A firm or trading company is a legal entity whose objective is to hold commercial activities.
From the moment of its creation it may experience diverse changes due to any economic or
legal processes that incentive the merger or division of the company.
> You may be interested in reading our entry: What you need to know to be an
entrepreneur in Mexico.
Merger:
Mergers allow firms to enhance their productive efficiency by reducing certain costs. It refers
to the acquisition of a company by another.
Types of mergers:
● Absorption: There should be at least two companies for one to acquire the other.
The acquiring company appropriates the assets, associates, and the totality of the
rights and obligations of the entity absorbed.
● Creation: Two or more companies are dissolved to form a new one. The new one is
formed by everyone while the original owners become shareholders of the new
company, thus assuming new rights and obligations.
Divisions:
Divisions represent an undissolved company that yet transfers one or various parts of its
assets to one or more existing companies or for their creation.
Types of divisions:
● Partial division: One or more parts of the company’s assets and liabilities are
segregated and transferred to new or already existing entities, but conserves a part
for itself.
● Complete division: The company transfers the totality of its assets and liabilities in
two or more parts. For instance, one of the parts may be destined to be absorbed,
whereas the other may support the creation of a new company.
Liquidations:
By the end of a company’s activities, liquidation should be used to pay the totality of the
liabilities and distribute the remaining parts among its partners in accordance to the
contributions each of them made.
Bankruptcy is a prominent reason to liquidate a company, but some other reasons include:
● Expiration of the terms established in the social contract.
● Reduction of shareholders to the minimum allowed by the law.
● Loss of two-thirds of the share capital.
It is paramount that all partners are present and the liquidator files a declaration of solvency.
At QuAdrans Law and Finance we offer the fiscal service to provide you with fiscal advice
to carry out the merger, division, or liquidation of your firm. Whether it is national or foreign,
we will help you through the complete process.
