No. There are at least some other states that have the same requirement. We have, however, 50 states, plus DC, territories, and possessions in this country and is very likely that the law on this is not identical in each one. But as you indicated Utah as the relevant state, I gave you what the case law in that state says on the matter. As a result, it appears that in Utah the buyer must use his own stock for the de facto merger argument to work. So if Utah is the relevant state here then it matters not what the law is in the other 49 states. Even if Utah were the only one with that requirement, that rule would still be what matters in Utah since there is no legal principle that says a state must follow what the other states do. So arguing what the law is in other states does not help you when the courts of Utah have already spoken on the issue.
But even if de facto merger does not work, perhaps some other legal principle would. You might want to consult a Utah business litigation attorney for advice on your situation.
According to the website Bloomberg law
The
de facto merger is the most commonly cited, particularly where the transaction is characterized by
1. a continuity of management
2. physical location
3. general business operations
4. equity ownership (the purchase consideration is stock of the acquirer), assumption by buyer of seller’s ordinary course business liabilities, and seller’s dissolution following the sale.
There is no mention that the equity ownership had to be purchase using their own stock.
All 50 states have the same criteria for successor liability which is. Utah law mirrors every other state.
- The buyer assumes the seller’s liabilities expressly or impliedly;
- the transaction in substance constitutes a merger or consolidation of buyer and seller (de facto merger);
- the buyer is “a mere continuation” of seller; and
- the intent of the transaction is to defraud seller’s creditors
Some states have expanded on those 4 general principals to strengthen successor liability in more situation but every state has these 4 basic core principals. Utah has the standard(not extended) definition used by most other states of the 4 general principals.
Can you please cite what law article you read which clearly states that the method/mode of payment is required to be with one's own stock for a de facto merger to occur?
All law articles I read basically say that "
“[n]o single factor is necessary or sufficient to establish a de facto merger.” Cargill, Inc. v. Beaver Coal & Oil Co., 424 Mass. 356, 360, 676 N.E.2d 815, 818 (1997).
That is to say, the absence of any one factor will not preclude a finding of de facto merger, and, in some cases, the presence of some amount of each factor would not compel a finding of de facto merger. from -businesslawtoday "
According to Wikipedia under "
De facto merger
"
Some courts require only one factor, others require all, and others still have entirely different factors when deciding if a transaction is a de facto merger.
[8]
Factors:
(1) continuity of ownership [or continuity of shareholders]; (2) cessation of the ordinary business and dissolution of the predecessor as soon as practically and legally possible; (3) assumption by the successor of liabilities ordinarily necessary for uninterrupted continuation of the business of the predecessor; and (4) a continuity of [enterprise, including] management, personnel, physical location, aspects, and the general business operation.
[9]
"
Wikipedia has no mention of having to use one's own stock to be the currency used to make the purchase.
The case you mentioned "
There is a continuity of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock ultimately coming to be held by the shareholders of the seller corporation so that they become a constituent part of the purchasing corporation. "
-
379 F.Supp. 797 (1974)Donald SHANNON and Carol Shannon, Plaintiffs,
v.
SAMUEL LANGSTON COMPANY, aka Langston Company, a Division of Harris Intertype Corporation, Defendant.
The Key phrase here is that
"There is a continuity of shareholders" which happen in this particular case to be a result of the purchasing corporation paying for its acquired assets with shares of its own stock.
If the continuity of shareholder resulted in other method of payment, the result would have been the same as long as there was a continutiy of shareholders.
It does not say that its REQUIRED but rather this is what happen in this particular case.
Where do you read its
REQUIRED in this case law you are citing?
(1974)Donald SHANNON and Carol Shannon, Plaintiffs,
v.
SAMUEL LANGSTON COMPANY
Also, you are talking about state court vs federal court has a appellate court which covers multiple states.
What makes you think that those cases applied to every case not just the unique case in front of them?
After all, the O.J. Simpson trial " If the glove don't fit, you must acquit" doctrine does not apply to every murder trial. There are convictions and acquittals in murder trials which don't involve a glove. Just like there are case after case of de facto mergers that don't have a method of payment as their own stock.