Certificate of Ownership and Merger
(Parent into Subsidiary) (DE Corporation)

Summary

This certificate of ownership and merger may be used by a Delaware corporation to file the merger of a parent into a subsidiary (the subsidiary being the surviving corporation) with the Delaware Secretary of State in accordance with 8 Del. C. § 253. This template contains practical guidance, drafting notes, and alternate and optional clauses. In general, a merger under Delaware law requires approval from the stockholders of each of the two merging entities. See 1 M & A Practice Guide Sec. 3.08. However, an important exception to the stockholder approval requirement is the "short-form merger." The short-form merger exception provides that a Delaware corporation may merge with a subsidiary corporation without a vote of the subsidiary corporation's stockholders if the parent corporation owns at least 90% of the outstanding shares of each class of stock of the subsidiary corporation. 8 Del. C. § 253. Typically, a short-form merger occurs as part of a "two-step acquisition." In the first step, an acquirer initiates a tender offer for the outstanding shares of the target in order to obtain 90% ownership of a target. In the second step, assuming 90% ownership has been obtained, the parent corporation executes the short-form merger. To do so, the parent simply executes, acknowledges and files a certificate of ownership and merger with the Delaware Secretary of State, such as the form below. Short-form mergers can be structured in one of two ways. In the first structure, the subsidiary is the surviving corporation (a "downstream merger"). In the second structure, the parent is the surviving corporation (an "upstream merger"). This template applies to downstream mergers. For a draft Certificate of Ownership and Merger for an upstream merger, see Certificate of Ownership and Merger (Subsidiary into Parent) (DE Corporation). Unlike an upstream merger, a downstream merger requires shareholder approval from the parent corporation's shareholders if those shareholders will receive shares with different attributes than those held prior to the merger. Despite this additional requirement, parties may still decide to structure a short-form merger as a downstream merger for organizational or tax purposes. A downstream merger may also be more appropriate if the material contracts principally held by the subsidiary are subject to change-of-control clauses. See the Corporate Fee Schedule on the Delaware Division of Corporations website for information on filing fees. It is recommended that, with the Certificate of Ownership, you include a cover letter with the corporation name, address, and telephone/fax number of a contact person. For additional information on the benefits and drawbacks of a two-step acquisition, see Two-Step Acquisitions Benefits and Drawbacks. For techniques to help a buyer reach the 90% statutory threshold for a short-form merger, see 90 Percent Ownership in Tender Offers. For information on a simpler short-form merger based on Section 251(h) of the Delaware General Corporation Law, which lowers the 90% ownership requirement, see Tender Offers under Amendments to the Delaware General Corporation Law. See also Certificate of Ownership and Merger (Parent into Subsidiary) (DE Corporation). For a full listing of key content covering Delaware corporate formation, organization, maintenance, ownership, management, and dissolution, see Corporation Resource Kit (DE).