Costa Rica: Practical Guide to Merger Processes of Operating Companies

The merger of companies constitutes a legal mechanism through which two or more entities are integrated into a single entity, either by absorption (where one entity absorbs the others) or through the creation of a new company. Both modalities entail the dissolution of the legal personality of the absorbed entities, as well as the transfer of their assets, liabilities, rights, and obligations to the surviving entity.

In the case of economically active entities, the merger process involves compliance with several milestones from a corporate, tax, operational, regulatory, labor, and asset registration standpoint. The following outlines the key milestones and practical considerations to ensure an orderly transition, in full compliance with Costa Rican regulations.

  1. Prior Review of Active Agreements and Permits

    Before formalizing any step of the merger, it is essential to conduct a thorough review of the active agreements of the involved entities to identify:

    • Restrictive or limiting clauses regarding a potential merger, which may require prior consent from contractual counterparties.
    • Provisions requiring contractual notices derived from the merger, whether prior to or following its execution.

    For regulated entities, an additional review is recommended to ensure compliance with all applicable regulatory requirements.

  2. Execution of Relevant Documents and Publication of Notice

    The formal merger process begins with the execution of a merger agreement, which must be ratified through shareholders’ meetings of the entities involved.

    The minutes of the surviving entity must include amendments to the bylaws, including a capital increase resulting from the aggregation of share capital. If the absorbed entities are wholly owned, a capital increase may not be required but must be expressly stated.

    If a new entity is created, the approval meetings must include its bylaws.

    Once notarized, a merger notice must be published in La Gaceta. Third parties may oppose the merger within one month, which may suspend the process until resolved.

  3. Accounting and Employer Effectiveness

    The merger becomes effective vis-à-vis third parties upon registration. Documents may establish an accounting effectiveness date prior—but close—to registration.

    This accounting date has no tax effects. For example, it may be set at the beginning of the month to align payroll and accounting processes.

  4. Registration and Update of Corporate Records

    The merger deed must be filed for registration. The National Registry will complete registration only after the one-month opposition period has elapsed.

    After registration:

    • Corporate books of absorbed entities are closed.
    • Corporate books of the new entity are opened, if applicable.
    • Shareholder registry is updated to reflect the new ownership structure.
    • New share certificates are issued.
  5. Transparency and Ultimate Beneficial Ownership Registry

    After registration, the resulting entity must file before the Transparency and Ultimate Beneficial Ownership Registry:

    • New entity: ordinary filing within 20 business days.
    • Merger by absorption: extraordinary filing within 15 business days if capital increases.
  6. Tax Deregistration of Absorbed Entities

    Absorbed entities must process tax deregistration within one month through the TRIBU-CR system, after filing all pending tax returns.

    After this period, the Tax Administration will automatically update their status to “Deregistered ex officio due to merger.”

  7. Employer Substitution

    If employees exist, employer substitution applies under Article 37 of the Labor Code.

    The surviving entity assumes all labor obligations, including maintaining employment conditions and seniority.

    Employees must be transferred to the new payroll and informed accordingly.

  8. Update of Permits and Public Services

    The surviving entity must update permits and utilities:

    • If operations cease: cancel permits and terminate services.
    • If operations continue: update ownership to the surviving entity.
  9. Update of Registered Assets Ownership

    Ownership of registered assets must be updated after the merger, as this is not automatic.

    Transfer taxes and registration costs apply.

  10. Update of Bank Accounts and Insurance Policies

    The surviving entity must coordinate with financial institutions and insurers to transfer or close accounts and policies, complying with applicable requirements.

The proper execution of a merger process requires comprehensive planning that considers legal, operational, tax, labor, and registration impacts at each stage. Adequate coordination and compliance ensure an efficient transition and minimize risks. Specialized legal advice is essential throughout the process.

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