I. Mergers and Spin-Offs under Law 479-08 The General Law on Business Companies and Individual Limited Liability Enterprises, Law 479-08, as amended by Law 31-11, provides that one or more business entities may, by way of merger, transfer their assets and liabilities to an existing entity or to a newly incorporated entity. Business entities may also, by way of spin-off, transfer their assets to one or several existing companies or to one or several newly formed companies. Mergers and spin-offs may be carried out among business entities of different corporate forms. Each participating entity decides under the conditions set out in its bylaws and the mandatory provisions of the law, which include a merger plan, financial statements, and approval by the qualified majorities required for bylaw amendments, followed by registration in the Mercantile Registry and updates before the DGII.
Services - Mergers & Acquisitions
II. Regulatory and Tax Considerations There is no general ex-ante merger control regime in the Dominican Republic (see Competition Law). However, transactions involving regulated entities require sector approvals: mergers of financial intermediation entities must be authorized by the Monetary Board (Law 183-02); insurance and reinsurance companies require approval from the Superintendence of Insurance; and transactions involving telecom concessionaires or securities market participants require authorization from INDOTEL and the securities regulator, respectively. For tax purposes, qualifying corporate reorganizations, mergers, spin-offs, and certain transfers between related entities, may obtain tax-neutral treatment, with carryover of tax attributes, subject to prior approval by the DGII (Art. 323, Law 11-92). Share and asset deals that do not qualify are taxed under the general capital gains rules (see Tax Law, section II). In practice, most private M&A in the DR is executed as a quota or share purchase rather than a statutory merger; buyers should budget time for the DGII reorganization ruling whenever tax neutrality is part of the deal model.
This publication is provided for informational purposes only and not as legal advice. Any transaction related to any of the described aspects shall require advice and be specifically consulted with the Firm in advance. © Arthur & Castillo. All Rights Reserved. Next