The courts of equity have never hesitated to look behind the form of a particular corporate transaction and find that it constituted a corporate merger, if in fact and in substance it was a merger, regardless of its deceptive outward appearance.
Plaintiff stockholders challenged the proposed transfer of all shares and assets of defendant United Board Carton Corporation, which would have included an assumption of all liabilities, a pooling of interests, total absorption of the former and dissolution of it, joinder of officers and directors from both corporations, retention of some personnel, and a surrender by the first corporation's sole stockholder of his stock in exchange for newly issued shares in the second corporation, defendant Interstate Container Corporation. The parties filed cross-motions for summary judgment. Plaintiffs contended that the combination amounted to a merger that entitled dissenting stockholders to an appraisal of their stock. Defendants argued to the contrary.
Did the action of both corporations constitute merger?
The court held that the corporate combination of both defendant corporations was a practical or de facto merger within the protective purview of N.J. Stat. Ann. § 14:12-7, and therefore plaintiffs were entitled to have been notified and advised of their statutory rights of dissent and appraisal. The court further held that the failure of defendant United Board Carton Corporation's corporate officers to have taken those steps and to have obtained stockholder approval of the agreement rendered the proposed corporate action invalid.