Before 2014, Connecticut law did not permit the direct conversion of a corporation or other business entity into any dissimilar business entity, did not expressly allow for a merger of dissimilar entities, and did not provide for an entity that was formed in a different jurisdiction to redomesticate in Connecticut. But, starting on January 1, these cross-entity transactions and domestications can now be accomplished in Connecticut, giving business owners greater flexibility to ensure that their choice of entity is properly serving their needs. Connecticut is one of a limited number of states that provide these opportunities to business entities.

Connecticut adopted its version of the Model Entity Transactions Act (“META”) in 2011, with an effective date of January 1, 2014. META was studied, appropriate Connecticut changes crafted and presented to the legislature for consideration by the Executive Committee of the Business Law Section of the Connecticut Bar Association during the period when Halloran & Sage partner Henry M. Beck, Jr., was chair of the Executive Committee.

META provides, among other things, for direct cross-entity mergers and consolidations, eliminating the need to engage in the complex and costly process that was previously required in Connecticut to accomplish such transactions. Also, META allows for an “interest exchange,” whereby an entity may acquire another entity in exchange for non-cash consideration such as securities.

Additionally, META allows for a Connecticut entity to convert directly to a another form of entity. Previously, if a Connecticut entity wanted to convert to another type of entity, the business owners had to engage in a lengthy and complicated process to achieve that result.

Finally, META permits an entity that was formed in a jurisdiction other than Connecticut to redomesticate to Connecticut, in a procedure that was not previously authorized by statute.

The choice of which business entity to utilize is a critical decision for all business owners. Connecticut’s adoption of META makes the process more straightforward for business owners to make changes to their entity structure if desirable. META also eases the process of merging and consolidating business for those seeking to engage in such business combinations.

Due to the wide variety of entity combinations that META covers, the Connecticut Secretary of the State has not issued forms for META transactions, and thus anyone seeking to take advantage of META-related benefits should consult legal counsel to ensure proper documentation and execution of such transactions in accordance with applicable law.

META transactions generally can have significant tax consequences. Such consequences should be fully and thoroughly evaluated with the assistance of counsel before engaging in any of the transactions permitted by META discussed in this article.

META was adopted as Public Act 11-241 and modified by Public Act 12-32, and has been codified in large part as Chapter 616 of the Connecticut General Statutes (C.G.S. § 34-600 et. seq.), but also resulted in a series of conforming amendments to previous existing statutes pertaining to the combination of like-kind business entities (see C.G.S. § 33-815 et. seq.; C.G.S. § 34 33a et. seq.; C.G.S. § 34 193 et. seq. and C.G.S. § 34-388 et. seq.)

For more information or assistance in evaluating a potential META transaction contact: Henry Beck, Jr., or Casey O’Connell