Changing a company’s name typically involves an amendment to the company’s articles of incorporation, which often requires shareholder consent. This process can be time-consuming and expensive, especially for companies subject to the Securities Exchange Act of 1934. Companies must follow the Exchange Act's proxy rules, which mandate disclosure and shareholder votes for major corporate actions such as name changes. However, companies incorporated in certain states, including Delaware and Nevada, have an alternative path that avoids this lengthy process—completing a name change through a parent-subsidiary merger without the need for shareholder approval.

Traditional Name Change Process and Its Drawbacks

Under normal circumstances, companies seeking a name change must amend their articles of incorporation. This amendment requires approval from shareholders, typically through a formal voting process. For public companies, this means preparing and filing proxy materials or information statements under SEC rules (Schedule 14A or Schedule 14C) and waiting for SEC review and shareholder response. The process of proxy solicitation involves significant legal and administrative costs, along with potential delays.

Both Schedule 14A (for solicited shareholder votes) and Schedule 14C (for actions taken via written shareholder consent) require companies to provide detailed disclosures to shareholders and file preliminary versions of these documents with the SEC for review. Only after clearing any SEC comments can a company proceed with the final mailing to shareholders. While these steps ensure transparency and accountability, they introduce significant delays and expenses, particularly for seemingly straightforward actions like a name change.

Using a Subsidiary Merger to Bypass Shareholder Approval

Companies can avoid this cumbersome process by forming a wholly-owned subsidiary with the desired new name and then completing a short-form parent-subsidiary merger. This merger allows the parent company to adopt the subsidiary's name without needing shareholder approval. The entire process requires only board approval and can be completed relatively quickly, allowing the parent company to change its name without the need for proxy filings or shareholder votes.

Here’s how the process works:

1. Form a Subsidiary: The company forms a wholly-owned subsidiary, giving the subsidiary the new name the parent wants to adopt.
2. Board Approval: The board of directors approves the merger of the subsidiary into the parent company.
3. File Short-Form Merger Documents: File a short-form merger document with the state in which the parent company is incorporated, indicating that the parent company will adopt the name of the merged subsidiary.
4. New CUSIP Number: Obtain a new CUSIP number for the renamed company.
5. Notify FINRA: Notify the Financial Industry Regulatory Authority (FINRA) of the corporate action at least 10 days before the effective date.
6. SEC Filing: If the company is subject to Exchange Act reporting requirements, file a Form 8-K with the SEC to disclose the name change.

This streamlined approach saves time and reduces the legal fees typically associated with shareholder solicitations and SEC review.

State Law Provisions for Short-Form Mergers

Many states have laws that facilitate the use of short-form mergers to effectuate corporate name changes. The specific provisions in Delaware and Nevada are often utilized by public companies due to their favorable corporate governance frameworks.

Nevada (NRS 92A.180)

Under Nevada law, if a parent company owns at least 90% of a subsidiary, the parent can merge the subsidiary into itself without shareholder approval. The parent can adopt the subsidiary’s name as part of this process, making it an ideal method for completing a name change. Nevada Revised Statutes (NRS) 92A.180 explicitly allows the name of the surviving entity (the parent) to be changed as part of the merger.

Delaware (DGCL Section 251)

Delaware offers a similar mechanism, allowing companies that own at least 80% of a subsidiary to complete a merger without shareholder approval. Delaware General Corporation Law (DGCL) Section 251 allows the parent company to adopt the subsidiary’s name during the merger process, simplifying the name change procedure.

Key Steps After the Merger

After completing the merger and changing the company's name, certain administrative steps are required to reflect the new name in public markets and ensure legal compliance:

• CUSIP Number and FINRA Notification: Companies must obtain a new CUSIP number (the identifier for securities) for the renamed company. FINRA processes the corporate action and updates the company's name in the quotation system. The company may also request a new ticker symbol at this time.
• Form 8-K Filing: If the company is publicly traded and subject to SEC reporting requirements, it must file a Form 8-K to disclose the name change. This filing ensures investors are informed of the change and maintains transparency in the marketplace.

Benefits of the Subsidiary Merger Route

Using a short-form subsidiary merger to effectuate a name change offers several advantages over the traditional shareholder vote route:

• Speed: The entire process can be completed in a fraction of the time compared to holding a shareholder vote and waiting for SEC review.
• Cost-Effectiveness: By avoiding the need for proxy materials, legal and administrative costs are significantly reduced.
• No Shareholder Involvement: Since the merger only requires board approval, the company avoids the complexities of shareholder engagement, voting, and SEC scrutiny under the proxy rules.

Conclusion

For companies incorporated in states like Delaware or Nevada, using a short-form parent-subsidiary merger to change the company’s name is a highly efficient and cost-effective alternative to traditional methods. By bypassing the need for shareholder approval and SEC proxy filings, companies can quickly implement name changes while reducing legal and administrative expenses.

This approach allows companies to focus on core operations and strategic goals without the delays typically associated with corporate name changes.