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Peru: A merger’s effective date

Maria Pía Talavera Barclay

A merger is a corporate reorganisation that involves the combining of different companies into a single company in order to enhance the financial and operational strengths of the corresponding organisations. Peruvian law provides that by virtue of a merger, one or more companies transfer in a single act all of their assets (property, rights, obligations and/or liabilities) in favour of a new or existing company, which absorbs them in their entirety, causing in turn the dissolution of the companies transferring their assets. Due to the relevance of the legal implications of a merger (among other things, the transfer of all of the assets of a company), it is pivotal to have certainty on the effective date of such corporate reorganisation. Unfortunately, Peruvian corporate laws are not clear in this respect.

Certainly, article 353 of the Peruvian General Corporations Act (Ley General de Sociedades, or LGS) provides that "Notwithstanding the immediate effectiveness of the merger [on the date agreed by the parties], the merger is subject to its registration with the Public Registries". Considering this regulation then, what would be the effect of not registering a merger? Would a merger be in force – in other words, would all the assets of the corresponding company(ies) be transferred – while that corporate structuring is unrecorded at the Public Registries if the parties had agreed a prior effective date for the merger? This question becomes even more relevant since registration of a merger with the Peruvian Public Registries potentially could be delayed for months or years because of exogenous factors (for instance, for not being able to record a previous spin-off of one of the companies involved in the merger).

On the one hand, it could be argued that registration is a condition precedent for the effectiveness of a merger, and therefore a merger's effective date (that is, among other things, the transfer of all assets and the cessation of the operations of the companies transferring their assets) can only occur once the merger is recorded with the Public Registries. In this connection, registration could also be considered a key formality established by law for every merger process. However, these interpretations do not take into account that article 353 of the LGS expressly empowers the parties involved in a merger to freely decide the moment of its effectiveness (even emphasising that registration shall occur without prejudice to the merger´s immediate effective date). Therefore, following legal interpretation rules under Peruvian law, opinions which support delaying the effectiveness of a merger until its registration should not prevail.

Considering the above, perhaps a reasonable interpretation of article 353 could be that mergers are effective on the date agreed by the parties involved, but will cease to be in force if and when registration is not accomplished. Since the LGS does not provide a specific term for complying with this registration requirement, it could be argued that a merger shall cease to have effect when such recording becomes impossible to accomplish, a situation that has to be analysed on a case-by-case basis. For instance, a final decision issued by a judicial authority denying registration of a merger could reasonably result in the impossibility to obtain such recording. Under this proposed interpretation, from a legal standpoint, failure to register a merger would be considered a negative condition subsequent.

Considering the different possible interpretations with respect to the effective date of a merger, and in the interests of legal certainty, clarification of article 353 of the LGS is encouraged. For this purpose, regulations regarding the effectiveness of a merger from a corporate standpoint should be consistent with the provisions regarding that effectiveness from a tax perspective. This presently is not the case, given that for tax purposes – in general terms – a merger could be deemed in force either on the date agreed by the parties, or as from the date of the public merger deed, depending on when the Peruvian tax administration is informed of the reorganisation.

Maria Pía Talavera Barclay

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