What is a Short Form Merger?

A short form merger combines a parent company and a subsidiary that is substantially owned by the parent. Either entity can be designated as the survivor of the merger. The requirements for a short form merger are set forth in the statutes of the applicable state government. State statutes typically mandate that the parent entity must own at least 90% of the subsidiary before it can use a short form merger. This approach is used to keep shareholders of the subsidiary from having to approve the arrangement.

Advantages of a Short Form Merger

There are several advantages to using a short form merger. First, it involves fewer costs than a normal merger, since there are fewer procedural steps to complete and therefore fewer administrative costs. Second, the process can be completed within a shorter period of time than a normal merger. And finally, it is not necessary to obtain the approval of the subsidiary entity’s shareholders.