What is an International merger of companies?

A process of international merger of companies implies the extinction or dissolution of one or more legal entities incorporated in several jurisdictions (different among themselves), for their consolidation into one of the preexisting companies (merger by absorption or merger by incorporation). In addition to the effect of extinction or dissolution of the absorbed company as mentioned above, the international merger by absorption also causes the transfer in block of the assets of the absorbed company to the absorbing one, increasing the capital stock of the latter in the applicable portions. The shareholders of the absorbed company (the extinguished one) will become shareholders of the absorbing company, receiving (in exchange) a number of shares proportional to their corresponding interest in the capital stock of the absorbed company.

Given the above, the international merger by absorption process has the following most outstanding characteristics:

  1. The universal transfer of assets, of one or more companies located in different jurisdictions (denominated absorbed or incorporated companies) to another preexisting one (denominated absorbing company).
  2. The existence of multiple jurisdictions.
  3. The extinction or dissolution of the absorbed companies, which subsist in the equity of the absorbing company.
  4. The proportional increase of the capital stock of the absorbing company.
  5. The absorbed company’s shareholders acquire the condition of absorbing company’s shareholders, through the exchange of shares of the absorbed company for the shares of the absorbing company, which will be issued by the latter as a result of the capital stock increase resulting from the equity increase.


Image: Nicholas Swanson – Unsplash

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