During the life of a Washington entity, whether it is a corporation, limited liability company, limited partnership, or partnership, it may be converted into another form of entity or it may be merged with another entity, whether the same form of entity or a different form of entity. It might also be involved in such a transaction with an entity formed outside the state of Washington. In any event, it is important to follow the legal requirements for such transactions. These requirements may involve actions to be taken by the entity and its owners that are internal to the entity and they may involve actions to be taken that are external to the entity, including, but not limited to, filing any appropriate documents with the Washington Secretary of State.
If the legal requirements are not satisfied, the action will not be effective. This can have a variety of potential adverse consequences to the entity and its owners.
A recent transaction provides a good example. Corporation A and Corporation B, two Washington corporations, believed they had merged in early 2022, with the intent that Corporation A would merge into Corporation B. In such a case, on the effective date of the merger, Corporation A would cease to exist and all its assets and liabilities would become the assets and liabilities of Corporation B. Such mergers require certain actions by the corporations and their shareholders, including filing articles of merger with the Washington Secretary of State. Corporation A owned a parcel of real estate. Corporation B entered into a purchase and sale agreement with a third party to sell that parcel. A variety of circumstances led to the discoveries that Corporation B did not have title to the real estate and Corporation A and Corporation B had not formally merged; there was no record of filing articles of merger with the Secretary of State. Fortunately, in this case, the corporate issues could be resolved fairly quickly, the real estate transaction was not lost, and closing of the real estate transaction was not delayed. If any one of these things had turned out differently, there could have been adverse consequences for any or all of the parties. Unfortunately, several people had to act quickly to avoid that result, actions that would have been unnecessary if the formal requirements for merger of the corporations had been satisfied in 2022.
If you need assistance with these issues, contact Per Oscarsson or one of the other attorneys in Beresford Booth’s Business and Real Estate Group.