Key Takeaways

  • A certificate of merger in Delaware formalizes the legal combination of two or more entities into one.
  • The Delaware Secretary of State allows pre-clearance reviews to ensure filing accuracy and timing.
  • Businesses must confirm good standing, pay franchise taxes, and resolve legal or IP issues before merging.
  • Filing involves coordinating timing, submitting accurate documentation, and obtaining a certified copy post-filing.
  • Mergers into or within Delaware benefit from the state's favorable corporate laws, tax policies, and court system.
  • Filing specifics vary depending on entity type, and foreign entities must appoint a registered agent in Delaware.

Delaware Certificate of Merger Overview

A Delaware certificate of merger, also known as the articles of merger, is a document detailing the combination of two or more business entities into one business entity. The content of this document and the exact requirements for filing it vary between states, so it is important to be aware of the statutes governing business entities in the state you intend to merge in. In the case of Delaware, for instance, one issue to be aware of is that certificates of merger may be filed instead of merger agreements.

Conducting a Merger in Delaware

In order to conduct a merger in the state of Delaware, the following steps should be taken:

  1. Pre-clear your certificate of merger. To ensure the merger process goes as smoothly as possible, both parties should ensure that filing for their certificates of merger will occur on the same day–the date of closing–and that neither will be rejected for any reason. To best achieve this, take advantage of a pre-clearance review, if your state allows it. In Delaware, the Secretary of State’s Office offers this service for $250 for regular service, $350 for 24-hour service, and $500 for two-hour service.
  2. Obtain a good standing certificate. It is a good idea to make sure the business to be merged with has paid its franchise taxes, made no changes to its charter, and remains in good standing in general. A good standing certificate can help you do this. These can be obtained from the Delaware Secretary of State and can usually be obtained within 24 hours.
  3. Make franchise tax payments. Just as you should ensure that the other company has made their franchise tax payments, you should be sure that you have made these payments as well. Ideally, such payments should be made well in advance of a merger deal.
  4. Conduct due diligence on legal issues.Due diligence will help confirm that no judgments or material pending suits or liens are connected to the company in question. It may be a good idea to verify with the U.S. Copyright or Patent and Trademark offices that no intellectual property issues exist either.
  5. Assign process for business licenses and confirm status. Ensuring that the relevant business licenses will be properly applied by the date of the merger or soon after is also important. Documentation of such licenses, the timing of submission, and the manner of submission should all be confirmed. If not all of this can be confirmed by the date of the merger, it may be moved to the post-closing process.
  6. File the certificate of merger. Should the pre-merger process occur without any significant problems, filing the certificate of merger will occur on the date of the closing. To do this properly, you should coordinate with your service company representative to submit the certificate with clear instructions pertaining to the timing of submission and the confirmation of submission. Also, someone should be in close contact with the state if there is any filing issue that needs to be addressed quickly.
  7. Obtain a certified copy. Once the certificates of merger are submitted, you should obtain a certified copy from Delaware’s Secretary of State. This document will certify that the documents filed with the Delaware Division of Corporations are authentic. The certified copy will include the name of the filed document and the date on which it was filed, as well as the Secretary of State’s signature and the state official seal to ensure that it is authentic.

Advantage of Merging in Delaware

Merging with a  company in Delaware may be an attractive proposition for many businesses because Delaware has some of the most business-friendly features in the country, including:

  • The Delaware Court of Chancery, which is focused solely on settling business disputes.
  • The ability for shareholders to act in writing rather than act through meetings.
  • The ability for non-shareholders to serve on a business’s governing board.
  • No requirement for a business to keep corporate records.
  • No state income tax for business that do not do business in Delaware.
  • No personal property or sales tax.

Filing Requirements for Certificate of Merger in Delaware

When filing a certificate of merger in Delaware, businesses must adhere to specific documentation and procedural rules depending on their entity types. The Delaware Division of Corporations requires:

  • Entity Identification: The certificate must list the exact names of the constituent and surviving entities and identify their jurisdictions of formation.
  • Effective Date and Time: If the merger is not effective upon filing, a future effective date (up to 90 days later) may be specified.
  • Authorization Statements: The document must affirm that the merger was duly authorized under each constituent entity's governing laws.
  • Registered Agent Appointment: If the surviving entity is not a Delaware entity, it must appoint a Delaware registered agent to receive service of process.
  • Signatures: The certificate must be signed by an authorized representative of each party to the merger.

Foreign entities involved in a Delaware merger must also provide consent to service of process in Delaware and submit the name and address of an agent authorized to receive legal documents on their behalf.

Types of Mergers Allowed Under Delaware Law

Delaware permits a variety of merger types to meet different corporate needs:

  • Parent-Subsidiary Mergers: A parent corporation may merge a subsidiary into itself or vice versa, sometimes without shareholder approval if the parent owns 90% or more of the subsidiary.
  • Cross-Entity Mergers: Entities of different types, such as an LLC merging with a corporation, are allowed under Delaware General Corporation Law and Delaware LLC Act.
  • Foreign Entity Mergers: Mergers involving at least one non-Delaware entity are permitted, but the non-Delaware party must meet additional filing and registration requirements.

Delaware law is particularly flexible, allowing merger structures that other states might restrict.

Common Mistakes to Avoid During Merger Filings

To prevent delays or rejections, avoid these frequent errors when submitting your certificate of merger in Delaware:

  • Inconsistent Entity Names: Ensure that all names match exactly between the merger agreement and the certificate.
  • Unpaid Franchise Taxes: Mergers cannot be processed if any party owes outstanding franchise taxes.
  • Invalid Signatures: Certificates must be signed by individuals with authority under the entity’s governing documents.
  • Omitting Effective Time: Leaving this field blank can create confusion about the legal effect of the merger.
  • Incorrect Registered Agent Designation: Foreign entities must list a Delaware-based registered agent, or filings will be rejected.

Working with a professional service company or corporate attorney can help avoid these common issues.

Frequently Asked Questions

  1. What is a certificate of merger in Delaware?
    A certificate of merger is a legal document filed with the Delaware Secretary of State to officially record the merger of two or more business entities.
  2. How long does it take to process a Delaware certificate of merger?
    Standard processing typically takes a few business days, but expedited options are available: 24-hour, same-day, and two-hour services for additional fees.
  3. Can different entity types merge in Delaware?
    Yes, Delaware law allows mergers between different entity types, such as LLCs and corporations, as long as all statutory requirements are satisfied.
  4. Do I need a registered agent in Delaware if my company is based elsewhere?
    Yes, any foreign entity merging into or surviving in Delaware must appoint a registered agent located in Delaware.
  5. Is a merger effective immediately after filing?
    Only if the certificate specifies that it is effective upon filing. Otherwise, a future date/time (up to 90 days later) may be included in the document.

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