A corporate merger occurs when one coproration transfers all of it assets to another corporation, so that it ceases to exist, being absorbed by the remaining corporation. The shareholders of the absorded company receive shares of the surviving corporation.
The right and power to consolidate or merge is possessed by corporations only with the consent and authority of the legislature, and such consent must be clearly and distinctly expressed by legislative enactment. Each corporation must have legislative authority to combine, and a contract of merger or consolidation will be invalid if one corporation is without such authority.
A merger or consolidation effected under the laws of a state, territory, the District of Columbia, or the United States, and which meets all requirements of local law, qualifies as a Type A reorganization under the Internal Revenue Code.