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts, statutory trusts, and real estate investment trusts. It grants similar authority to limited partnerships, limited liability companies, and partnerships.

Under current law, stock corporations, limited liability companies, and limited partnerships organized under Connecticut law may merge only with their own type of entity. Partnerships may only merge with partnerships or limited partnerships.

The bill makes the laws that currently apply to these mergers also apply to mergers with the other entities. But it makes a few adjustments to reflect mergers that involve other entities.

The bill also authorizes stock corporations to engage in share exchange with these other business entities by allowing their shares to be exchanged for shares, cash, or other types of property.

The bill also made numerous changes unrelated to mergers to our corporation laws.

MERGER OF CORPORATIONS INTO OTHER ENTITIES

Under current law, one or more domestic or foreign corporations may merge into another domestic corporation under certain circumstances. (A domestic corporation is one formed under Connecticut law. A foreign corporation is formed under the law of another jurisdiction. ) The bill broadens this authority by allowing one or more domestic corporations to merge with "other entities" pursuant to a merger plan. Under the bill, the term "other entities" means any association or legal entity, other than a corporation, organized to conduct business. This includes, but is not limited to partnerships, limited partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts, statutory trusts, and real estate investments trusts.

Existing law, unchanged by the bill, authorizes statutory trusts to merge only with other statutory trusts. Thus, the bill would authorize Connecticut corporations, to merge with statutory trusts created in some other jurisdictions, but not those created in Connecticut.

The bill allows another entity to be a party to a merger with a corporation, or to be created by the terms of a merger plan with a corporation, only if (1) the law of the state or country under which it is organized or by which it is governed permits the merger and (2) in effecting the merger, the corporation or entity complies with that law and its certificate of incorporation or organizational documents.

The bill makes the laws that currently apply to corporate mergers also apply to mergers with other entities. It makes a few adjustments to these laws to reflect mergers that involve other entities.

The merger plan between a corporation and other entities must include:

1. the name of each party that will merge and the name of the survivor;

2. its terms and conditions;

3. the manner and basis of converting the shares of each merging party into shares or other property;

4. the certificate of incorporation of any corporation, or the organizational documents of any other entity, to be created by the merger or, if a new corporation or other entity is not to be created by the merger, any amendments to the survivor's certificate of incorporation or organizational document; and

5. any other provisions required by the law of the state or country under which any party to the merger is organized or governed, or by the certificate of incorporation or organizational documents of any such party.

The bill allows the terms of the merger plan to be made dependent upon objectively ascertainable facts outside the plan. Under the bill "facts" include, but are not limited to, the occurrence of any event, including a determination or action by any person or body, including the corporation.

The bill also allows the plan to include a provision allowing it to be amended before a certificate of merger is filed with the secretary of the state. But, if the shareholders of a domestic corporation that is a party to the merger must, or may, vote on the plan, the plan must provide that, after the shareholders approve it, it may not be amended to change

1. the amount or kind of shares or other securities, interests, or other property to be received by the shareholders of or owners of interests in any party to the merger upon conversion of their shares or interests under the plan;

2. the certificate of incorporation of any corporation, or the organizational documents of any other entity, that will survive or be created as a result of the merger, except for changes (a) the law explicitly permits boards to make without shareholder approval, unless the certificate of incorporation provides otherwise, or (b) boards can make without shareholder approval under comparable provisions of the law of the state or country under which the foreign corporation or foreign entity is organized or governed; or

3. any of the plan's other terms or conditions if the change would adversely affect shareholders in any material respect.

The bill makes similar changes to the merger plans governing the merger of nonstock corporations.

SHARE EXCHANGE

Current law authorizes a domestic corporation to acquire, through a share exchange, all of the shares of one or more classes or series of shares of another domestic or foreign corporation. The bill expands this authority to acquire through a share exchange all of the interests of one or more classes or series of interests of a domestic or foreign "other entity," in exchange for shares or other property, pursuant to a share exchange plan. Current law also allows all of the shares of one or more class or series of shares of a domestic corporation to be acquired by another domestic or foreign corporation. The bill expands this authority by allowing the shares of a domestic corporation to be acquired by another entity, in exchange for shares or other securities, interests, obligations, or rights to acquire shares or other property, pursuant to a share exchange plan.

The bill allows a foreign corporation, or a domestic or foreign other entity, to be a party to a share exchange only if (1) the law under which the corporation or other entity is organized or governed permits it and (2) in effecting the share exchange, the corporation or other entity complies with the law and its certificate of incorporation or organizational documents.

The bill requires the share exchange plan to include:

1. the name of each corporation or other entity whose shares or interests will be acquired and the name of the corporation or other entity that will acquire such shares or interests;

2. the terms and conditions of the share exchange;

3. the manner and basis of exchanging shares of a corporation or interests in another entity whose shares or interests will be acquired under the share exchange into shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property, or any combination of them; and

4. any other provisions required by the law of the state or country under which any party to the share exchange is organized or governed or by any party's certificate of incorporation or organizational documents.

The bill allows the share exchange plan's terms to be made dependent on objectively ascertainable facts outside the plan.

The bill allows the plan to also include a provision allowing it to be amended before a certificate of share exchange is filed with the secretary of the state. But, if the shareholders of a domestic corporation that is a party to the share exchange must or may vote on the plan, it must provide that after the shareholders approve the plan, it may not be amended to (1) change the amount or kind of shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property to be issued by the corporation or to be received by the shareholders of or owners of interests in any party to the share exchange in exchange for their shares or interests under the plan or (2) change any of the plan's terms or conditions if they would adversely affect such shareholders in any material respect.

The bill specifies that it does not limit a domestic corporation's power to acquire shares of another corporation or interests in another entity in a transaction other than a share exchange.

Action on Plan of Merger or Share Exchange

Under current law, after adopting a merger or share exchange plan, the board of directors of each corporation that is a party to the merger, and the board of directors of the corporation whose shares will be acquired in the share exchange, generally must submit the plan of merger, or share exchange for shareholder approval.

For either plan to be approved (1) the board of directors must recommend it to the shareholders, unless the board determines that because of conflict of interest or other special circumstances it should make no recommendation, in which case it must submit the plan to the shareholders and inform them of the basis for its determination and (2) the shareholders entitled to vote must approve it.

The bill requires that the board of directors of a domestic corporation that is a party to a merger or a share exchange adopt the merger plan before submitting it to its shareholders.

The bill allows the board to condition its submission of the merger or share exchange plan to the shareholders on any basis.

Under the bill, if the shareholders must approve the plan at a meeting, the corporation must notify each shareholder, including any not entitled to vote, of the meeting at which the plan is to be submitted for approval. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan.

If the corporation is to be merged into an existing corporation or other entity, the notice must also include, or be accompanied by, a copy or summary of each party's certificate of incorporation or organizational documents. If it is to be merged into a corporation or other entity that is to be created pursuant to the merger, the notice must include or be accompanied by a copy or a summary of the certificate of incorporation or organizational documents of the new corporation or other entity.

Unless the business corporation law, the certificate of incorporation, or the board of directors requires a greater vote or a vote by voting groups, the plan must be approved by each voting group entitled to vote separately on it by a majority of all the votes entitled to be cast on the plan by that voting group.

The bill requires separate voting by voting groups:

1. on a merger plan by each class or series of shares that (a) are to be converted under the merger plan into shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property, or any combination of these, or (b) would have a right to vote as a separate group on a provision in the plan that, if contained in a proposed amendment to the certificate of incorporation, would require action by separate voting groups;

2. on a share exchange plan, by each class or series of shares included in the exchange, with each class or series constituting a separate voting group; and

3. on a merger or share exchange plan, if the voting group is entitled under the certificate of incorporation to vote as a voting group to approve a plan of merger or share exchange.

Under the bill, unless the certificate of incorporation provides otherwise, the corporation's shareholders do not have to approve a merger or share exchange plan if (1) the corporation will be the survivor in the merger or is the acquiring corporation in the share exchange; (2) except for amendments the law permits boards to make without shareholder approval, its certificate of incorporation will not be changed; or (3) each shareholder of the corporation whose shares were outstanding immediately before the effective date of the merger or the share exchange will hold the same number of shares, with identical preferences, limitations, and relative rights, immediately after the effective date.

The bill requires that if, as a result of a merger or a share exchange, one or more shareholders of a domestic corporation would become personally liable for the obligations or liabilities of any other person or entity, approval of the merger plan or share exchange must require each such shareholder to execute a separate written consent to become subject to such personal liability.

The bill establishes separate approval provisions for a merger or share exchange plan authorized by a corporation incorporated under Connecticut law before January 1, 1997. It requires that the plan be approved by the affirmative vote of at least two-thirds of the voting power of each voting group entitled to vote on it, unless the certificate of incorporation expressly provides otherwise. But, if the corporation is the surviving corporation of the merger and the merger plan will not change its certificate of incorporation and the shares to be issued under the plan could have been issued by its board of directors without further shareholder authorization, then the shareholders do not have to approve the plan.

The bill also requires that the plan be approved by the affirmative vote of at least two-thirds of the voting power of each class of stock of such corporation outstanding before January 1, 1997, and not otherwise entitled to vote on it, unless the certificate of incorporation expressly provides otherwise. But, the bill does not require approval by the holders of such class or series not otherwise entitled to vote if the corporation is the surviving corporation of the merger and the merger or share exchange plan does not contain any provisions which, if contained in a proposed amendment to its certificate of incorporation, would entitle any class or series of its shareholders to vote as a class or series.

Merger of Subsidiary

Current law allows a parent corporation owning at least 90% of the outstanding shares of each class of a subsidiary corporation to merge the subsidiary into itself without approval of shareholders of the parent or the subsidiary.

The bill allows a domestic parent corporation that owns shares of a domestic or foreign subsidiary corporation that carries at least 90% of the voting power of each class and series of the outstanding shares of the subsidiary to merge with the subsidiary or with another such subsidiary. But the merger is not allowed if (1) the certificate of incorporation of any of the corporations provides otherwise and (2) in the case of a foreign subsidiary, approval by the foreign subsidiary's board of directors or shareholders is required by the law under which the subsidiary is organized or governed.

With respect to mergers with a subsidiary, the bill eliminates the special rules that apply to the merger plan, notice to shareholders, and filing the certificate of merger with the secretary of the state.

Under the bill, if the subsidiary's shareholders are not required to approve the merger, the parent corporation must, within 10 days after the merger's effective date, notify each of the subsidiary's shareholders that the merger has become effective. Otherwise the bill makes the laws that apply to any merger apply to a merger between a parent and a subsidiary.

Certificate of Merger and Share Exchange

The bill requires that after a merger or share exchange plan has been adopted and approved as required by law, an officer or other representative of each party must execute a merger or share exchange certificate on behalf of each party to the merger or the share exchange.

The bill requires the certificate to specify:

1. the parties' names;

2. the name of the corporation or other entity that will be the survivor of the merger or that will acquire the shares or interests of the other party to the share exchange;

3. the date the merger or share exchange is to be effective;

4. the amendments to the survivor's certificate of incorporation, if any, or the certificate of incorporation of the new corporation if a new corporation is created as a result of a merger;

5. if the merger or share exchange plan required approval by the shareholders of a domestic corporation, a statement that the plan was duly approved by the shareholders and, if voting by any separate voting group was required, by each separate voting group, in the manner required by law and the certificate of incorporation;

6. if the plan did not require approval by the shareholders of a domestic corporation, a statement to that effect; and

7. as to each foreign corporation and each other entity that was a party to the merger or share exchange, a statement that the plan and the performance of its terms were duly-authorized as required by the law of the state or country under which the corporation or other entity is organized or by which it is governed, and by its certificate of incorporation or organizational documents.

The bill requires that a certificate of merger or share exchange be delivered to the secretary of the state for filing by the survivor of the merger or the acquiring corporation in a share exchange and makes it take effect on the effective date of the merger or the share exchange, instead of on the effective date of the certificate of merger or share exchange.

The bill makes similar changes with respect to the certificate of merger involving nonstock corporations.

Effect of Merger or Share Exchange

Under the bill, when a merger becomes effective:

1. the corporation or other entity designated in the merger certificate as the survivor continues or comes into existence, as the case may be;

2. the separate existence of every party merged into the survivor ceases;

3. all liabilities of each party merged into the survivor are vested in the survivor;

4. all property owned by, and every contract right possessed by, each party that merges into the survivor is vested in the survivor without reversion or impairment;

5. the survivor's name may be substituted in any pending proceeding for the name of any party to the merger whose separate existence ceased in the merger;

6. the survivor's certificate of incorporation or organizational documents are amended to the extent provided in the certificate of merger;

7. the certificate of incorporation or organizational documents of a survivor that is created by the merger become effective; and

8. the shares of each corporation that is a party to the merger, and the interests in another entity that is a party to a merger, that are to be converted under the merger plan into shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property, or any combination of them, are converted.

The former holders of these shares or interests are entitled only to the rights provided to them in the merger plan or to any rights they may have under Connecticut's corporation laws.

The bill specifies that any shareholder of a domestic corporation that is a party to a merger or a share exchange and, prior to the merger or the share exchange, was liable for the liabilities or obligations of such corporation, is not released from such liabilities or obligations because of the merger or share exchange.

Under the bill, when a merger becomes effective, a foreign corporation, or a foreign other entity, that is the survivor of the merger is deemed to (1) appoint the secretary of the state as its agent for service of process in a proceeding to enforce the appraisal rights of shareholders of a domestic corporation that is a party to the merger and (2) agree that it will promptly pay the amount, if any, to which such shareholders are entitled to under the laws governing appraisal rights. (Appraisal rights give shareholders the right to dissent from certain corporate actions, including such things as mergers and consolidations, that affect their rights materially and adversely. It also gives them the right to obtain payment for the fair value of their shares following such actions. )

New Merger and Share Exchange-Abandonment

The bill allows any party to the merger or share exchange involving a domestic corporation plan adopted and approved under the bill to abandon it without action by the party's shareholders or owners of interests, in accordance with any procedures included in the plan. If no such procedures are in the plan, the parties may abandon the plan in the manner determined by the board of directors of a corporation, or the managers of another entity, subject to any contractual rights of other parties to the merger or the share exchange. The bill allows this action unless the plan provides otherwise or the law of the state or country under which a foreign corporation or a domestic or foreign entity that is a party is organized or governed provides otherwise. The parties may do so at any time before the merger or the share exchange has become effective.

The bill establishes similar changes regarding the abandonment of a merger between nonstock corporations.

The bill requires that if a merger or share exchange is abandoned after a certificate of merger or share exchange has been filed with the secretary of the state, but before either becomes effective, a statement of the abandonment must be executed on behalf of a party to the merger or the share exchange by an officer or other duly authorized representative of such party. It must be delivered to the secretary of the state for filing before the merger's or the share exchange's effective date. The statement takes effect upon filing and the merger or the share exchange is deemed abandoned and does not become effective.

MERGERS BY NONSTOCK CORPORATIONS

Action Plan of Merger

Under current law, a domestic nonstock corporation that is a party to a merger must submit the plan to its members for approval. The law requires that the notice for the members' meeting to vote on the plan contain certain information. The bill requires that if the corporation is to be merged into an existing corporation, the notice must also include or be accompanied by a copy or summary of the existing corporation's certificate of incorporation. If the corporation is to be merged into a corporation that is to be created pursuant to the merger, it requires that the notice also include or be accompanied by a copy or a summary of the new corporation's certificate of incorporation.

The bill specifies that approval of the merger plan by members may precede or follow its adoption by the board of directors and the board's sending a recommendation to the members to approve it.

Current law requires separate voting by a class of members of a corporation on a merger plan if the plan contains a provision that, if contained in a proposed amendment to its certificate of incorporation, would require action by such class, as a separate class. The bill also requires separate voting by a class of members of a corporation on a plan of merger if (1) such class is entitled under its certificate of incorporation to vote as a separate class to approve a merger plan or (2) the membership of such class is to be converted, under the merger plan, into memberships of a different class of members of the corporation or into membership of any class of any other corporation.

Effect of Merger

Current law specifies what occurs when a merger between nonstock corporations becomes effective. The bill also specifies that when a merger becomes effective the (1) name of the survivor may be substituted in any pending proceeding for the name of any party to the merger whose separate existence ceased in the merger and (2) certificate of incorporation of a survivor that is created by the merger becomes effective.

MERGER OF LIMITED PARTNERSHIPS

Current law allows a domestic limited partnership (formed under Connecticut law) to merge with or into one or more limited partnerships formed under Connecticut law or the law of other states pursuant to a properly approved merger plan. The bill expands this authority to include other types of business entities and entities organized under the laws of foreign countries or other foreign jurisdiction. Specifically, it allows any domestic limited partnership to merge with or into any one or more limited partnerships or any one or more "other entities" formed or organized under the laws of this state or any other state or any foreign country or other foreign jurisdiction, or any combination of them. Under the bill, "other entity" means any association or legal entity, other than a domestic or foreign limited partnership, organized to conduct business. This includes, but is not limited to, corporations, general partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts, statutory trusts, and real estate investment trusts.

The bill requires the merger plan to name the survivor. Under the bill, "survivor" means, in a merger or consolidation, the limited partnership or other entity into which one or more other limited partnerships or other entities are merged or consolidated. A survivor of a merger may preexist the merger or be created by the merger.

The bill requires the merger plan to include:

1. the name and jurisdiction of organization of each party to the merger and the name of the limited partnership or other entity which is to be the survivor;

2. any changes in the survivor's certificate of limited partnership or the organizational documents;

3. the merger's effective date or time, if it is not to be effective when the certificate of merger is filed; and

4. the terms and conditions of the merger. (This includes the manner and basis of converting the shares or interests of each party to the merger into shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property, or any combination of these. It may include provision for the distribution by any merging party of cash, securities, or other property in lieu of, in addition to, in exchange for, or upon conversion of all or part of the interests of a party that is not the survivor in the merger. )

The bill allows the plan to include other provisions regarding the merger as are deemed necessary or desirable.

The bill specifies that a written plan of merger for a merger that involves one or more other entities, meets the bill's requirements if it meets the requirements for merger under the statutes under which the other entity is organized or governed.

CONSOLIDATION OF LIMITED PARTNERSHIPS

Current law allows domestic limited partnerships to consolidate with one or more limited partnerships formed under Connecticut law or the laws of some other state into a new limited partnership, pursuant to a properly approved consolidation plan. The bill expands this authority to include consolidating into Connecticut entities in addition to limited partnerships and entities formed in other countries.

The bill expands this authority by allowing any domestic limited partnerships to consolidate with any entities formed or organized under the laws of this state or any other state or any foreign country or other foreign jurisdiction, or any combination of these, into a new limited partnership or other entity.

It requires the consolidation plan to include:

1. the name and jurisdiction of organization of each party and the name and jurisdiction of organization of the new limited partnership or other entity, which name may be that of any of the consolidating limited partnerships or other entities or any other name available under the provisions of the limited partnership laws;

2. if the survivor is a limited partnership, a certificate of limited partnership complying with Connecticut's limited partnership laws;

3. the effective date or time, which shall be a date or time certain, of a consolidation if it is not to be effective when the consolidation certificate is filed; and

4. the terms and conditions of the consolidation. (This includes the manner and basis of converting the shares or interests of each party into shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property, or any combination to these. It may provide for the distribution by any consolidating limited partnership of cash, securities of any limited partnership, or other property in lieu of, in addition to, in exchange for, or upon conversion of all or part of the interests in any consolidating party or of the new limited partnership or other entity. )

It also allows it to include whatever other provisions on the consolidation deemed necessary or desirable.

The bill specifies that if the consolidation involves one or more other entities, a written consolidation plan that meets the requirements for consolidation under the statutes under which such other entity is organized or governed meets the bill's requirements.

Certificate of Merger and Consolidation

The bill requires that after a merger or consolidation plan is approved, the survivor must file a certificate of merger or consolidation with the secretary of the state. With respect to a merger, the survivor must file a certificate of merger properly executed by any merging limited partnership. With respect to a consolidation, it must file a consolidation certificate properly executed by any consolidating limited partnership together with an appointment of statutory agent for service of process. The bill specifies that general partners executing a certificate of merger or consolidation do not have to sign or swear as to facts set forth in it that do not pertain to the limited partnership of which they are general partners.

The bill requires that the merger or consolidation certificate must include (1) the merger or consolidation plan and (2) as to each merging or consolidating limited partnership, a statement of the vote of limited partners required to adopt the plan and the vote for the plan.

If the survivor is a foreign limited partnership that will transact business in Connecticut, the certificate must include a statement that it will comply with the limited partnership law. It must also include a statement irrevocably appointing the secretary of the state as its attorney to accept service of process in any proceeding to enforce any obligations of any domestic merging or consolidating limited partnership for which it is liable under (1) Connecticut law, (2) the plan of merger or consolidation, or (3) the laws of its own jurisdiction that govern it.

If it does not appoint the secretary of the state, the bill allows legal process in any such proceeding to be served upon the secretary of the state as provided by existing law as attorney for the survivor.

The bill specifies that these requirements are in addition to the requirements for a certificate of merger or consolidation under the statutes under which any other entity that is a party to the merger or consolidation is organized or governed.

Under the bill, a certificate of merger or consolidation acts as a certificate of cancellation for a domestic limited partnership that is not the survivor in the merger or consolidation. A certificate of merger acts as a certificate of amendment for a domestic limited partnership that survives the merger, to the extent provided by the merger plan. In the case of a consolidation, if the new entity is a limited partnership, the certificate of limited partnership set forth in the consolidation certificate is the certificate of limited partnership of the new limited partnership.

Effect of Merger

The bill specifies that in the case of a merger, the survivor is that limited partnership or other entity the plan designates as the survivor. In the case of a consolidation, the survivor is the new limited partnership or other entity provided for in the consolidation plan. The consolidation or merger acts to eliminate the separate existence of each party except the survivor.

The bill gives the survivor, to the extent consistent with its certificate of limited partnership or other organizational documents in effect when the merger or consolidation occurred, all the rights, privileges and powers of each of the limited partnerships and other entities that have merged or consolidated. It also provides that all property owned by and all debts due to any of the parties automatically vest in the survivor. The bill specifies that title to any real estate, or any other interest in it, vested in any of the parties to the merger or consolidation does not revert or is not in any way impaired, because of such merger or consolidation.

The bill also specifies that any interest contained in a will or in another instrument, made before or after the merger or consolidation, to or for the benefit of any party to the merger or the consolidation, benefits the survivor.

The bill:

1. makes the survivor responsible for all the liabilities, obligations, and penalties of each party to the merger or the consolidation;

2. allows any existing or proceeding civil or criminal claim, pending by or against any party to be prosecuted as if such merger or consolidation had not taken place;

3. allows the survivor to be substituted for any party;

4. allows any judgment rendered against any party to the merger or the consolidation to be enforced against the survivor; and

5. specifies that the merger or consolidation may not impair the rights of a party's creditors nor any liens upon its property.

The bill specifies that any general partner of a limited partnership or holder of an interest in any other entity that is a party to a merger or a consolidation who, before the merger or consolidation, was obligated for any of the party's liabilities or obligations is not released because of the merger or the consolidation from those liabilities or obligations.

MERGER OF LIMITED LIABILITY COMPANIES

Current law allows limited liability companies (LLCs) to merge or consolidate with or into one or more LLCs. The bill expands this authority by also allowing them to merge or consolidate with or into one or more other entities formed or organized under Connecticut law or the laws of any other state or any foreign country or other foreign jurisdiction, or any combination of them.

The bill defines "other entity" as any association or legal entity, other than a domestic or foreign limited liability company, organized to conduct business. This includes, but is not limited to, corporations, general partnerships, limited liability partnerships, limited partnerships, joint ventures, joint stock companies, business trusts, statutory trusts and real estate investment trusts.

Current law allows an LLC organized under Connecticut law to render professional services to merge or consolidate with another LLC organized under Connecticut law to provide the same professional services. The bill expands this authority by allowing them to also merge or consolidate with a Connecticut professional service corporation, a partnership or limited liability partnership if the company, corporation, or partnership is organized to render the same professional service. Current law prohibits a merger or consolidation of a Connecticut LLC organized to render professional services with any foreign LLC. The bill expands this to also prohibit mergers or consolidations with any other entity organized under the laws of some other state, country, or jurisdiction.

Existing law, unchanged by the bill, defines "professional service" as any type of service to the public that requires that members of a profession rendering such service obtain a license or other legal authorization as a condition of rendering them, but limits the definition to the professional services rendered by dentists, naturopaths, chiropractors, physicians and surgeons, doctors of dentistry, physical therapists, occupational therapists, podiatrists, optometrists, nurses, nurse-midwives, veterinarians, pharmacists, architects, professional engineers, or jointly by architects and professional engineers, landscape architects, real estate brokers, insurance producers, certified public accountants and public accountants, land surveyors, psychologists, attorneys-at-law, licensed marital and family therapists, licensed professional counselors, and licensed clinical social workers.

Approval of Mergers

Under current law, unless the articles of organization provide otherwise, a proposed merger or consolidation plan must be authorized and approved by each LLC that is a party to it by the affirmative vote of at least two-thirds in interest of the members. The bill applies this same requirement for mergers and consolidations the bill authorizes, but also eliminates the vote requirement if the LLC's operating agreement provides otherwise. Existing law, unchanged by the bill, defines "operating agreement" as any agreement, written or oral, for conducting the business and affairs of a limited liability company, which is binding on all of the members.

Plan of Merger and Consolidation

The bill requires each LLC and other entity that is a party to a proposed merger or consolidation to enter into a written plan of merger or consolidation.

The bill requires the plan to include:

1. the name of each LLC and other entity that is a party to the merger or consolidation and the name of the survivor in a merger or the new LLC in a consolidation;

2. the terms and conditions of the proposed merger or consolidation;

3. the manner and basis of converting the interests in each LLC or other entity in the merger or consolidation into interests of the surviving or new LLC or other entity or, in whole or in part, into cash or other property;

4. in the case of a merger, such amendments to the survivor's organizational documents as are desired to be effected by the merger, or state that no such changes are desired;

5. in the case of a consolidation, all of the statements required to be set forth in the survivor's organizational documents; and

6. whatever other provisions relating to the proposed merger or consolidation as are deemed necessary or desirable.

The bill defines "survivor" as the LLC or other entity into which one or more other limited liability companies or other entities are merged or consolidated. A survivor of a merger may preexist the merger or be created by the merger. The bill defines "organizational documents" as the basic document or documents that create, or determine the internal governance of, another entity.

If the merger or consolidation involves an other entity, the bill specifies that a plan meets its requirements if it meets the requirements for merger or consolidation of the statutes under which such other entity is organized or governed.

Articles of Merger and Consolidation

After a merger or consolidation plan is approved, the bill requires the survivor to deliver to the secretary of the state for filing articles of merger or consolidation duly executed by each LLC and other entity that is a party specifying:

1. the name and jurisdiction of formation or organization of each LLC and other entity;

2. the effective date of the merger or consolidation if later than the filing date;

3. the survivor's name;

4. a statement that the plan of merger or consolidation was duly authorized and approved by each LLC in accordance with Connecticut's law and by each other entity in accordance with their applicable organizational documents;

5. the address of the survivor's business place where a copy of the plan is on file; and

6. that a copy of the plan of merger or consolidation will be furnished by the survivor, on request and without cost, to any one holding an interest in any LLC or other entity that is a party to the merger or consolidation.

The bill specifies that a merger or consolidation takes effect when filed or on the date specified in the plan, whichever is later.

The bill requires that each LLC or other entity that is a party to the merger or consolidation must execute the articles of merger or consolidation. It requires the survivor to file the articles with the secretary of the state in order for them to become effective.

Under the bill, these articles act as articles of dissolution for a LLC that is not the survivor.

Effect of Merger and Consolidation

Under the bill, when the merger or consolidation between an LLC and another entity becomes effective:

1. the survivor becomes a single LLC or other entity which, in the case of a merger, is the one designated in the merger plan as the survivor and, in the case of a consolidation, becomes the new one provided for in the consolidation plan;

2. the separate existence of each party, except the survivor, terminates;

3. the survivor possesses all the rights, and powers of each of the merging or consolidating parties and is subject to all the restrictions, disabilities, and duties of each one;

4. any property interest of the parties automatically vests in the survivor and does not revert or become impaired;

5. the survivor is responsible and liable for all liabilities and obligations of each of the parties and any claim existing or action or proceeding pending against any party may be prosecuted as if the merger or consolidation had not taken place, or the survivor may be substituted in the action;

6. the rights of creditors or lien holders of the parties are not impaired by the merger or consolidation; and

7. the membership or other interests in a party that are to be converted or exchanged into interests, cash, obligations, or other property under the terms of the merger or consolidation plan are so converted, and the former holders of these interests are entitled only to the rights the plan or law provides.

Merger or Consolidation with Foreign Entity

If the survivor of a merger between a Connecticut LLC and a foreign entity is to be governed by the laws of any other state, the laws of the District of Columbia, or of any foreign country, then the survivor must agree (1) that it may be served with process in this state in any proceeding to enforce any obligation of a party to the merger or consolidation that was formed under Connecticut's laws, as well as for enforcement of any obligation of the survivor and (2) to irrevocably appoint the secretary of the state as its agent for service of process in any such proceeding. The survivor must specify the address to which the secretary of the state may mail a copy of the process.

The bill specifies that if the survivor is to be governed by the laws of any jurisdiction other than Connecticut, the effect of the merger or consolidation is the same as for a survivor governed by Connecticut law, except to the extent that the laws of such other jurisdiction provide otherwise.

MERGER OF PARTNERSHIPS

Current law allows partnerships to merge with one or more partnerships or limited partnerships. The bill expands this authority by allowing one or more partnerships to merge with or into any one or more other entities formed or organized under the laws of this state or any other state or any foreign country or other foreign jurisdiction. The bill defines "other entity" as any association or legal entity, other than a domestic or foreign partnership, organized to conduct business. This includes, but is not limited to, corporations, limited partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts, statutory trusts, and real estate investment trusts.

The bill requires the merger plan between a partnership and another entity to specify:

1. each party's name;

2. the name of the survivor into which the other partnerships or other entities will merge;

3. whether the survivor is a partnership or another entity and, if the survivor is a partnership or a limited partnership, the status of each partner;

4. the merger's terms and conditions;

5. the manner and basis of converting the shares or interests of each party to the merger into the survivor's shares, interests or obligations or into money or other property;

6. the street address of the survivor's chief executive office;

7. the merger's effective date or time, if it is not to be effective when the certificate of merger is filed; and

8. whatever other provisions that are necessary or desirable.

The bill requires that a merger plan be approved:

1. in the case of a partnership that is a party to the merger, by all of the partners or by a number or percentage specified for merger in the partnership agreement and

2. in the case of an other entity that is a party to the merger, by the vote required for approval of a merger by the law of the state or foreign jurisdiction in which the other entity is organized or governed. (In the absence of such a specific law for a limited partnership, the merger plan must be approved by all of the partners, notwithstanding a provision to the contrary in the partnership agreement. )

As under current law, after a merger plan is approved and before it takes effect, it may be amended or abandoned according to its provisions.

Under existing law, unchanged by the bill, the merger takes effect (1) when all parties approve it, (2) when all documents required by law to be filed are filed, or (3) the effective date the plan specifies.

If the merger involves one or more other entities, the bill specifies that these requirements regarding merger plans are satisfied if the plan meets the requirements of the laws under which they are organized or governed.

Effect of Merger

Under the bill, when a merger between a partnership and another entity takes effect:

1. the separate existence of every party other than the survivor, ceases;

2. all property owned by each party vests in the survivor;

3. all obligations of every party become the obligations of the survivor; and

4. an action or proceeding pending against a party may be continued as if the merger had not occurred, or the survivor may be substituted as a party to the action or proceeding.

Under the bill, the secretary of the state is the agent for service of process in an action or proceeding against a survivor to enforce an obligation of a party to a merger. Upon receipt of process, the secretary of the state must mail a copy of to the survivor.

The bill makes a partner of a surviving partnership or limited partnership liable for:

1. all obligations of a party to the merger for which the partner was personally liable before the merger;

2. all other obligations of the survivor incurred before the merger by a party to the merger, but those obligations may be satisfied only out of the survivor's property; and

3. all obligations the survivor incurred after the merger takes effect, but those obligations may be satisfied only out of property of the survivor if the partner is a limited partner.

Under the bill, if the obligations incurred before the merger with another entity by a party that is a partnership or limited partnership are not satisfied out of the survivor's property, those who were general partners of that party immediately before the merger's effective date must contribute the amount necessary to satisfy that party's obligations to the survivor. They must do so immediately before the effective date of the merger in the manner provided by Connecticut law, or by the law of the jurisdiction in which the party was organized, as the case may be, as if the merged party were dissolved.

Under the bill, any partner of a partnership or holder of an interest in another entity that is a party to a merger who, before the merger, was obligated for any of the liabilities or obligations of the partnership or other entity is not released because of the merger from such liabilities or obligations that arose before the merger's effective date.

Statement of Merger

Under the bill, after a merger between a partnership and another entity, if the survivor is a partnership, the partnership may file a statement that one or more partnerships or other entities have merged into the surviving partnership.

The bill requires the statement to contain, in addition to the statutory requirements for a certificate of merger or consolidation applicable to another entity that is a party to the merger:

1. the name of each party to the merger;

2. the name of the survivor into which the other parties were merged;

3. the street address of the survivor's chief executive office and of an office in this state, if any; and

4. the type of entity the survivor is.

The bill specifies that property of the survivor partnership or entity that before the merger was held in the name of another party to the merger is property held in the survivor's name when the merger statement is filed. Real estate owned by the survivor that before the merger was held in the name of another party to the merger is property held in the name of the survivor when a certified copy of the statement of merger is filed in the office for recording transfers of that real property.

A filed and, if appropriate, recorded statement of merger, executed and declared to be accurate pursuant to Connecticut law, stating the name of a partnership or other entity that is a party to the merger in whose name property was held before the merger and the name of the survivor, is effective with respect to the partnerships or other entities named to transfer property, even if it does not contain all of the other information the bill requires.

The bill requires that if the survivor is a limited liability partnership, a certificate of merger must be filed with the secretary of the state

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