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Merger and Consolidation

§ 6.14
Key point 6-14. Two or more religious congregations can merge or consolidate. In a merger, one corporation absorbs the other and remains in existence while the other is dissolved, whereas in a consolidation a new corporation is created and the consolidating corporations are extinguished. The procedure for merging and consolidating incorporated churches is specified by state nonprofit corporation law.

Although the terms merger and consolidation frequently are used interchangeably, they have separate legal meanings. In a merger, one corporation absorbs the other and remains in existence while the other is dissolved, whereas in a consolidation a new corporation is created and the consolidating corporations are extinguished.

One court has observed that a church's decision to either merge or consolidate is a religious question that should be of concern to no one other than the congregations involved, that the choice is one to be made by the respective members in the exercise of their religious beliefs, and that their freedom to make this choice is guaranteed by the First Amendment against federal or state interference.[438] Mount Zion Baptist Church v. Second Baptist Church, 432 P.2d 328 (Nev. 1967).

Although the state may not interfere with a church's decision to merge or consolidate, a church must follow those procedures in its own governing documents or in applicable state nonprofit corporation law for a valid merger or consolidation to occur. State nonprofit corporation laws governing mergers and consolidations often are separate and distinct. As a result, a church seeking to merge with another church may not employ a state law governing consolidations, and two churches desiring to consolidate may not use a state law governing mergers. State nonprofit corporation law may contain a single procedure governing both mergers and consolidations, but this must not be assumed. The Model Nonprofit Corporation Act contains separate procedures, and this is the practice in most states.

Unincorporated congregational churches generally are not restricted by state corporation law, and may merge or consolidate whenever the respective congregations of the merging or consolidating churches so desire, provided that applicable provisions in each church's bylaws are followed. However, an unincorporated church and an incorporated church will not be permitted to merge under a state nonprofit law requiring that both of the merging churches be incorporated.[439] Trinity Pentecostal Church v. Terry, 660 S.W.2d 449 (Mo. App. 1983).

Incorporated churches, like any other form of corporation, derive their corporate existence and powers from the state. It follows that an incorporated church has the power to merge or consolidate only if such power is expressly delegated by state corporation law. Most religious and nonprofit corporation laws grant churches the power to merge or consolidate. Such laws typically prescribe the following procedure:

  1. Board resolutions. The board of directors of each church desiring to merge or consolidate adopts a resolution approving of the proposed plan and submits it to a vote of members having voting rights at a general or special meeting.
  2. Notice. Written notice of the proposed plan is given to each member eligible to vote.
  3. Approval. The proposed plan is adopted if at least two-thirds of the votes cast approve of the plan.
  4. Articles of merger or consolidation. Upon approval of the plan by the voting members, each corporation executes either articles of merger or articles of consolidation on a form prescribed by the secretary of state. This document sets forth the plan of merger or consolidation, the date of the meeting at which the plan was approved, and a statement that a quorum was present and that the plan received at least two-thirds voter approval. The articles of merger or articles of consolidation are filed with the secretary of state.[440] MODEL NONPROFIT CORPORATION ACT §§ 38-43.

Church charters or bylaws may impose further requirements that must be followed.[441] In re Estate of Trimmer, 330 N.E.2d 241 (Ill. 1975); In re First Methodist Church, 306 N.Y.S.2d 969 (1970). And, if a proposed merger or consolidation would alter the doctrines of a church, it is essential to the validity of such a merger or consolidation that the church congregation possess the authority to change its doctrine and that the required number of members assent to the change.[442] See generally FLETCHER CYC. CORP. ch. 61 (perm. ed. 2008). Church corporations affiliated with religious hierarchies must of course comply with applicable procedures in the constitution or bylaws of the parent ecclesiastical body.

The legal effect of a merger or consolidation generally is determined by state corporation law and the terms of the merger or consolidation agreement. State corporation law typically stipulates that all the properties of a church corporation that merges with another congregation belong to the surviving corporation. Similarly, the properties of two consolidating churches belong to the new corporation resulting from the consolidation. The surviving corporation in the case of a merger or the new corporation in the case of a consolidation is responsible for all the liabilities and obligations of each of the corporations so merged or consolidated. Thus, neither the rights of creditors nor any liens upon the property of such corporations is affected by a merger or consolidation.

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