Corporate Sale of Substantially All Assets Approval Requirements in Pennsylvania
At a glance
| Governing law, corporation, assets, and transaction scope | 15 Pa.C.S. § 1932; ordinary domestic business corporation. Covers sale, lease, exchange, or other disposition of all/substantially-all property and assets, with/without goodwill; shareholder-required route uses plan of asset transfer (§ 1932(b)) |
|---|---|
| Ordinary-course, significant-activity, and substantially-all trigger | Board-alone route for usual/regular course or relocating all/substantially- all business unless bylaws restrict. Otherwise plan route unless another express exception; 25%/25% retained-activity presumption conclusively means not substantially all (§ 1932(a), (b), (g)) |
| Quantitative safe harbor, subsidiaries, and investment-holding tests | Retained corporation/controlled-subsidiary activity: ≥25% total assets and ≥25% of pretax continuing income or continuing revenue, prior fiscal year, consolidated. Assets may use book, appreciation-adjusted, current segmented/ going-concern, or other reasonable method; income/revenue may use GAAP or corporation's reasonable usual practices (§ 1932(g)) |
| Board resolution, recommendation, conflict exception, and conditioning | Board resolution approves plan/directs vote under incorporated Chapter 3 procedure; plan sets terms or delegates any/all to board. No ordinary recommendation requirement; record agreement may require submission even if board later finds plan inadvisable and recommends rejection (§§ 320, 321(a), 1932(b)(3)-(4)) |
| Shareholder meeting notice, nonvoting holders, terms, and consideration | Record notice to every record holder, voting or not, with plan/summary, special-treatment notice, applicable dissent texts, and free organic-rules statement. Voting holders get ≥10 days for Chapter 3/19 meeting (§§ 321(b), 1704(b)-(c), 1932(b)(4)) |
| Vote denominator, classes/groups, articles, and higher thresholds | Majority of votes cast by all entitled holders, plus majority votes cast in each required class vote. Article-change-equivalent class rights and qualifying special treatment may create class/group vote; shareholder- adopted bylaws may require more (§§ 321(c), 1757, 1906) |
| Ordinary-course, encumbrance, subsidiary, distribution, and dissolution exclusions | No plan/share vote for usual/regular course, relocation unless bylaws restrict, statutory distribution or division, qualifying parent-to-wholly- owned corporation transfer with parent-share rights unchanged, dissolution/ liquidation, simultaneous sale-leaseback, or mortgage/pledge/security/ debt-dedication (§ 1932(a), (b)(1), (d)-(e)) |
| Agreement execution, closing, abandonment, and contract rights | Record-form plan states terms or delegates them, may distribute consideration and use external facts; acquirer need not be party. Adopt/amend/terminate through incorporated Chapter 3 merger-plan procedure; no Department of State filing needed for effectiveness (§ 1932(b)(3)-(5)) |
| Appraisal/dissent notice and transaction effect | Objecting transferring-corporation shareholder complying with Chapter 15 has dissent rights, if any; excluded for court-ordered sale and plan requiring substantially-all net proceeds distributed by interests within one year or to liquidating trust. Notice includes dissent provisions (§ 1932(b)(4), (c)) |
| Fiduciary, successor-liability, creditor, tax, antitrust, securities, and fact boundaries | Section forbids construing transfer authority to permit fraud on corporate creditors or violation of law. Procedure/safe harbor does not decide substantially-all facts outside presumption, fairness, validity, successor liability, liens, tax, securities, antitrust, employment, environmental, licensing, or fiduciary compliance (§ 1932(f)-(g)) |
Requirements one by one
Pennsylvania combines qualitative exceptions with a conclusive 25% test
15 Pa.C.S. § 1932(a)-(b) routes an all-or-substantially-all transfer through a plan unless it is in the usual and regular course, relocates all or substantially all of the business, or falls within another express exception. The bylaws can restrict the board-alone ordinary-course or relocation route.
Section 1932(g) conclusively deems the corporation not to have disposed of substantially all property and assets when it or a controlled direct or indirect subsidiary retains activity representing at least 25% of total assets and at least 25% of either pretax continuing income or continuing revenue. Each measure uses the end of the most recently completed fiscal year before the transaction and a consolidated basis.
The asset measure may use book values, appreciation/depreciation-adjusted value, current separate, segmented, or going-concern value, or another reasonable method. Income or revenue may use GAAP or the corporation's usual reasonable accounting practices. This page does not select a method or apply the figures.
The transfer uses a plan with flexible terms
Section 1932(b)(3) requires the plan to state terms and conditions or authorize the board to fix any or all of them, including consideration. It may distribute consideration to holders, provide statutory special treatment, and use external facts if it states how they operate. The acquirer need not be a party.
Under 15 Pa.C.S. §§ 320 and 321(a)-(c), the board ordinarily adopts a resolution approving the plan and directs a holder vote. No ordinary affirmative board recommendation is required. A record-form agreement may require submission even after the board finds the plan inadvisable and recommends rejection.
Notice includes the plan and dissent materials
Section 321(b) gives record-form notice to every record shareholder, voting or not. It includes the plan or summary, special-treatment notice, applicable dissent provisions, and a statement offering the post-transaction organic rules without charge. Section 1932(b)(4) specifically requires the plan or summary and, when applicable, Chapter 15 dissent text plus § 1932(c).
Under 15 Pa.C.S. § 1704(b)-(c), voting shareholders receive notice at least 10 days before a Chapter 3 or Chapter 19 meeting. Special-meeting notice states the general nature of the business.
The default vote is a majority of votes cast
Section 321(c) and § 1757 use a majority of votes cast by all entitled holders, plus a majority of votes cast in each required class vote. Article-change- equivalent rights and a qualifying special-treatment plan can create additional class or group votes. A shareholder-adopted bylaw may demand a higher number or percentage.
Under 15 Pa.C.S. §§ 1757(a)-(b) and 1766(a)-(c), consent defaults to all entitled holders unless the bylaws permit the meeting-minimum route. Partial consent to the incorporated Chapter 3 transaction cannot become effective until at least 10 days after full-content notice to every nonconsenting voting holder.
The statute lists multiple no-plan routes
In addition to ordinary-course and relocation transfers, § 1932 excludes a qualifying statutory distribution or division, a transfer from a parent to its wholly owned corporation when parent-share rights do not change, a disposition in dissolution or liquidation, and a transaction in which every disposed asset is simultaneously leased back.
A mortgage, pledge, security-interest grant, or property dedication to repay debt—with or without recourse—is not a disposition for § 1932. The statute also counts controlled direct and indirect subsidiary property as parent property and treats a third-party subsidiary merger as a parent “other disposition.”
No Department filing makes the plan effective
Section 1932(b)(4)-(5) incorporates Chapter 3 merger-plan procedures for proposal, adoption, postadoption amendment, and termination, except for the specified merger no-vote subsection. It expressly says no articles or other Department of State document is necessary to make the adopted asset-transfer plan effective.
That filing rule does not decide when the commercial agreement closes, what amendment or termination it permits, or whether another title, tax, lien, license, or regulated-industry filing applies.
Dissent rights have court-sale and distribution exceptions
Section 1932(c) gives an objecting transferring-corporation shareholder who complies with Chapter 15 the dissenting-shareholder rights and remedies provided there, if any. The route does not apply to a court-ordered sale or a plan requiring all or substantially all net proceeds to be distributed by holder interests within one year after sale or to a liquidating trust.
This page identifies the statutory eligibility and notice boundary. It does not administer objection, demand, valuation, payment, or court procedure.
What trips people up
- Relocation is an express board-alone route. Pennsylvania does not limit subsection (a) to the usual and regular course; it separately names relocating all or substantially all of the business, subject to bylaw restrictions.
- The 25% test is two-part. Retaining 25% of assets alone is insufficient; retained activity must also meet 25% of either pretax continuing income or continuing revenue.
- The asset plan is not filed with the Department of State. The absence of a § 1932 filing does not eliminate the plan, board, notice, vote, or dissent steps.
Common questions
Does a simultaneous sale-leaseback require the plan route?
Not under § 1932(d)(3) when all disposed assets are simultaneously leased back. This page does not decide whether a multistep or partial leaseback meets that text.
Does mortgaging all assets count as the disposition?
No for § 1932 purposes. Subsection (e) expressly removes the listed mortgage, pledge, security-interest, and debt-dedication transactions.
Does the safe harbor prove a transaction is fair or lawful?
No. It conclusively answers only the statutory substantially-all determination, and § 1932(f) expressly refuses to authorize fraud on creditors or a violation of law.
Statutes and sources
- 15 Pa.C.S. § 1932. The quoted current text supplies the trigger, plan, subsidiary treatment, exceptions, filing rule, dissent boundary, creditor savings, and 25% test. Official current Chapter 19 (accessed September 5, 2026).
- 15 Pa.C.S. §§ 320-321. The quoted current text supplies board proposal, notice, vote, and continued submission. Official current Chapter 3 (accessed September 5, 2026).
- 15 Pa.C.S. §§ 1704, 1757, and 1766. The quoted current text supplies notice timing, vote, higher-bylaw, and consent mechanics. Official current Chapter 17 (accessed September 5, 2026).
Source links
Every statute quoted above, linked, with the date we checked it.
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