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Generally a name change is completed through an amendment to a company’s articles of incorporation. Moreover, amendments to articles of incorporation generally require shareholder consent, which can be time-consuming and expensive and become even more so if the company is subject to the reporting requirements of the Securities Exchange Act of 1934.
All companies with securities registered under the Securities Exchange Act of 1934, as amended, (i.e., through the filing of a Form 10 or Form 8-A) are subject to the Exchange Act proxy requirements found in Section 14 and the rules promulgated thereunder. The proxy rules govern the disclosure in materials used to solicit shareholders’ votes in annual or special meetings held for the approval of any corporate action requiring shareholder approval. The information contained in proxy materials must be filed with the SEC in advance of any solicitation to ensure compliance with the disclosure rules.
Solicitations, whether by management or shareholder groups, must disclose all important facts concerning the issues on which shareholders are asked to vote. The disclosure information filed with the SEC and ultimately provided to the shareholders is enumerated in SEC Schedule 14A.
Where a shareholder vote is not being solicited, such as when a company has obtained shareholder approval through written consent in lieu of a meeting, a company may satisfy its Section 14 requirements by filing an information statement with the SEC and mailing such statement to its shareholders. In this case, the disclosure information filed with the SEC and mailed to shareholders is enumerated in SEC Schedule 14C. As with the proxy solicitation materials filed in Schedule 14A, a Schedule 14C Information Statement must be filed in advance of final mailing to the shareholder and is reviewed by the SEC to ensure that all important facts are disclosed. However, Schedule 14C does not solicit or request shareholder approval (or any other action, for that matter), but rather informs shareholders of an approval already obtained and corporate actions which are imminent.
In either case, a preliminary Schedule 14A or 14C is filed with the SEC, who then reviews and comments on the filing. Upon clearing comments, a definitive Schedule 14A or 14C is filed and mailed to the shareholders as of a certain record date.
However, there is another option.
Using a Subsidiary to Effectuate a Name Change
Many states, including Delaware and Nevada, have provisions whereby a company can establish a new wholly owned subsidiary, which subsidiary is named with the desired new company name, and then complete a short-form parent subsidiary merger, whereby the parent is the surviving entity but concurrently adopts the name of the merged in subsidiary. The entire process can be completed with board of director approval and no shareholder consent is necessary.
The company will still be required to obtain a new CUSIP number and provide FINRA with notification of the corporate action. FINRA is the entity that processes the name change such that the company’s quotation on OTC markets will be updated with the new name. The company may also request a voluntary symbol change at the same time.
To break it down again in simple terms, an entity that desires to complete a name change without the expense, time and process of holding a shareholder meeting or obtaining shareholder consent and complying with the SEC proxy rules and state shareholder notice requirements, can do so as follows:
- Obtain board of directors approval to form a new wholly owned subsidiary and complete the name change process through a short-form parent subsidiary merger;
- Form a new subsidiary, which subsidiary is named with the desired new name of the parent entity;
- File short-form merger documents with the state whereby the parent entity is the surviving entity and such parent adopts the subsidiary name as part of the merger process;
- Obtain a new CUSIP number;
- Notify FINRA of the corporate action at least 10 days prior to the desired effective date; and,
- For a company subject to the reporting requirements of the Securities Exchange Act of 1934, file a Form 8-K disclosing the name change.
The Delaware and Nevada Specific State Law Provisions
As Delaware and Nevada are the most common states of incorporation for public entities, below are the corporate law provisions for these states that allow for the name change process without shareholder consent. Many states have similar statutory provisions.
Nevada Revised Statutes (NRS) 92A.180 allows for the merger of a subsidiary into a parent or parent into a subsidiary without shareholder approval. An entity may only avail itself of the provisions of 92A.180 if the parent owns at least 90% of the subsidiary. NRS 92A.180 provides in pertinent part: “Articles of merger under this section may not contain amendments to the constituent documents of the surviving entity except that the name of the surviving entity may be changed.”
Delaware General Corporation Law (DGCL) Section 251 allows for the merger of a subsidiary into a parent or parent into a subsidiary without shareholder approval. An entity may only avail itself of the provisions of DGCL 251 if the parent owns at least 80% of the subsidiary. DGCL 251 provides in pertinent part: “…the certificate of incorporation and bylaws of the holding company immediately following the effective time of the merger contain provisions identical to the certificate of incorporation and bylaws of the constituent corporation immediately prior to the effective time of the merger (other than provisions, if any regarding… the corporate name…)…”
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
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