CONSOLIDATIONS, SALES AND LEASES OF ASSETS 1. "'leaning of term consolidation.—The word con solidation has been used indiscriminately to indicate all processes of forming intercorporate relations. Careful -writers, however, restrict its use to describe a complete fusion of corporations under the pro-, visions of some statute. This fusion may result in a company with a name similar to that of one of the constituents. In that case the process is called merger. If the consolidated company adopts a new name, the process is called amalgamation. The proc esses of consolidating and the legal effect they offer are practically the same whether an old name or a new name be used.
"A_malgarnation" is the English equivalent of the American term "consolidation." It has been held in leading English cases that the term "amalgamation" has no technical legal meaning, and even as a com mercial term bears no definite meaning. "To consti tute an amalgamation," said Justice Buckley, in a no table judgment, "you must have the rolling, somehow or other, of two concerns into one. You must weld two things together and arrive at an amalgam—a blending of' two undertakings. It does not neces sarily follow that the whole of the two undertakings should pass—substantially they must pass—nor need all the corporations be parties. The difference be tween reconstruction and merger is, that in the latter is involved the blending of two concerns one with the other, and not merely the continuance of one con cern." "Amalgamation," and "merger" mean the same thing, it is said also, but the former term serves znore properl.y to describe a process of fu sion, and the latter to describe the process of absorp tion.
2. Statutory authority state is jealous of its creature and will not permit it without the state's consent to do anything that affects its corporate existence. It would be contrary to the common law, then, for two corporations to consolidate unless the state's consent be first obtained. This con sent is now generally given in the General Corpora tion Act of the individual state, but is restricted to such corporations as will not in the process of con solidation violate any of the other laws of the state, chiefly the anti-trust laws. 'Moreover, the companies that can consolidate must generally be in the same line of business in order that the consolidated com pany may not reach out into all activities of life and design to become more powerful than the state. Thus
if company X has powers A. B C and company Y has powers A and 13, the two cannot consolidate. This was the situation when the United States Leather Company and the Central Leather Company tried to merge in 1906. In 1909, however, the Central Leather Company changed its powers and then ac quired the stock of the United States Leather Com pany.' Statutes usually restrict consolidation to cases where consolidation will do the constituents some good. Thus, unconnected railroads are not permitted to con solidate. In New Jersey, the whole question is placed before the Public Utilities Commission to whom all applications for the right to consolidate, whether by public service companies or by industrials, must be made.
3. Nature of results in the complete fusion of the constituent companies. The number of powers and obligations remain the same as before the consolidation.
4. Method of statutes usually prescribe four steps in the consolidation of several companies : (1) an agreement by the directors of the several companies upon the terms of consolidation ; (2) submission of the proposition to the stockholders, two-thirds of whom in each corporation must consent ; (3) the filing of the certificate of agreement in the proper public office; (4) exchange of certificates of stock of' the old companies for those of the new com pany. In some states the agreement of consolidation must be published in newspapers once a week for several weeks.
5. Effect of consolidation upon the old corpora an attempt at consolidation does not con form to the statute, any stockholder may bring an action to prevent the consolidation and, of course, the state may bring a proper action to preserve its own rights. If, however, the consolidation conforms to the statute, the stockholders become stockholders in the new company tho in many states, including New York and New Jersey, non-consenting stockholders may apply to a court to have a commission appointed to appraise the value of their stock. The consoli dated companies are then required to pay the costs of the court proceeding and the fees of the commis sioners, and to purchase the stock of the disgruntled stockholder at the price set by the appraisers.