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[Glossary] Triangular Merger

M&A Tax

A triangular merger refers to a merger where the surviving corporation uses shares of its parent corporation, instead of its own shares, as the consideration for the merger.

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Triangular Merger

A triangular merger refers to a merger where the surviving corporation uses shares of its parent corporation, instead of its own shares, as the consideration for the merger.

Under the old Commercial Code, it was not allowed to use shares of its parent corporation as the consideration for the merger. Since the new Companies Act relaxed relevant regulation with effect from May 1, 2007, it is now permitted to use shares of its (domestic or foreign) parent corporation as the merger consideration.

Prior to the 2007 tax reform, any asset other than shares of the surviving corporation was not allowed as the consideration for a tax qualified merger. This requirement was revised by the 2007 tax reform to treat certain parent corporation shares as tax qualified consideration, provided that no other asset is used as the merger consideration. Other requirements for a tax qualified merger basically remain the same.

Parent corporation shares in the above are defined as shares of a corporation that directly owned, prior to the merger and is expected to own continuously after the merger, 100% of issued and outstanding shares of the surviving corporation (excluding treasury shares).

(As of February 2015)

This article is general in nature and is not intended to provide any tax advice on specific transactions. This article may not be relied upon by anyone and we accept no liability to anyone who took actions based on this article.

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