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Asset Sales

Original Creator: Brian JM Quinn Current Version: Brian JM Quinn Show/Hide

Another common statutory deal structure is the asset sale. The asset sale as it is commonly structured is a three step transaction. In the first step, the seller agrees to sell all or substantially all of its assets to a buyer. This transaction is accomplished pursuant to §271.  Cash or other consideration is transferred from the buyer to the selling corporation. Then, all of the liabilities of the seller are paid and the balance of the sale proceeds are distributed to the stockholders of the seller in the form of a dividend. Following distribution of the dividend, the seller is voluntarily dissolve pursuant to §275.

The end result of the transaction is that all of the assets of the selling corporation are held by a buyer and the stockholders of the now dissolved seller are holding transaction consideration. This result is functionally the same as a merger. However, there are important differences. First, in this structure the stockholders of the buyer have no right to vote. Second, there are no appraisal rights available to stockholders of the seller.

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June 14, 2016

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Brian JM Quinn

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