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Reorganizations require …
valid business purpose, continuity of shareholder interest, continuity of business enterprise
Type A reorganization
involves the acquisition of assets and includes statutory mergers and consolidations
Advantages to Type A reorganization
most flexible
boot can be 60% of consideration going to acquired corporation’s shareholders
all of the target’s assets do not have to be acquired
Disadvantages to Type A reorganization
all liabilities are assumed by the acquiring corporation
shareholders of both corporations must approve
Type B reorganization
the acquiring corporation must use solely voting stock to acquire control of the acquired corporation
Advantages of Type B reorganization
acquired corporations remains in existence
the acquiring corporation is protected from the liabilities of the acquired corporation
Disadvantages of Type B reorganization
only voting stock can be used to make the acquisition
never do a type b reorganization
Type C reorganization
exchanging all properties of one corporation for all or a part of the acquiring corporation’s voting stock
Advantages of Type C reorganization
not all assets and liabilities need to be acquired
shareholders of the acquiring corporation do not have to formally approve the acquisition
Disadvantages of Type C reorganization
substantial transfer costs may be incurred in acquiring assets
Type D reorganization
transfer of assets in exchange for stock or securities (in the form of a spin-off, split-off, or split-up)
Spin-off
corporation distributes stock of a subsidiary corporation
Split-off
shareholders of the parent corporation surrender part or all of their stock in the parent in exchange for stock of the subsidiary
Split-up
the parent distributes its stock in two or more subsidiaries and is itself dissolved
Type E reorganization
recapitalization (a change in the debt-equity structure of a single corporation)
Type F reorganization
a change in identity, form, or place
Type G reorganization
takes place in bankruptcy or insolvency
Note
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