In a merger where one bank absorbs the other bank's net assets, what is the effect on the absorbed bank's corporate existence?

In a merger where one bank absorbs the other bank's net assets, what is the effect on the absorbed bank's corporate existence?

• A. It ceases to exist
• B. It remains as a separate entity
• C. It becomes a subsidiary
• D. It continues as before

Answer: (A)

In an absorption merger, the surviving bank takes over the other bank's net assets, liabilities, and contracts, and the absorbed bank loses its separate legal existence. The key point is that the merger is a unification where one entity continues to exist in its legal form while the other is dissolved. All of the absorbed bank’s assets and liabilities become part of the surviving bank, and its charter is canceled, so there is no independent legal entity left for the absorbed bank. The name or brand of the absorbed bank might continue in some form as part of the surviving institution, but the legal entity itself ceases to exist.

In an absorption merger, the surviving bank takes over the other bank's net assets, liabilities, and contracts, and the absorbed bank loses its separate legal existence. The key point is that the merger is a unification where one entity continues to exist in its legal form while the other is dissolved. All of the absorbed bank’s assets and liabilities become part of the surviving bank, and its charter is canceled, so there is no independent legal entity left for the absorbed bank. The name or brand of the absorbed bank might continue in some form as part of the surviving institution, but the legal entity itself ceases to exist.