Author

Diego Quirós
Associate
Costa Rica
E-mail

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 active agreements to identify:

    • Restrictive clauses that may require prior consent from contractual counterparties.
    • Provisions requiring notices derived from the merger.

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

  2. Execution of Relevant Documents and Publication of Notice

    The merger process begins with a merger agreement, which must be ratified through shareholders’ meetings.

    The surviving entity’s minutes must include bylaw amendments and capital increases, unless entities are wholly owned.

    If a new entity is created, its bylaws must be approved.

    Once notarized, a notice must be published in La Gaceta. Third parties may oppose within one month.

  3. Accounting and Employer Effectiveness

    The merger becomes effective upon registration. An accounting effectiveness date may be set prior to registration to align payroll and accounting processes.

    This date has no tax effects.

  4. Registration and Update of Corporate Records

    The merger deed must be filed for registration after the opposition period.

    After registration:

    • Close corporate books of absorbed entities.
    • Open new books or update shareholder registry.
    • Issue updated share certificates.
  5. Transparency and Ultimate Beneficial Ownership Registry

    After registration:

    • New entity: file within 20 business days.
    • Absorption: file within 15 business days if capital increases.
  6. Tax Deregistration of Absorbed Entities

    Absorbed entities must deregister within one month via TRIBU-CR after filing all pending returns.

  7. Employer Substitution

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

    Employees must be transferred and informed.

  8. Update of Permits and Public Services

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

    Ownership must be updated after the merger. Transfer taxes apply.

  10. Update of Bank Accounts and Insurance Policies

    Coordinate with financial institutions to transfer or close accounts and policies.

The proper execution of a merger process requires comprehensive planning across legal, operational, tax, labor, and registration aspects. Proper coordination minimizes risks and ensures an efficient transition. Specialized legal advice is essential.

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