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A Simplified Process for Corporate Restructuring

Posted by Kenady Hague | Mar 05, 2015 | 0 Comments

Written by Meredith K. Marder and Elizabeth Parsons

The Arizona Entity Restructuring Act (“AERA”) went into effect on January 1, 2015.  The AERA streamlines and simplifies the reorganization/restructuring process for all types of business entities—including partnerships, LLCs, PLLCs, and corporations. 

Companies reorganize for a variety of business reasons.  For example, a company might choose to implement an asset protection strategy or streamline its business operations.  Companies also reorganize in anticipation of capital-raising activities or acquisition by a third party.

Whatever the reason for a company to amend its corporate structure, there are five primary types of “reorganization” transactions:  (1) a merger, in which two companies merge into a single, unified company; (2) a conversion, in which one type of entity (e.g., an LLC or a partnership) converts to another type of entity (e.g., a corporation); (3) an interest exchange, in which the owners exchange their interests in Company A for interests in Company B; (4) a domestication, in which a company changes its state of incorporation/organization; and (5) a division, in which a single company divides into two or more separate entities.  Before the adoption of AERA, each of these transactions involved lengthy documentation and numerous filings with the Arizona Corporation Commission; in some cases, the old entity had to dissolve and the owners were required to form a new company altogether. 

The AERA streamlines the process significantly by allowing companies to file a single, comprehensive “Statement of Merger” (or Conversion, Division, etc.).  As a result, the AERA minimizes disruption to the company's day-to-day operations and significantly reduces transaction costs.  

If your company is considering a reorganization—or you would like to discuss whether reorganization would be beneficial—please give us a call.

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