M&A Conditions Precedent Checklist - New York

M&A CONDITIONS PRECEDENT CHECKLIST

State of New York

Transaction Name: [________________________________]
Transaction Type: ☐ Stock Purchase ☐ Asset Purchase ☐ Statutory Merger ☐ Consolidation ☐ Other: [________________________________]
Seller/Target: [________________________________]
Buyer/Acquirer: [________________________________]
Anticipated Closing Date: [__/__/____]
Definitive Agreement Date: [__/__/____]
Outside Date (Drop-Dead Date): [__/__/____]
Deal Counsel (Seller): [________________________________]
Deal Counsel (Buyer): [________________________________]

STATUS KEY:

• NS = Not Started
• IP = In Progress
• PC = Pending Counterparty
• PR = Pending Regulatory
• C = Complete
• W = Waived
• NA = Not Applicable

PART I: PRE-CLOSING CONDITIONS

A. Regulatory Approvals

B. Third-Party Consents

C. Stockholder/Member Approvals

PART II: SELLER'S CONDITIONS TO CLOSING (Conditions for Seller's Benefit)

A. Representations and Warranties Bring-Down

B. Buyer's Covenants Performed

C. Other Seller Conditions

PART III: BUYER'S CONDITIONS TO CLOSING (Conditions for Buyer's Benefit)

A. Representations and Warranties Bring-Down

B. Seller's Covenants Performed

C. No Material Adverse Change (MAC/MAE)

D. Legal Opinions

E. Financial and Diligence Conditions

PART IV: MUTUAL CONDITIONS TO CLOSING

PART V: NEW YORK-SPECIFIC REQUIREMENTS

A. State Merger Filings (Statutory Merger / Consolidation)

B. New York Good Standing and Entity Status

C. New York Tax Matters

D. New York Bulk Sales Notification (Asset Purchases)

E. New York-Specific Licensing and Permits

PART VI: CLOSING DELIVERABLES CHECKLIST

A. Seller's Closing Deliverables

B. Buyer's Closing Deliverables

C. Funds Flow and Payment

PART VII: POST-CLOSING CONDITIONS AND OBLIGATIONS

PART VIII: PRACTICE NOTES -- NEW YORK-SPECIFIC

Key New York Considerations

1. Formation-Date and Certificate-Dependent Vote: BCL 903 does not impose a universal two-thirds rule. Depending on the corporation's formation date and, for specified existing corporations, an express certificate provision, the plan requires either a majority or two-thirds of all outstanding shares entitled to vote. Run the separate-class or affected-series test as well.

2. Filing Office: Certificate of Merger is filed with the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. Filing fee is $60. Expedited processing: $25 (24-hour), $75 (same-day), $150 (2-hour).

3. Bulk Sales Notification: Unlike most states that have repealed UCC Article 6, New York maintains a bulk sales notification requirement under N.Y. Tax Law 1141(c). The buyer must file Form AU-196.10 with the Tax Department via registered mail at least 10 days before closing an asset purchase. The Tax Department will respond within 5 business days with either a release (Form AU-197.1) or a notice of claim (Form AU-196.2). Failure to file exposes the buyer to successor liability for the seller's unpaid sales taxes.

4. Short-Form Merger: BCL 905(a) allows a parent owning at least 90% of each class of a subsidiary to merge without subsidiary shareholder approval.

5. Appraisal Rights: BCL 910 defines eligibility and exclusions; BCL 623 supplies a multi-stage procedure. Calendar the pre-vote objection or applicable post-authorization election, certificate submission, statutory offer, 80% advance payment after consummation, negotiation period, and special proceeding separately.

6. Real Property Transfer Taxes: New York has multiple layers of transfer tax. The state imposes $2 per $500 of consideration (0.4%) under Tax Law Art. 31. NYC imposes additional RPTT (1%-2.625% depending on property type and consideration amount). The combined tax burden on NYC real property transfers can be significant.

7. Mortgage Recording Tax: If the transaction involves new mortgage financing secured by New York real property, mortgage recording tax applies. Rates vary by county (in NYC, approximately 1.8%-2.80% depending on loan amount).

8. New York WARN Act: New York's WARN Act (N.Y. Lab. Law 860-860-i) requires 90 days' advance notice (compared to 60 days under federal WARN) for mass layoffs, plant closings, or relocations affecting 25 or more employees (lower threshold than federal WARN's 50-employee threshold).

9. Written Consent: Under BCL 615, action by written consent of shareholders generally requires unanimous consent unless the certificate of incorporation provides otherwise. This is more restrictive than Delaware and many other states.

10. NYC Unincorporated Business Tax: If the target is a partnership or LLC doing business in New York City, the NYC unincorporated business tax (UBT) at 4% applies. Factor into closing tax analysis.

11. Article 28 Healthcare Facilities: If the target operates a healthcare facility licensed under N.Y. Pub. Health Law Art. 28, change of ownership requires Department of Health approval, which can take months. Start early.

Common Pitfalls

• Assuming every New York merger requires the same vote instead of applying BCL 903's formation-date, certificate, and separate-class rules
• Failing to file Form AU-196.10 bulk sales notification at least 10 days before closing
• Not accounting for multiple layers of real property transfer tax (state + NYC)
• Overlooking NYC-specific taxes (UBT, commercial rent tax for certain Manhattan properties)
• Assuming written consent by less than all shareholders is valid without checking the certificate of incorporation
• Missing the 90-day New York WARN Act notice period (longer than federal)
• Not factoring in mortgage recording tax when transaction involves new debt financing
• Forgetting to withdraw foreign entity qualification after merger (if disappearing entity was foreign-qualified in NY)

RWI and Insurance Considerations

• D&O tail policies should be bound at or before closing. Typical tail period is 6 years.
• Confirm RWI policy covers New York-specific representations and does not exclude state-specific regulatory matters (particularly financial services, healthcare, and real estate).
• For transactions involving NYC real property, confirm environmental liability coverage under the RWI policy.
• New York workers' compensation insurance must be confirmed for post-closing operations.

Timing and Scheduling Notes

• New York Department of State standard processing: approximately 7-10 business days
• Expedited processing available: $25 (24-hour), $75 (same-day), $150 (2-hour)
• Form AU-196.10 bulk sales notification must be filed at least 10 days before closing; plan accordingly
• Tax Department responds to AU-196.10 within 5 business days
• HSR filing (if applicable): ordinarily 30 days after FTC/DOJ receipt of both required notifications; 15 days for a cash tender offer after receipt of the acquiring person's notification, subject to statutory extensions
• NY WARN Act requires 90 days' advance notice -- longer than federal WARN
• Article 28 DOH healthcare facility approvals can take 3-6+ months; start early

SOURCES AND REFERENCES

• New York Business Corporation Law, Article 9: BCL 901-913
• New York Department of State -- Merger Filing: dos.ny.gov
• Bulk Sales Notification -- Form AU-196.10: tax.ny.gov
• New York Bulk Sales Requirements: tax.ny.gov
• New York Real Estate Transfer Tax (TP-584): tax.ny.gov
• New York Appraisal Rights: BCL 623, BCL 910
• New York WARN Act: N.Y. Lab. Law 860-860-i
• Hart-Scott-Rodino Act, 15 U.S.C. 18a; 2026 thresholds: ftc.gov