actg 451 chapter 17

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