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Corporations • Fundamental Corporate Changes
CORP#062
Legal Definition
(1) Statutory merger, (2) consolidation, (3) dissolution, (4) fundamental amendment to the articles of incorporation, and (5) sale of all or substantially all of the corporation's assets.
Plain English Explanation
Corporations have a lot of autonomy to make decisions without constantly seeking approval from shareholders, but fundamental corporate changes always require shareholder approval. There are 5 recognized fundamental changes you should know:
(1) A statutory merger occurs when one corporation absorbs another corporation. Here, one company poofs out of existence while another company remains.
(2) A consolidation is a pretty drastic corporate change because it involves combining the corporation with one or more other corporations to form a completely new corporation while the old corporations effectively poof out of existence.
(3) This one is probably obvious, but a corporation can't choose to kill itself and dissolve without first getting permission from its shareholders.
(4) Directors are allowed to make amendments to their articles of incorporation. For example, if an officer listed in a company's articles of incorporation dies, they'll likely need to be replaced, which means the board will need to update the articles of incorporation. But fundamental changes, like that those that substantially impact the existence of the corporation, will require approval. For example, changing the corporation's name or its business purpose would be a pretty substantial, fundamental change.
(5) Directors are allowed to sell company assets. It's a common way to get rid of stuff that is no longer needed, or even raise revenue. But if the directors attempt to sell too many things, all at once, it may require approval from shareholders.
(1) A statutory merger occurs when one corporation absorbs another corporation. Here, one company poofs out of existence while another company remains.
(2) A consolidation is a pretty drastic corporate change because it involves combining the corporation with one or more other corporations to form a completely new corporation while the old corporations effectively poof out of existence.
(3) This one is probably obvious, but a corporation can't choose to kill itself and dissolve without first getting permission from its shareholders.
(4) Directors are allowed to make amendments to their articles of incorporation. For example, if an officer listed in a company's articles of incorporation dies, they'll likely need to be replaced, which means the board will need to update the articles of incorporation. But fundamental changes, like that those that substantially impact the existence of the corporation, will require approval. For example, changing the corporation's name or its business purpose would be a pretty substantial, fundamental change.
(5) Directors are allowed to sell company assets. It's a common way to get rid of stuff that is no longer needed, or even raise revenue. But if the directors attempt to sell too many things, all at once, it may require approval from shareholders.
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