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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Commercial Law

Date & Time
  • event Date

    Wednesday, June 26, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will examine the divisive merger statutes of Delaware, which apply only to LLCs, and Texas, which apply to all Texas entities. The panel will guide M&A counsel on how to structure a divisive merger and will also discuss the implications of divisive mergers for existing and future credit agreements and other contracts to which Delaware and Texas entities may be parties.

Faculty

Cliff Ernst
Partner
McGinnis Lochridge, LLP

Mr. Ernst’s diverse clientele include governmental agencies, nonprofits, and a full range of businesses from start-up companies to large corporations in a variety of industries including real estate and hospitality, professional services, technology, entertainment, oil and gas and publishing. His work encompasses mergers and acquisitions; general corporate counseling; private equity offerings; venture capital and debt financings; and general contracting. Mr. Ernst frequently acts as an outside general counsel and provides advice to executive officers and directors of public and privately-held companies and non-profits, a testament to the strong and lasting relationships he builds with his clients.

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Byron F. Egan
Partner
Jackson Walker LLP

Mr. Egan is engaged in a corporate, partnership, securities, mergers and acquisitions (M&A), and financing practice. He has extensive experience in business entity formation and governance matters, M&A, and financing transactions in a wide variety of industries. He also advises boards of directors and their audit, compensation, and special committees.

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J. Machir Stull
Partner
Jackson Walker LLP

Mr. Stull is a business lawyer in the Bankruptcy, Restructuring, & Recovery practice in Dallas with experience representing businesses and executives from the boardroom to the courtroom. He has represented nearly every constituency in a bankruptcy, from debtors and committees to trustees and landlords.

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Description

A divisive merger under Texas law enables an existing entity to divide its assets and liabilities into one or more entities pursuant to a plan of merger or division (the plan). Delaware law also enables an existing LLC to similarly divide its assets and liabilities into two or more LLC’s or an existing limited partnership to divide into two or more limited partnerships pursuant to a plan. The Delaware statutes simply refer to this type of transaction as a "division," which is not accomplished by a merger. For ease of reference, division under both Texas and Delaware law is referred to herein as a "divisive merger."

The divisive merger gives M&A lawyers a strategic alternative to traditional spinoffs or asset sales but also presents new concerns for creditors and counterparties. Divisive mergers have implications for corporate and finance practices nationwide.

Once a plan is adopted and a certificate of division or merger is filed with the applicable secretary of state, the assets and liabilities of the initial entity will be divided as provided in the plan. There can be unintended consequences if the plan does not sufficiently and clearly make the allocations of the entities' assets and liabilities.

Fraudulent transfer statutes and regulatory requirements may impact a divisive merger. The divisive merger statutes generally cannot be used to circumvent contractual obligations under agreements with third parties existing before the effective date of the divisive merger. Lenders and counterparties may consider amending existing agreements to address divisive mergers.

Listen as our authoritative panel discusses the process as well as the consequences of adopting a plan of divisive merger under the Delaware and Texas statutes. The panel will also discuss best practices for lenders and other counterparties in transactions with Delaware and Texas entities going forward.

Outline

  1. Delaware and Texas divisive merger statutes: structuring alternative to M&A spinoffs and carve-outs
  2. Mechanics of a divisive merger
    1. Plan of a divisive merger: key terms
    2. Approval of divisive merger
    3. Certificate of division or merger
  3. Effect of the divisive merger: allocation of assets, properties, licenses, debts, liabilities, and duties of the dividing entity among multiple survivors
  4. Effects of fraudulent transfer, bankruptcy, and other laws impacting rights of creditors on divisive mergers

Benefits

The panel will review these and other important issues:

  • How is a divisive merger accomplished under Delaware and Texas statutes?
  • How does a divisive merger impact the structure of a future M&A transaction?
  • What is the effect of a divisive merger?
  • What steps should lenders and other counter-partners take in existing and future credit and other agreements to address the possibility of a future divisive merger?