TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 2. Business Corporations, 14-2-101 through 14-2-1703.

ARTICLE 11 MERGER AND SHARE EXCHANGE

14-2-1102. Share exchange.

A corporation may acquire all of the outstanding shares of one or more classes or series of another corporation through a share exchange if the board of directors of each corporation adopts and its shareholders (if required by Code Section 14-2-1103) approve the share exchange.
The plan of share exchange must set forth:
1. The name of the corporation whose shares will be acquired and the name of the acquiring corporation;
2. The terms and conditions of the share exchange; and
3. The manner and basis of exchanging the shares to be acquired for shares or other securities, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing, and if any shares of any holder of a class or series of shares are to be exchanged in a manner or basis different from any other holder of shares of such class or series, the manner or basis applicable to each such holder.
The plan of share exchange may set forth other provisions relating to the share exchange, including a provision that the plan may be amended prior to the time the share exchange has become effective, but if shareholders of a corporation that is a party to the share exchange are required or permitted to vote on the plan, subsequent to approval of the plan by such shareholders the plan may not be amended to change in any respect not expressly authorized by such shareholders in connection with the approval of the plan:
1. The amount or kind of shares or other securities, obligations, rights to acquire shares or other securities, cash, or other property to be issued by the corporation or to be received under the plan by the shareholders of any party to the share exchange if such change would adversely affect such shareholders; or
2. Any of the other terms or conditions of the plan if such change would adversely affect such shareholders in any material respect; and
  in the event that the plan of share exchange is amended after articles or a certificate of share exchange has been filed with the Secretary of State but before the share exchange has become effective, a certificate of amendment of share exchange executed on behalf of each party to the share exchange by an officer or other duly authorized representative shall be delivered to the Secretary of State for filing prior to the effectiveness of the share exchange.
Any of the terms of the plan of share exchange may be made dependent upon facts ascertainable outside of the plan of share exchange, provided that the manner in which such facts shall operate upon the terms of the share exchange is clearly and expressly set forth in the plan of share exchange. As used in this subsection, the term "facts" includes, but is not limited to, the occurrence of any event, including a determination or action by any person or body, including the corporation.
This Code section does not limit the power of a corporation to acquire all or part of the shares of one or more classes or series of another corporation through a voluntary exchange of shares or otherwise.

(Code 1981, §14-2-1102, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 2003, p. 897, § 7; Ga. L. 2006, p. 825, § 9/SB 469.)

Law reviews.

- For article, "2006 Amendments to Georgia's Corporate Code and Alternative Entity Statutes," see 12 Ga. St. B. J. 12 (2007).

COMMENT

Source: Model Act, section 11.02. Former Georgia law contained no counterpart to these provisions, which were introduced into the Model Act in 1976 as section 72A.

Section 14-2-1102 establishes a procedure by which a direct exchange of shares for cash or other consideration in corporate combinations may be effected under the same safeguards applicable to statutory mergers or similar transactions. A share exchange under Section 14-2-1102 is binding upon all shareholders of the acquired class or series of shares.

Under Section 14-2-1102, all shares of a particular class or series of shares must be acquired. However, shares of one or more classes or series may be excluded from the plan or may be included on different basis. After the plan is adopted and approved by the shareholders as required by Section 14-2-1103, it is binding on all holders of shares of the class or series to be acquired; members of the class or series, however, have the right to dissent under Article 13.

Subsection (b)(3) provides that it is not necessary that a share exchange under Section 14-2-1102 be on a share-for-share basis. The consideration for the shares being acquired may be "shares, obligation, or other securities of the acquiring or any other corporation or . . . cash or other property in whole or part."

The effects of an approved share exchange, like the effects of an approved merger, are set by the terms of the plan and by operation of law, so that in both cases shareholders of an "acquired corporation" (one that is not the surviving corporation nor the acquiring corporation) lose their status as shareholders of the acquired corporation, except to the extent of their dissenter's rights under Article 13.

Subsection (d) makes clear that a plan of share exchange pursuant to this article is not the exclusive means of exchanging shares. Voluntary exchange offers, available on an individual basis, without approval of the holders of the class or series, still remain available under the Code.

Note to 2003 Amendment Code Section 14-2-1102(d) is added to allow any of the terms of a plan of share exchange to be made dependent upon "facts" ascertainable outside of the plan of share exchange, in the same way that may be done with a plan of merger under Code Section 14-2-1101(d). This added flexibility for a plan of share exchange follows Section 11.03(d) of the Model Business Corporation Act. The same definition of "facts" is added to Code Section 14-2-1102(d) as is found in Code Section 14-2-1101(d) and Code Sections 14-2-601, 14-2-602 and 14-2-624.

Note to 2006 Amendment The amendments to subsection (b)(3) of Code Section 14-2-1102, which are consistent with the amendments to subsection (b)(3) of Code Section 14-2-1101, subsection (b)(2) of Code Section 14-2-1104 and clause (C) of subsection (d)(1) of Code Section 14-2-1109, are intended to clarify existing law by expressly recognizing the possibility of different treatment of shareholders in a plan of share exchange. See comment to Section 14-2-1101.

The amendments to subsection (c) of Code Section 14-2-1102, which are consistent with new subsection (c)(2) of Code Section 14-2-1101, confirms and clarifies a corporation's authority to include provisions in plan of share exchange that would permit a corporation to amend the plan in certain respects subsequent to shareholder approval. See comment to Section 14-2-1101.

Cross-References Abandonment of share exchange, see § 14-2-1103. Approval by shareholders, see § 14-2-1103. Articles of share exchange, see § 14-2-1105. Certificate of share exchange, see § 14-2-1105. Classes of shares, see § 14-2-601. Definitions, see § 14-2-140. Dissenters' rights, see Article 13. Effect of share exchange, see § 14-2-1106. Series of shares, see § 14-2-602. Share exchange with foreign corporation, see § 14-2-1107. Share exchange with Secretary of State corporation, see § 14-2-1108. Share exchange with joint-stock association, see § 14-2-1109.