Judiciary Committee
AN ACT CONCERNING PROFESSIONAL SERVICE CORPORATIONS, BUSINESS CORPORATIONS, NONSTOCK CORPORATIONS, LIMITED PARTNERSHIPS, LIMITED LIABILITY COMPANIES & PARTNERSHIPS
SUMMARY: This act allows stock corporations to merge with a broader range of business entities. Under prior law, stock corporations, limited liability companies, and limited partnerships organized under Connecticut law could merge only with their own type of entity. Partnerships could merge only with partnerships or limited partnerships. The act allows corporations also to merge with partnerships; limited partnerships; limited liability partnerships; limited liability companies; joint ventures; joint stock companies; and business, statutory, and real estate investment trusts. It grants similar authority to limited partnerships, limited liability companies, and partnerships.
The act applies the laws that currently apply to these mergers to mergers with the other entities. It makes a few adjustments to these laws to reflect mergers that involve other entities.
The act authorizes stock corporations to exchange their shares with these other business entities for shares, cash, or other types of property. It also authorizes a corporation to exchange its shares for other types of property owned by another corporation.
It changes the conditions under which stock corporations may sell their assets, other than in the ordinary course of business, without shareholder approval. Prior law required shareholder approval if a disposition involved all, or substantially all, of the corporation's property. The act instead requires such approval if a disposition would leave the corporation without a significant continuing business activity. It establishes a test to determine if this new standard has been met. It establishes a similar test for nonstock corporations.
The act makes numerous changes in the laws relating to dissolved corporations, including procedures to deal with known and unknown claims.
The act makes numerous changes to stock corporation laws relating to corrections of filed documents, the corporation's acquisition of its own shares, distributions to shareholders, removal of directors by judicial proceeding, liability for unlawful distributions, and amendments to certificates of incorporation and bylaws. It makes similar changes for nonstock corporations with respect to correcting filed documents, liability for unlawful distributions, and amendments to the certificates of incorporation.
It makes numerous changes in the laws dealing with nonstock corporations relating to ex-officio directors, staggered terms for directors, and court-appointed board members.
The act validates any certificate of amendment for stock corporations, or certificates of merger or share exchange filed between January 1, 1997, and the act's passage, if they were otherwise valid except for an incorrect or incomplete statement of the information required by the laws under which they were filed with respect to shareholder approval.
The act reduces the fees for filing a certificate of merger or consolidation between limited partnerships from $30 for each limited partnership that is involved to one $30 fee. It establishes a $30 fee for mergers or consolidations between limited partnerships and other entities.
It makes similar changes for filing a certificate of merger or consolidation for limited liability companies and limited liability partnerships. It establishes a $30 fee for filing a certificate of merger or consolidation involving a statutory trust and other statutory trusts or other entities.
Finally, the act makes numerous conforming and technical changes.
EFFECTIVE DATE: July 1, 2003, except for the validating provision, which is effective upon passage.
PROFESSIONAL SERVICE CORPORATIONS (§ 1)
Prior law allowed professional service corporations to consolidate or merge with other professional corporations organized under Connecticut law. The act allows these corporations to consolidate or merge with a Connecticut limited liability company, partnership, or limited liability partnership, if it is organized to render the same specific professional service.
CORRECTING FILED DOCUMENTS (§§ 3 & 33)
Prior law allowed a Connecticut or foreign corporation (incorporated under a law other than Connecticut's) to correct a document filed by the secretary of the state if (1) it contains an inaccuracy; (2) it was defectively executed, attested, sealed, verified, or acknowledged; or (3) the electronic transmission was defective. The act allows the corporation to correct a document that is defectively made as well. It makes a similar change to the nonstock corporation law.
CORPORATION'S ACQUISITION OF ITS OWN SHARES (§ 4)
The law allows a stock corporation to acquire its own shares. Once acquired, they constitute authorized but unissued shares. Under the act, if the certificate of incorporation prohibits the reissue of acquired shares, the acquisition automatically reduces the number of authorized shares by the number of shares acquired. Under prior law, the number of shares was reduced only when the corporation amended its certificate of incorporation.
Prior law authorized the board of directors to adopt a certificate of amendment without shareholder action and deliver it to the secretary of the state for filing. The certificate had to specify the (1) corporation's name; (2) reduction in the number of authorized shares, itemized by class and series; and (3) total number of authorized shares, itemized by class and series, remaining after reduction. The act eliminates this authority (As noted above, under the act, the reduction occurs automatically. )
DISTRIBUTION TO SHAREHOLDERS (§ 5)
The act specifies that the rules and requirements relating to distributions to shareholders do not apply to distributions in the course of dissolution, which are covered by dissolution rules.
REMOVAL OF CORPORATION DIRECTORS BY JUDICIAL PROCEEDING (§ 6)
The act changes the standards the court may use to remove a director from a stock corporation's board and expands the right of small shareholders to initiate the proceeding. Under prior law, the corporation, or shareholders holding at least 10% of the outstanding shares of any class, could ask the court to do so. The act eliminates the 10% requirement, thus allowing any shareholder to make such a request.
The act eliminates the court's authority to remove a director it finds engaged in gross abuse of authority or discretion with respect to the corporation. It allows the court to remove a director it finds (1) grossly abused the position of director or (2) intentionally harmed the corporation. Before removing a director, it requires the court to consider the inadequacy of other remedies and the director's course of conduct when deciding whether removal is in the corporation's best interest. By law, unchanged by the act, the court may remove a director it finds engaged in fraudulent or dishonest conduct with respect to the corporation.
The act specifies that a shareholder who initiates a lawsuit to remove a director must comply with all the rules that apply to shareholders suing in the name of the corporation except the requirement that he (1) was a shareholder at the time of the act complained of or (2) became a shareholder through transfer by operation of law from one who was a shareholder at the time. It eliminates the requirement that a shareholder make the corporation a defendant to such a lawsuit.
Finally, the act specifies that its authority to remove a director does not limit the court's authority to order other appropriate relief.
LIABILITY FOR UNLAWFUL UNAUTHORIZED DISTRIBUTIONS (§§ 7 & 38)
By law, a director who fails to follow statutory standards and votes for, or assents to, a distribution that violates the law governing distributions to shareholders or the certificate of incorporation is personally liable to the corporation for any amount distributed over what could have been distributed without the violation. The act also makes a director personally liable to the corporation if he votes for, or assents to, a distribution that violates the act's requirements for setting aside security for unknown or contingent claims.
By law, a lawsuit involving a stock corporation to enforce this liability must be filed within two years after the distribution date. The act also allows it to be filed within two years after the date (1) the violation of the corporation law occurred as a consequence of disregarding a restriction in the certificate of incorporation or (2) on which the distribution of assets to shareholders or members was made pursuant to the act's provisions regarding setting aside security for unknown or contingent claims.
The act makes a similar change for nonstock corporations except that it does not change the statute of limitations for lawsuits to enforce the director's liability to the corporation, which is three years from the date of the distribution, and the change maintains this three-year period.
The law gives directors who are liable for improper distributions the right to recover from certain other directors (contribution) and certain shareholders (recoupment). The act requires that the lawsuit for recovery be filed within one year after the liability of the claimant has been finally adjudicated in the lawsuit against the director for improper distribution of assets. (The term "contribution" refers to the legal principal that when one of several people liable for the same judgment or obligation is called upon to satisfy it, the others may be required to reimburse him (make contribution) to the extent of their share of the total liability. The term "recoupment" refers to the legal proceeding to force shareholders or recipients to pay back distributions that were improperly made to them by directors. )
The act makes a similar change for nonstock corporations.
AMENDMENT OF CERTIFICATE OF INCORPORATION BY BOARD OF DIRECTORS (§ 9)
Unless the certificate of incorporation provides otherwise, the act authorizes a stock corporation's board of directors to adopt, without shareholder approval, amendments to the corporation's certificate of incorporation to:
1. increase the number of authorized shares of the class of stock, when there is only one class of stock outstanding, to the extent necessary to permit the issuance of shares as a share dividend;
2. reflect a reduction in authorized shares as a result of the corporation acquiring its own shares, when its certificate of incorporation prohibits the reissuance of the acquired shares; and
3. delete a class of shares from the certificate of incorporation as a result of the corporation acquiring all shares of a class of stock and the certificate of incorporation prohibits the reissuance of acquired shares.
VOTING ON AMENDMENTS BY VOTING GROUPS (§ 11)
By law, holders of the outstanding shares of a class of stock are entitled to vote as a separate voting group on a proposed amendment to the certificate of incorporation if the amendment would do certain things. The act eliminates this right to vote as a separate group when the amendment would:
1. increase or decrease the aggregate number of authorized shares of the class;
2. change the designation of all or part of the shares of the class;
3. create a new class of shares having rights or preferences substantially equal to the shares of the class;
4. increase the rights, preferences, or the number of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions or dissolution that are substantially equal to the shares of the class; or
5. cancel or otherwise affect rights to dividends that have accumulated but not yet been authorized on all, or part of, the shares of the class.
By law, if a proposed amendment to a certificate of incorporation entitles the holders of two or more series of shares to vote as a separate voting group and it would affect them in the same or substantially similar way, the holders of those shares must vote together as a single voting group on the proposed amendment. The act specifies that they would not vote as a single voting group if the certificate of incorporation or the board of directors required otherwise. Also, the act specifies that the rule about voting as a single voting group applies to the holders of two or more classes of shares in the same way that it applies to holders of two or more series of shares.
AMENDMENT BEFORE ISSUANCE OF SHARES (§ 12)
The act limits the ability of the incorporators to amend a stock corporation's certificate of incorporation. Under prior law, they could do so before the corporation had issued shares. Under the act, they may do so during this period only if the corporation has no board of directors.
CERTIFICATE OF AMENDMENT (§§ 13 & 40)
By law, a corporation amending its certificate of incorporation must deliver a certificate of amendment to the secretary of the state for filing. When the shareholders approve an amendment, the act eliminates the requirement that the certificate include the designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment, and the number of votes of each voting group indisputably represented at the meeting. It also eliminates the requirement that the certificate contain either (1) the total number of votes cast for and against the amendment by each voting group entitled to vote separately or (2) the total number of undisputed votes cast for the amendment by each voting group, and a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group. The act instead requires that, if an amendment requires shareholder approval, the certificate must include a statement that it was duly approved by the shareholders as required by law and by the certificate of incorporation.
The act makes a similar change for nonstock corporations.
RESTATED CERTIFICATE OF INCORPORATION (§§ 14 & 41)
By law a corporation's board of directors may restate a certificate of incorporation at any time, with or without shareholder action. The act specifies that the board may do so just to consolidate all amendments into a single document. The law requires that a restated certificate of incorporation must be delivered to the secretary of the state for filing and contain certain information. The act requires that this information include a statement specifying that the restated certificate consolidates all amendments into a single document. If a new amendment is included in the restated certificate, the statement also must include the information required when new amendments are submitted to the secretary. The act eliminates the board's duty to notify shareholders who do not have the right to vote. The act makes a similar change for nonstock corporations.
AMENDMENT OF BYLAWS (§ 16)
The act eliminates the authority of a stock corporation's board of directors to amend or repeal a corporation bylaw if, when the shareholders adopted it, they expressly provided that the board could not do so. It also eliminates the board's authority to reinstate a bylaw contrary to the shareholders express direction.
MERGER OF CORPORATIONS INTO OTHER ENTITIES (§§ 17, 18, & 42)
By 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 act broadens this authority by allowing one or more domestic corporations to also merge with "other entities" pursuant to a merger plan. Under the act, "other entities" are any association or legal entity, other than a corporation, organized to conduct business, including partnerships, limited partnerships, limited liability partnerships (LLP), limited liability companies (LLC), joint ventures, joint stock companies, business trusts, statutory trusts, and real estate investments trusts.
The act allows an other 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 act applies the laws that currently apply to corporation mergers to mergers with other entities. It makes a few adjustments to these laws to reflect mergers that involve other entities.
What a Merger Plan Must Include
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, any amendments to the survivor's certificate of incorporation or organizational document (which, under current law is permitted, but not required, when corporations merge); 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.
Plan's Terms
The act allows the terms of the merger plan to be made dependent upon objectively ascertainable facts outside the plan. Under the act, "facts" include the occurrence of any event, including a determination or action by any person or body, including the corporation.
Plan Amendment
The act 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:
1. change the amount or kind of shares or other securities, interests, or other property to be received by the shareholders or owners of interests in any party to the merger upon conversion of their shares or interests under the plan;
2. change 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 (a) changes the law explicitly permits boards to make without shareholder approval, unless the certificate of incorporation provides otherwise or (b) changes comparable provisions of the law of the state or country under which the foreign corporation or foreign entity is organized or governed permit boards to make without shareholder approval; or
3. change any of the plan's other terms or conditions if the change would adversely affect shareholders in any material respect.
The act makes similar changes to the merger plans governing the merger of nonstock corporations, except nonstock corporations continue to be able to merge only with other nonstock corporations.
SHARE EXCHANGE (§ 19)
The 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 corporation. The act expands this authority to allow it to acquire through a share exchange plan all of the interests of one or more classes or series of interests of a foreign corporation or domestic or foreign "other entity," in exchange for shares or other property.
The act allows a domestic corporation's shares to be acquired by a foreign corporation or 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 act 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 act 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 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 act allows the share exchange plan's terms to be made dependent on objectively ascertainable facts outside the plan.
It allows the plan also to 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 or owners of interests in any party to the share exchange or (2) change any of the plan's terms or conditions if they would adversely affect such shareholders in any material respect.
The act specifies that it does not limit a domestic corporation's power to acquire interests in another entity in a transaction other than a share exchange.
ACTION ON PLAN OF MERGER OR SHARE EXCHANGE (§ 20)
By law, after adopting a merger plan, the board of directors of each domestic corporation must submit the merger or share exchange plan for shareholder approval. Prior law always required shareholders approval for share exchange. The act establishes exceptions.
For either plan to be approved (1) the board 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 act requires a board of directors of a domestic corporation that is a party to a merger or a share exchange to adopt the merger plan before submitting it to its shareholders. The law allows the board to condition its submission of the merger or share exchange plan to the shareholders on any basis.
Under the act, if the shareholders must approve the plan at a meeting, the corporation must notify each shareholder 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 contain or be accompanied by a copy or summary of the plan.
If the corporation is to be merged into a new or 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 by 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 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 that group is entitled to cast on the plan.
The act 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 group to approve a plan of merger or share exchange.
Under the act, 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 that the law permits boards to make without shareholder approval, its certificate of incorporation will not be changed; or (3) each shareholder whose shares were outstanding immediately before the effective date of the merger or share exchange will hold the same number of shares, with identical preferences, limitations, and relative rights, immediately after the effective date.
The act requires that if, as a result of a merger or 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 plan of merger or share exchange must require each such shareholder to execute a separate written consent to become subject to such personal liability.
The act retains the existing 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 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 act 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 (§ 21)
The law allows a parent corporation owning at least 90% of the outstanding shares of each class of a subsidiary corporation's stock to merge the subsidiary into itself without approval of shareholders of the parent or the subsidiary.
The act allows a domestic parent corporation that owns shares that carry at least 90% of the voting power of outstanding shares to merge with the subsidiary or to merge the subsidiary 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 act eliminates the rules that apply to the merger plan, notice to shareholders, and filing the certificate of merger with the secretary of the state. But the general merger rules apply, which have certain similar requirements.
Under the act, 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 act makes the laws that apply to any merger apply to a merger between a parent and a subsidiary.
CERTIFICATE OF MERGER & SHARE EXCHANGE (§§ 22 & 44)
The act 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. Under prior law, the certificate of merger or stock exchange involving domestic corporations had to include specific things, such as the plan; if applicable, a statement that shareholders approval unnecessary; and certain voting information if shareholder approval was necessary. The act instead 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 merger's or share exchange's effective date;
4. the amendments to the survivor's certificate of incorporation, if any, or the certificate of incorporation of the new corporation if one 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 it was 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 jurisdiction 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 act 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 act makes similar changes with respect to the certificate of merger involving nonstock corporations.
EFFECT OF MERGER OR SHARE EXCHANGE (§ 23 & 45)
Under the act, 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.
Similar requirements apply for mergers of nonstock corporations.
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.
When a share exchange becomes effective, under the act the shares of each domestic corporation that are to be exchanged for shares or other securities, interests, obligations, rights to acquire shares or other securities, cash or other property, or any combination of them are entitled only to the rights provided to them in the share exchange plan or to any rights they may have under Connecticut law.
The act specifies that any shareholder of a domestic corporation that is a party to a merger or a share exchange and, before the merger or share exchange, was liable for the corporation's liabilities or obligations, is not released from these because of the merger or share exchange.
Under the act, 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 rights of shareholders of each domestic corporation that is a party to the merger who exercises appraisal rights 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 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. )
AB&ONMENT OF MERGER OR SHARE EXCHANGE (§§ 24 & 46) (STOCK & NONSTOCK CORPORATIONS)
The act allows any party to the merger or share exchange plan adopted and approved under the act 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 share exchange. The act 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 becomes effective.
The act 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 for filing before the merger's or 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.
The statement must contain the name of each party to the merger or exchange, the date it was to become effective, and the date it was abandoned.
The act establishes similar changes regarding the abandonment of a merger between nonstock corporations.
TRANSFER OF ASSETS (§§ 25 & 47)
Unless a corporation's certificate of incorporation provides otherwise, the act allows it, without shareholder approval, to (1) distribute assets pro rata to the holders of one or more classes or series of its shares and (2) transfer assets to any entity, instead of just to any corporation, as long as it owns all its shares or other interests. It makes the second of these changes, for nonstock corporations as well.
SALE OF ASSETS OTHER THAN IN THE ORDINARY COURSE OF BUSINESS (§§ 26 & 48)
Stock Corporations
The act changes the standard for determining whether a corporation's disposition of assets, other than in the usual or ordinary course of business, needs shareholder approval. Prior law required approval if all or substantially all of the corporation's property was involved. The act, instead, requires approval if a disposition would leave the corporation without a significant continuing business activity. The act establishes a non-exclusive safe harbor test to make this determination.
The corporation is conclusively deemed to have retained a significant continuing business activity if it retains a business activity that represents (1) at least 25% of total assets at the end of the most recently completed fiscal year and (2) 25% of either income from continuing operations before taxes or revenue from continuing operations for that year for the corporation and each of its subsidiaries on a consolidated basis. The act specifies that the assets of a direct or indirect consolidated subsidiary are the assets of the parent corporation for the purposes of this requirement. It specifies that these rules do not apply to disposition of assets in the course of dissolution.
The act requires that a disposition that requires shareholder approval must be initiated by an authorizing resolution of the board of directors.
It specifies that the notice to shareholders of the meeting to approve the disposition must include the terms and conditions and the consideration the corporation will receive. Prior law required only that the notice describe the disposition.
The law allows the corporation to abandon the disposition after the shareholders approve it, without shareholder approval, subject to any contractual rights. The act specifies that it may be abandoned at any time before it has been consummated.
Nonstock Corporations
The act changes the standard under which a nonstock corporation may dispose of its property, outside its ordinary course of affairs, without member approval.
Under prior law, the members could approve a transfer of corporate property if it was not in the corporation's ordinary course of affairs and it disposed of all or substantially all of its property. Under the act, unless the certificate of incorporation provides otherwise, member approval is required if a transfer would leave the corporation without a significant continuing activity.
The act establishes the same non-exclusive safe harbor test for stock corporations to determine whether a nonstock corporation will be left without a significant continuing activity. If a corporation retains an activity that represented at least 25% of total assets at the end of the most recently completed fiscal year, and 25% of either income from continuing operations before taxes or revenue from continuing operations for that fiscal year for the corporation and each of its subsidiaries on a consolidated basis, the corporation will be conclusively deemed to have retained a significant continuing activity. The act specifies that assets of a direct or indirect consolidated subsidiary are the assets of the parent corporation for this purpose.
CERTIFICATE OF DISSOLUTION (§§ 27 & 49)
The law allows stock corporations to dissolve by filing a certificate of dissolution with the secretary of the state. Under prior law, the certificate for a dissolved stock corporation had to include (1) the number of votes entitled to be cast on the proposal to dissolve and (2) either the total number of votes cast for and against dissolution or the total number of undisputed votes cast for dissolution and a statement that this number was sufficient for approval. If voting by voting groups was required, the information had to be provided separately for each voting group entitled to vote separately. Instead, the act requires the certificate to include a statement that the proposal to dissolve was duly approved by the shareholders, as required by law and by the certificate of incorporation.
The act defines a "dissolved corporation" as a corporation whose certificate of dissolution has become effective and the successor entity to which the remaining assets of the corporation are transferred subject to the corporation's liabilities for purposes of liquidation. The act applies this definition to the laws governing the dissolution of a stock corporations.
The act makes similar changes for nonstock corporations.
NEW & OTHER CLAIMS AGAINST DISSOLVED CORPORATION (§§ 31 & 52)
The act allows a dissolved stock or nonstock corporation that has published a dissolution notice and asked people with claims to present them to file an application with the Superior Court for a determination of the amount and form of security to be provided for payment of claims that are (1) contingent or have not been made known to the dissolved corporation or (2) based on an event occurring after the effective date of dissolution but that, based on the facts known to the corporation, are reasonably estimated to arise after the effective date of dissolution. The act specifies that the provision does not have to be made for any claim that is or is reasonably anticipated to be barred. The application must be filed with the Superior Court for the judicial district where the dissolved corporation's principal office or, if there is none in this state, where its registered office, is located. Within 10 days after it files an application, the dissolved corporation must notify each claimant holding a contingent claim shown on the corporation's records.
The court may appoint a guardian ad litem to represent all claimants whose identities are unknown in any such proceeding. The act requires the corporation to pay the guardian's reasonable fees and expenses, including all reasonable expert witness fees.
Under the act, a dissolved corporation that provides security in the amount and form the court orders satisfies its obligations for claims that (1) are contingent, (2) have not been made known to the corporation, or (3) are based on an event occurring after the effective date of dissolution. These claims may not be enforced against a shareholder or member who received assets in liquidation.
The act establishes similar provisions for nonstock corporations.
NEW DIRECTORS' DUTIES (§§ 32 & 53)
The act requires directors of a dissolved corporation to have the corporation discharge or make reasonable provision for paying claims and distributing assets to shareholders after paying or providing for claims. Under the act, directors of a dissolved corporation that has properly disposed of claims are not liable for claims against the dissolved corporation that are barred or satisfied under the law or the act. The act establishes the same requirements for nonstock corporations.
SPECIAL PROVISIONS REGARDING DIRECTORS OF NONSTOCK CORPORATIONS (§§ 34 & 35)
The act allows a nonstock corporation's bylaws to provide that people occupying certain positions within or outside the corporation are ex-officio directors. The law allows the certificate of incorporation to do so. But, unless otherwise provided in the certificate of incorporation or bylaws, ex-officio directors may not be counted in determining a quorum and are not entitled to vote.
Under the act, if a corporation's members are entitled to vote on the adoption, amendment, or repeal of its bylaws, any bylaw providing for ex-officio directors must require approval, either before, on, or after July 1, 2003, by the same vote necessary to amend its bylaws.
The act allows a nonstock corporation's bylaws to provide for staggering the terms of directors, other than ex-officio directors, in the same manner that current law allows its certificate of incorporation to do so. Under the act, if the corporation has members entitled to vote on the adoption, amendment, or repeal of its bylaws, any bylaw providing for staggering the terms of directors must require their approval, either before, on, or after July 1, 2003, by the same vote necessary to amend the bylaws.
COURT ORDER FOR NEW BOARD (§ 36)
The act authorizes any corporate officer to petition the Superior Court for the judicial district where the nonstock corporation's principal office is located for an order appointing a new board of directors, if a nonstock corporation's board ceases to exist and there are no members to elect a new board. If the corporation does not have a principal Connecticut office, the petition may be filed in the judicial district where its registered office is located. If there are no officers, the act authorizes the attorney general, any officer of any organization holding the corporation's funds or other assets, or any other person having dealings with the corporation to file the petition.
The petition must specify the relevant circumstances, propose the names of three or more people willing to serve as directors under the circumstances, and contain their addresses and a brief statement of their backgrounds. The petition filer must provide a copy to the attorney general. The court may require additional information about the corporation and the proposed directors. It may order a hearing and notice to such people as it deems appropriate under the circumstances. It may give the notice in whatever manner it deems appropriate.
The act authorizes the court to appoint and set the terms of office of a new board of directors. The new board may include some or all of the people proposed in the petition or may be composed entirely of others the court deems appropriate. Board members serve for terms of office the court specifies in the order. They have the power, authority, duties, and responsibilities, and are subject to the same standards of conduct, as if they had been otherwise validly elected and serving under the provisions of the certificate of incorporation, bylaws, and applicable statutes.
PLAN OF MERGER (§ 43)
By 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 act 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, the notice must include or be accompanied by a copy or a summary of the new corporation's certificate of incorporation.
The act specifies that members' approval of the merger plan may precede or follow its adoption by the board of directors and the board's sending a recommendation to the members to approve it.
The law requires separate voting on a merger plan by a class of members of a corporation if the plan contains a provision that, if contained in a proposed amendment to its certificate of incorporation, would require separate voting. The act also requires separate voting by a class on a plan of merger if (1) the class is entitled under its certificate of incorporation to vote separately to approve a merger plan or (2) the memberships of the class are to be converted under the merger plan into memberships of a different class or into membership of any class of any other corporation.
EFFECT OF MERGER (§ 45)
The law specifies what occurs when a merger between nonstock corporations becomes effective. The act also specifies that when a merger becomes effective (1) the 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) the certificate of incorporation of a survivor that is created by the merger becomes effective.
LIMITED PARTNERSHIPS
Merger of Limited Partnerships (§ 55)
The law allows a domestic (formed under Connecticut law) limited partnership 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, which must name the surviving or resulting limited partnership. The act expands this authority to allow mergers with other types of business entities and entities organized under the laws of foreign countries or other foreign jurisdictions. 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, any other state, any foreign country, or other foreign jurisdiction, or any combination of them. Under the act, "other entity" means any association or legal entity, other than a domestic or foreign limited partnership, organized to conduct business, including, corporations, general partnerships, limited liability partnerships, limited liability companies, joint ventures, joint stock companies, business trusts, statutory trusts, and real estate investment trusts.
The act requires the merger plan to name the survivor. Under the act, "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.
The act requires the merger plan to include:
1. the name and jurisdiction of organization of each party to the merger and the survivor's name;
2. any changes in the survivor's certificate of limited partnership or 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, including 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 (The plan may include provision for any merging party to distribute 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 act allows the plan to include other provisions regarding the merger as are deemed necessary or desirable. It specifies that if the merger involves one or more other entities, a written merger plan meets the act's merger requirements if it meets the requirements of the statutes the other entity is organized under or governed by.
Consolidation of Limited Partnerships (§ 56)
The law allows domestic limited partnerships to consolidate with one or more limited partnership formed under Connecticut law or the laws of another state into a new limited partnership, pursuant to a properly approved consolidation plan.
The act allows any domestic limited partnerships to consolidate with any entities formed or organized under the laws of this state or any other state, 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 of the new limited partnership or other entity, which 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 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, including 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. The plan 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 deemed necessary or desirable.
The act specifies that if the consolidation involves one or more other entities, a written consolidation plan satisfies the act's requirement if the plan meets the consolidation requirements of the statutes under which the other entity is organized or governed.
Certificate of Merger and Consolidation (§ 57)
The act 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 act specifies that general partners executing a certificate of merger or consolidation do not have to sign or swear to facts set forth in it that do not pertain to the limited partnership of which they are general partners.
The act requires that the merger or consolidation certificate 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 state's 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 act 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 act specifies that these requirements are in addition to the statutory requirements for a certificate of merger or consolidation under which any other entity that is a party to the merger or consolidation is organized or governed.
Under the act, 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. If the new entity after a consolidation is a limited partnership, the certificate set forth in the consolidation certificate is the certificate of the new limited partnership.
Effect of Merger (§ 58)
The act specifies that in a merger, the survivor is that limited partnership or other entity the plan designates as the survivor. In 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 act 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 act 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 the merger or consolidation.
The act 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 act (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 the 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 or any liens on its property.
The act 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 from those liabilities or obligations because of the merger or consolidation.
LIMITED LIABILITY COMPANIES
Merger (§§ 61 and 63)
The law allows limited liability companies (LLCs) to merge or consolidate with or into one or more LLCs. The act allows 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, foreign country, or other foreign jurisdiction, or any combination of them.
The act defines "other entity" as any association or legal entity, other than a domestic or foreign LLC, organized to conduct business, including corporations; general partnerships; limited liability partnerships; limited partnerships; joint ventures; joint stock companies; and business, statutory, and real estate investment trusts.
Professional Service LLCs (§ 63)
The 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 act allows such LLC also to merge or consolidate with a Connecticut professional service corporation, a partnership, or a limited liability partnership if that business is organized to render the same professional service. The law prohibits a merger or consolidation of a Connecticut professional services LLC with any foreign LLC. The act prohibits mergers or consolidations with any other entity organized under the laws of some other state, country, or jurisdiction.
Approval of Mergers (§ 64)
By 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 members who own at least two-thirds of the LLC. The act applies this same requirement for mergers and consolidations the act authorizes, but eliminates the vote requirement if the LLC's operating agreement provides otherwise. By law an "operating agreement" is any written or oral agreement for conducting an LLC's business and affairs that is binding on all of its members.
Plan of Merger and Consolidation (§ 65)
The act 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 plan must 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, any amendments to the survivor's organizational documents as are desired to be effected by the merger, or that no such changes are desired; (5) in the case of a consolidation, all statements required to be set forth in the survivor's organizational documents; and (6) whatever other provisions relating to the proposed merger or consolidation deemed necessary or desirable.
The act defines "survivor" as the LLC or other entity into which one or more other LLC's or other entities are merged or consolidated. It 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 act specifies that a plan meets the act's requirements if it meets the requirements for merger or consolidation of the statutes under which the other entity is organized or governed.
Articles of Merger and Consolidation (§ 66)
After a merger or consolidation plan is approved, the act 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 law and by each other entity in accordance with its applicable organizational documents;
5. amendments, if any, to the surviving LLC's articles of organization, or, if a new LLC results, its articles of organization;
6. the address of the survivor's business place where a copy of the plan is on file; and
7. that the survivor will furnish a copy of the plan of merger or consolidation, on request and without cost, to anyone holding an interest in any LLC or other entity that is a party to the merger or consolidation.
The act specifies that a merger or consolidation takes effect when filed or on the date specified in the plan, whichever is later.
It requires each LLC or other entity that is a party to the merger or consolidation to 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 act, these articles act as articles of dissolution for a LLC that is not the survivor.
Effect of Merger and Consolidation (§ 68)
Under the act, when the merger or consolidation of 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, is 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 (§ 68)
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 District of Columbia, or of any foreign country, the act requires the survivor to 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 may mail a copy of the process.
The act 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 the other jurisdiction provide otherwise.
PARTNERSHIPS
Merger of Partnerships (§§ 69 and 70)
The law allows partnerships to merge with one or more partnerships or limited partnerships. The act allows one or more partnerships to merge with or into one or more other entities formed or organized under the laws of this or any other state or any foreign country or other foreign jurisdiction. The act defines "other entity" as any association or legal entity, other than a domestic or foreign partnership, organized to conduct business, including, corporations; limited partnerships; limited liability partnerships; LLCs; joint ventures; joint stock companies; and business, statutory, and real estate investment trusts.
The act requires the merger plan between a partnership and an other 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 act 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 merger approval by the law of the jurisdiction in which the other entity is organized or by which it is 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 existing 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, the merger takes effect (1) when all parties approve it, (2) when all documents required by law to be filed are filed, or (3) on the effective date the plan specifies.
If the merger involves one or more other entities, the act specifies that its requirements regarding merger plans are satisfied if they meet those of the laws under which the other entities are organized or by which they are governed.
Effect of Merger (§ 71)
Under the act, 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 act, 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 must mail a copy to the survivor.
The act 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 these may be satisfied only out of property of the survivor if the partner is a limited partner.
Under the act, if a partnership or limited partnership incurred obligations before merging with another entity and those obligations are not satisfied out of the survivor's property, the 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 in Connecticut law or 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 act, 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 liabilities or obligations that arose before the merger's effective date.
Statement of Merger (§ 72)
Under the act, if the survivor of a merger between a partnership and another entity, is a partnership, it may file a statement that one or more partnerships or other entities have merged into the surviving partnership.
The act 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 and of the survivor into which the other parties were merged;
2. the street address of the survivor's chief executive office and of an office in this state, if any; and
3. the type of entity the survivor is.
The act 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, or in the case of real estate, when a certified copy of the statement of merger is filed in the office for recording transfers of that real estate.
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 act requires.
The act requires that, if the survivor is a limited liability partnership, a certificate of merger must be filed with the secretary of the state.