Not so long ago companies were conducting business as usual — which for some meant entering into mergers and acquisitions. But then COVID-19 struck, and there is nothing even remotely resembling business as usual.

Can you get out of a merger if you’ve already filed?

Among the coronavirus’ innumerable consequences for businesses is that mergers that seemed like such a good idea at the time no longer seem so good. And the parties entering into those transactions now want to get out of them. But what if the articles of merger were already filed in the state or states of formation? Are the parties stuck?

Delayed effective date

The answer is not necessarily. If the articles of merger that were delivered to the state filing office or offices had a delayed effective date, and that date has not passed, the parties may be able to file articles of abandonment of merger, and the merger will not go into effect.

Where allowed by the business entity statute, delayed effective dates are a very useful tool. This is particularly true for mergers as they allow the merger itself to go in effect, as well as related filings such as qualifications and withdrawals, at the same date and time in every state in which the filings are made.

Most business entity statutes provide for both delayed effective dates and the ability to abandon a filed transaction before the effective date passes. That means that if the parties to the merger used a delayed effective date, and the merger has not yet become effective, in many states they can get out of the merger. This requires the filing of a document - generally called articles of abandonment of merger - with the filing office or offices where the articles of merger were filed.

Effective upon filing?

But what if the articles of merger went into effect upon filing, or if the delayed effective date has passed? This presents a bigger problem. But one possible solution is to file articles of correction. Although most business entity statutes provide for correction filings, not every situation can be corrected. Whether the cancellation of a merger that the parties want out of because of COVID-19 can be effected through a correction filing will depend upon the state.

However, it is a possibility that is at least worth investigating.

So, if you filed articles of merger before the COVID-19 outbreak, and no longer want to enter into that transaction, all may not be lost. Depending upon the circumstances, and the states involved, it may be possible to get out of the merger through abandonment or correction filings. Although you won’t get back the original filing fees, and will have to pay additional fees for the abandonment and correction filings, it will be worth it to avoid entering into a transaction the parties no longer want to complete