Which of the following describes a consolidation in corporate changes?

A consolidation occurs when two or more corporations merge to form a completely new entity. In this context, choice B correctly captures the essence of consolidation by stating that A and B become C. This means both original companies—A and B—cease to exist in their prior forms and instead create a new corporation, C. The fundamental characteristic of consolidation is that the existing companies do not continue as separate entities; rather, they come together to form a new legal identity, which is recognized formally by law.

In a consolidation, the assets and liabilities of both original entities are combined to support the new entity, and the shareholders of both companies typically exchange their shares for shares in the new company. This process emphasizes the total integration of the two entities, which distinguishes it from other forms of corporate transactions such as an acquisition where one company absorbs another without creating a new entity.

Understanding this distinction is critical in recognizing how business structures evolve and transform through legal mechanisms like consolidation.