A corporate reorganization is any change to a company’s internal operating structure that aims to improve efficiency, increase revenues, decrease costs, or achieve any combination of these objectives.
Under Section 368 of the Internal Revenue Code (IRC), there are seven different types of corporate reorganizations. The seven types of reorganizations are the following:
- Type A Reorganization: Merger and Consolidation. Section 368(a)(1)(A)
- Type B Reorganization: Acquisition of Subsidiary. Section 368(a)(1)(B)
- Type C Reorganization: Acquisition with Target Liquidation. Section 368(a)(1)(C)
- Type D Reorganization: Transfers. Section 368(a)(1)(D)
- Type E Reorganization: Recapitalization. Section 368(a)(1)(E)
- Type F Reorganization: Identity Change. Section 368(a)(1)(F)
- Type G Reorganization: Transfer of Assets. Section 368(a)(1)(G)
Type A Reorganizations under Section 368(a)(1)(A)
A Type A reorganization is a statutory merger or consolidation of one or more corporations.
A statutory merger occurs where the assets and liabilities of a target corporation are transferred to the acquirer, and the target corporation dissolves after the transfer.
Consolidation occurs when two or more existing corporations transfer their assets to a newly formed corporate entity. The previous corporations are dissolved after the transfer of assets and liabilities is complete.