TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

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

ARTICLE 11 MERGER AND SHARE EXCHANGE

14-2-1106. Effect of merger or share exchange.

When a merger governed by this article takes effect:
1. Every other corporation or entity party to the merger merges into the surviving corporation or entity and the separate existence of every corporation or entity except the surviving corporation or entity ceases;
2. The title to all real estate and other property owned by, and every contract right possessed by, each corporation or entity party to the merger is vested in the surviving corporation or entity without reversion or impairment, without further act or deed, and without any conveyance, transfer, or assignment having occurred;
3. The surviving corporation or entity has all liabilities of each corporation or entity party to the merger;
4. A proceeding pending against any corporation or entity party to the merger may be continued as if the merger did not occur or the surviving corporation or entity may be substituted in the proceeding for the corporation or entity whose existence ceased;
5. The articles of incorporation or other governing documents of the surviving corporation or entity are amended to the extent provided in the plan of merger; and
6. The shares of each corporation party to the merger and the shares of each of the entities party to the merger that are to be converted into shares, obligations, or other securities of the surviving or any other corporation or into cash or other property are converted and the former holders of the shares are entitled only to the rights provided in the plan of merger or to their rights otherwise provided by law.
When a share exchange takes effect, the shares of each acquired corporation are exchanged as provided in the plan, and the former holders of the shares are entitled only to the share exchange rights provided in the plan of share exchange or to their rights under Article 13 of this chapter.
For purposes of this Code section, the definitions contained in Code Section 14-2-1109 shall be applicable.

(Code 1981, §14-2-1106, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1990, p. 257, § 17; Ga. L. 2003, p. 897, § 9.)

Cross references.

- Determination of rate of employer contribution to Unemployment Compensation Fund in cases of merger or consolidation of corporations, § 34-8-122.

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 2003, "this article" was substituted for "Article 11 of this chapter" in subsection (a).

Law reviews.

- For survey article on business associations, see 34 Mercer L. Rev. 13 (1982). For article, "2006 Amendments to Georgia's Corporate Code and Alternative Entity Statutes," see 12 Ga. St. B. J. 12 (2007). For article, "2013 Georgia Corporation and Business Organization Case Law Developments," see 19 Ga. St. B. J. 28 (April 2014). For article, "2014 Georgia Corporation and Business Organization Case Law Developments," see 20 Ga. St. B. J. 26 (April 2015).

COMMENT

Source: Model Act, section 11.06. There is no substantial change from prior law governing mergers, under former § 14-2-216(b); no comparable provisions existed for share exchanges.

Section 14-2-1106 describes the legal consequences of a merger or share exchange on its effective date.

Subsection (a) describes the effect of a merger. On the effective date every disappearing corporation that is a party to the merger disappears into the surviving corporation and the surviving corporation automatically becomes the owner of all real and personal property and becomes subject to all liabilities, actual or contingent, of each disappearing corporation. A merger is not a conveyance or transfer, and does not give rise to claims of reverter or impairment of title based on a prohibited conveyance or transfer. See subsection (a)(2). Further, all pending litigation is continued; the name of the surviving corporation may, but need not be, substituted for the name of a disappearing corporation that is a party to litigation.

The articles of incorporation of the surviving corporation are amended as provided in the plan of merger on the effective date of the merger. See subsection (a)(5).

Subsection (a)(6) provides that if any shareholders to any party to the merger are to receive different shares or cash or property under the plan of merger, the rights of those shareholders after the articles of merger or certificate of merger is filed are limited to their rights under the plan of merger or their rights under Article 13 of this Act.

Subsection (b) describes the effect of a share exchange. On the effective date, the shareholders of the acquired class of shares cease to be shareholders of the acquired corporation. On that date they are entitled to receive only the consideration provided in the plan of share exchange, or the rights of dissenting shareholders under Article 13.

Note to 1990 Amendment The 1990 amendment corrects an error in the section by substituting the term "plan of merger" for "articles of merger."

Note to 2003 Amendment The amendments to Code Section 14-2-1106 conform to the Model Business Corporation Act's language, as amended in 1999, with respect to the effect of a merger by adding a specific reference clarifying that the property of the constituent corporation that vests in the surviving corporation includes every contract right. In addition, language has been added to Code Section 14-2-1106(a)(2) explicitly stating that no conveyance, transfer or assignment occurs when property, including contract rights, are acquired by the surviving corporation in a merger. These amendments are intended to clarify, not change, existing law. This Code Section has been further amended by adding references to mergers with other entities to conform to the Model Act and to reflect the 1996 amendment to Code Section 14-2-1109.

Cross-References Dissenters' rights, Article 13. Effective date of merger or share exchange, see § 14-2-123. "Proceeding" defined, see § 14-2-140.

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Civil Code 1895, § 1863, former Civil Code 1910, § 2227, former Code 1933, § 22-1007, and former Code Section 14-2-216, which were repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section.

Effect of merger on liabilities.

- The acquiring corporation by reason of a merger becomes liable for the payment of all unpaid debts and unperformed contracts of the acquired corporation, and is bound by the terms of the contract entered into between the latter and another corporation prior to the merger. Hawkins v. Central of Ga. Ry., 119 Ga. 159, 46 S.E. 82 (1903); Atlanta, B. & A.R.R. v. Atlantic Coast Line R.R., 138 Ga. 353, 75 S.E. 468 (1912) (decided under former Civil Code 1895, § 1863 and former Civil Code 1910, § 2227).

Name of corporate defendant in legal proceeding.

- An action could proceed against a former corporation as if a merger had never taken place, or the surviving corporation could be substituted as a defendant. Employers' Liab. Assurance Corp. v. Keelin, 132 Ga. App. 459, 208 S.E.2d 328 (1974) (decided under former Code 1933, § 22-1007).

In a suit brought by mortgagors against the mortgagor bank that was taken over by a successor bank, the appellate court erred in dismissing the successor bank's appeal under O.C.G.A. § 9-11-25 for lack of standing based on the trial court's failure to add or substitute the bank as the defendant because the two corporations were deemed the same entity under federal and state law by virtue of their merger, thus, the claims originally filed by and against the mortgagee bank could continue. Nat'l City Mortg. Co. v. Tidwell, 293 Ga. 697, 749 S.E.2d 730 (2013).

Where one corporation conveys its property to another, this alone does not destroy the corporate existence of the grantor or constitute a merger of the two corporations, or render the grantee subject to an action for damages for a tort previously committed by the grantor. The grantor is still subject to suit; and, if liable, the question of seeking to subject property to such liability on a judgment rendered thereon is different from suing the grantee directly for the tort. Louisville & N.R.R. v. Hughes, 134 Ga. 75, 67 S.E. 542 (1910) (decided under former Civil Code 1910, § 2227).

Because creditor bank's claims, including the creditor's claim for fraud against the debtor, became claims of the successor bank by operation of merger between banks under the National Banking Act and Georgia law regarding merger of banks and corporations, the successor bank had standing to bring a non-dischargeability action. Wells Fargo Bank, N.A. v. Lovett (In re Lovett), 560 Bankr. 372 (Bankr. M.D. Ga. 2016).

Cited in Lowe v. American Mach. & Foundry Co., 132 Ga. App. 572, 208 S.E.2d 585 (1974); Rosing v. Dwoskin Decorating Co., 141 Ga. App. 617, 234 S.E.2d 128 (1977); Donald v. Luckie Strike Loans, Inc., 148 Ga. App. 318, 251 S.E.2d 168 (1978); Albermarle, Inc. v. Eaton Corp., 183 Ga. App. 80, 357 S.E.2d 887 (1987); Holmes v. Clear Channel Outdoor, Inc., 284 Ga. App. 474, 644 S.E.2d 311 (2007).

RESEARCH REFERENCES

Am. Jur. 2d.

- 19 Am. Jur. 2d, Corporations, § 2237 et seq.

C.J.S.

- 19 C.J.S., Corporations, § 907 et seq.

ALR.

- Liability of corporation for debts of predecessor, 15 A.L.R. 1112; 149 A.L.R. 787.

Changes in corporate organization as affecting status as trustee, executor, administrator, or guardian, 131 A.L.R. 753.

Statutory superadded liability of stockholders as affected by reorganization, consolidation, or merger of corporation, 154 A.L.R. 427.

Liability of corporation for torts of subsidiary, 7 A.L.R.3d 1343.

Merger or consolidation of corporation as terminating charitable trust of which corporation is beneficiary, 34 A.L.R.3d 749.

Validity and construction of state statute making successor corporation liable for taxes of predecessor, 65 A.L.R.3d 1181.

Products liability: liability of successor corporation for injury or damage caused by product issued by predecessor, 66 A.L.R.3d 824.

Successor products liability: form of business organization of successor or predecessor as affecting successor liability, 32 A.L.R.4th 196.

Merger or consolidation of corporate leases as breach of clause in lease prohibiting, conditioning, or restricting assignment or sublease, 39 A.L.R.4th 879.

Liability of successor corporation for punitive damages for injury caused by predecessor's product, 55 A.L.R.4th 166.

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