Bylaws of the surviving corporation: Overview, definition, and example
What are bylaws of the surviving corporation?
Bylaws of the surviving corporation refer to the internal rules and regulations governing the management, operations, and structure of a corporation that remains in existence after a merger or acquisition. When two companies merge, or one company acquires another, the surviving corporation is the entity that continues to operate, and its bylaws are typically revised or adopted to reflect the new structure, ownership, and goals.
The bylaws serve as the foundational document for how the surviving corporation is governed, detailing procedures for shareholder meetings, board of directors’ elections, officer responsibilities, and other corporate governance matters. In the context of a merger or acquisition, the bylaws of the surviving corporation may be amended to reflect changes in leadership, the integration of new business operations, or adjustments to reflect the needs of the combined entity.
Why are bylaws of the surviving corporation important?
The bylaws of the surviving corporation are crucial because they define how the corporation will be managed post-merger or acquisition. These bylaws ensure that the governing structure is clearly outlined, helping to prevent internal conflicts and confusion about decision-making authority.
They also play an important role in ensuring compliance with legal requirements and maintaining effective corporate governance after a merger. The bylaws can address how shareholder meetings are conducted, how board members are elected, and how decisions are made regarding executive compensation, dividends, and other critical corporate matters.
Understanding bylaws of the surviving corporation through an example
Imagine two companies, Alpha Corp. and Beta Inc., agree to merge, with Alpha Corp. being the surviving corporation. After the merger, the bylaws of Alpha Corp. are amended to incorporate provisions that reflect the new governance structure, including changes to the number of directors on the board, the election process for officers, and the allocation of shareholder rights.
For example, if Beta Inc. had a shareholder rights plan in place, the surviving corporation’s bylaws might adopt similar provisions or modify them to fit the new company’s strategy. The amended bylaws will provide a clear framework for how the new, combined corporation will operate and ensure smooth integration of both businesses.
Example of bylaws of the surviving corporation clause in a merger agreement
Here’s an example of how a "bylaws of the surviving corporation" clause might appear in a merger agreement:
“Upon the effective date of the merger, the Bylaws of Alpha Corp. (the Surviving Corporation) shall be amended to include the following provisions: (i) the number of directors on the Board shall be increased to accommodate directors from Beta Inc., (ii) the officers of Beta Inc. will be offered positions within the Surviving Corporation, and (iii) the shareholder rights plan of Beta Inc. will be incorporated into the Bylaws of the Surviving Corporation to ensure a smooth transition. The Bylaws of the Surviving Corporation will govern all matters relating to corporate governance and management thereafter.”
Conclusion
The bylaws of the surviving corporation play a pivotal role in defining the structure and operational guidelines for a company after a merger or acquisition. They help ensure smooth governance and operations by clearly outlining the roles and responsibilities of directors, officers, and shareholders. By adopting or amending the bylaws post-merger, the surviving corporation can integrate the best practices of both entities and effectively manage the transition, making the process more efficient and reducing potential conflicts. Understanding the importance of these bylaws is essential for the long-term success of the newly formed entity.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.