Written by attorneys · grounded in primary & secondary sources — see below
A document that sets forth the terms and conditions for combining one or more business entities into a single survivor. The document must identify each party, designate the survivor, and specify the conversion of equity interests along with any required amendments to organic documents.
Sources & Authorities
How it applies
Common Examples
3
Conditional Survivor Designation
Phoenix Technologies, Paragon Construction, and Pioneer Energy executed a single plan that named Paragon as the survivor unless foreign approvals for Pioneer failed by closing, in which case Pioneer would survive with the same ownership allocations. Preferred shareholders of Phoenix sued to block the deal, claiming the conditional survivor clause violated the statute. The court upheld the plan because it always produced exactly one survivor depending on an objectively ascertainable fact at closing.
Board Opinion on Share Value
Virginia Bankshares directors approved a plan of merger that would cash out minority shareholders at a stated price. The proxy statement quoted the board's opinion that the plan provided high value for the shares. Minority shareholders later sued, alleging the opinion was materially misleading because the board lacked a reasonable basis for the valuation claim.
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Model Codes
Study Supplements
Virginia Bankshares, Inc. v. Sandberg[501 U.S. 1083, 1090-1098] (1991)
Merger Plan and Disclosure Duties
Santa Fe Industries adopted a plan of merger that cashed out minority shareholders at a price set by the parent. The plan was approved without full disclosure of the valuation methods or the parent's intent to eliminate the minority. Minority shareholders sued under Rule 10b-5, claiming the plan itself constituted a fraudulent device because material facts about fairness were omitted.
Santa Fe Industries, Inc. v. Green430 U.S. 462 (1977)
Common questions
Frequently Asked
4
What elements must appear in every plan of merger?+
The plan must name each party and its jurisdiction and entity type, designate the survivor and state whether it is newly created, set the terms and conditions of the merger, and describe the manner and basis for converting shares and interests. It may also include any other lawful provisions and may make terms contingent on facts outside the plan.
Supporting sources
Can a plan of merger designate alternative survivors depending on future events?+
Yes. The statute permits terms to depend on objectively ascertainable facts outside the plan. A plan that always produces exactly one survivor, even if the identity of that survivor turns on regulatory approvals or similar conditions, satisfies the requirement of a single survivor.
Supporting sources
Does board adoption of a plan of merger require review of the full document?+
Yes. Directors must engage with the actual terms of the plan before adopting it. A generic ratification after seeing only a summary does not satisfy the statutory requirement that the board adopt the plan.
Supporting sources
What happens to a nonsurviving entity's property and liabilities upon merger?+
All property of each nonsurviving entity vests automatically in the survivor without transfer or impairment. All debts and liabilities of the nonsurviving entities also become obligations of the survivor by operation of law.
Supporting sources
501 U.S. 1083 (1991)Business Associations
…for two statements found to have been materially misleading in violation of § 14(a) of the Act, one of which was that "The Plan of Merger has been approved by the Board of Directors because it provides an opportunity for the Bank's public shareholders to achieve a high value for their shares." App. to Pet. for Cert. 53a.…