Selling a Company in Uruguay: Legal Process, Due Diligence and Taxes
Selling a company is one of the most important decisions in a business owner’s life. In Uruguay, the legal process for selling a company is well structured and offers solid legal tools to protect both seller and buyer. However, carrying it out properly requires planning, professional advice and attention to many legal, tax and financial aspects which, if neglected, can derail the deal or create costly contingencies.
In this guide we explain step by step how the sale of a company in Uruguay works, which instruments are involved, the applicable taxes and how the transaction differs depending on the type of company being sold.
Two Ways to Sell a Company in Uruguay: Assets or Shares
Before discussing the process, it is essential to understand that selling a company in Uruguay can be structured in two different ways, with very different legal and tax implications:
- Sale of shares or quotas: the seller transfers their shares (in an SA or SAS) or quotas (in an SRL) to the buyer. The company as a legal entity continues to exist with all its assets, contracts, debts and obligations. This is the most common method.
- Sale of assets (going concern): the seller transfers the business assets — premises, equipment, clientele, brand, contracts — without transferring the legal entity itself. The buyer acquires the business but not the company. This method is specifically regulated by the law on the transfer of commercial establishments.
The choice between them depends on factors such as each party’s tax situation, any liabilities in the company, the possibility of transferring key contracts and the buyer’s preferences. A legal and tax adviser should analyse each case to recommend the best structure.
Selling an SA in Uruguay: Transfer of Shares
The sale of an SA in Uruguay is usually carried out by transferring the shares representing the company’s capital. Since Uruguayan shares must be registered (following Law No. 18,930 and subsequent reforms), the transaction requires:
- Checking restrictions in the bylaws and any shareholders’ agreements (pre-emption rights, prior approvals, lock-up clauses).
- Signing the share purchase agreement between seller and buyer.
- The notary’s involvement to certify signatures or execute the transaction by deed, as applicable.
- Updating the company’s register of registered shares.
- Updating the ultimate beneficial owner declaration with the Central Bank of Uruguay (BCU).
- Settling the taxes due on the seller’s gain.
The advantage of selling the SA through its shares is that the company remains the same legal entity, with its contracts, licences and RUT intact, making business continuity easier.
Selling an SRL in Uruguay: Assignment of Quotas
The sale of an SRL in Uruguay is carried out by assigning its quotas. Unlike SA shares, SRL quotas have stricter legal and contractual restrictions on transfer to outsiders, which makes the process somewhat more formal:
- Following the pre-emption procedure if the articles provide for it.
- Obtaining the partners’ consent required by Law No. 16,060 or the articles of association.
- Executing the public deed of assignment of quotas before a Uruguayan notary public.
- Amending the articles of association to reflect the new capital structure.
- Legal publications in the Official Gazette and a national newspaper.
- Registering the amendment with the General Registry Office (DGR).
- Updating DGI and other bodies.
As with the SA, the SRL keeps its legal identity after the sale, preserving contracts, licences and the company’s commercial history.
The Legal Process for Selling a Company in Uruguay
Whatever the company type, the legal process for selling a company in Uruguay follows a logical sequence that can be divided into the following stages:
- Decision and preparation: the seller assesses whether to sell, organises the company’s documentation and hires advisers (lawyer, accountant, possibly a broker or financial adviser).
- Valuation: the value of the business is determined using a method suited to the type and size of the company (see the next section).
- Finding a buyer and preliminary negotiation: contacting potential buyers, signing non-disclosure agreements (NDAs) and negotiating the general terms.
- Letter of intent (LOI): a non-binding document (or binding in some terms) reflecting the preliminary agreement on price, structure and conditions.
- Due diligence: legal, accounting and tax review by the buyer (see the specific section).
- Negotiating and signing the final agreement: drafting and signing the purchase agreement with all the agreed representations, warranties and conditions.
- Closing: meeting the conditions precedent, paying the price and effectively transferring the shares or assets.
- Post-closing obligations: updating registers, paying taxes, notifying bodies and meeting obligations assumed in the agreement.
Valuing a Company for Sale in Uruguay
Determining what a company is worth is one of the most complex and debated aspects of any company sale in Uruguay. There is no single method, and the choice depends on the type of business, its size, its sector and the financial information available.
The most commonly used valuation methods in Uruguay are:
- Book value: based on the company’s net worth according to its financial statements. Useful as a reference but often undervalues profitable businesses or those with significant intangible assets.
- Adjusted net asset value: starts from book equity but revalues assets at market prices and considers unrecorded contingent liabilities.
- Discounted cash flow (DCF): projects the company’s future cash flows and discounts them to present value at a rate reflecting the business risk. It is the most technically rigorous method.
- EBITDA or sales multiples: applies a market multiple to the company’s operating result or sales, comparing with similar transactions in the sector.
- Mixed valuation: combines several methods and averages or weights the results to reach a reasonable value range.
In all cases, it is advisable for the valuation to be prepared or validated by an independent accountant or financial adviser, especially when the buyer is an institutional or foreign investor who will demand methodological rigour.
Due Diligence When Selling a Company in Uruguay
Due diligence is the thorough review the buyer (or its advisers) carries out on the target company before signing the final agreement. Its aim is to verify that the company is what the seller says it is: that its assets exist, its contracts are valid, it has no hidden liabilities and it complies with its legal and tax obligations.
A typical due diligence in Uruguay covers:
- Legal due diligence: review of the bylaws, corporate books, key contracts, pending litigation, registry status of assets, licences and permits.
- Accounting and tax due diligence: analysis of financial statements, debts with DGI and BPS, BCU status, tax contingencies and correct settlement of taxes in previous years.
- Employment due diligence: review of payroll, applicable collective agreements, employees’ BPS status, pending severance and contingent employment liabilities.
- Commercial due diligence: analysis of key client and supplier contracts, revenue concentration, dependence on key people and business continuity risks.
Due diligence findings can lead to price adjustments, additional representations and warranties in the agreement, or even a decision not to proceed.
The Company Purchase Agreement in Uruguay
The company purchase agreement is the legal instrument that formalises the transaction and sets out the parties’ rights and obligations. Depending on whether shares, quotas or assets are sold, it takes different forms, but in all cases it should cover:
- Identification of the parties and the target company.
- A precise description of what is being sold: shares, quotas or assets, with details of quantity and characteristics.
- Price and payment terms: amount, currency, timing, method of payment and guarantees.
- The seller’s representations and warranties on the state of the company, its assets, liabilities, contracts and tax position.
- Conditions precedent to closing: regulatory approvals, release of encumbrances, etc.
- A post-closing price adjustment mechanism if applicable.
- Indemnification for breach of representations and warranties.
- Post-sale non-compete and confidentiality clauses.
- Governing law and jurisdiction for disputes.
The Notary’s Role in Selling a Company in Uruguay
The notary’s role in selling a company in Uruguay varies with the structure of the transaction. In the sale of SRL quotas, their involvement is mandatory because a public deed is required. In the sale of SA shares, they may certify signatures or execute the transaction by deed, as the parties agree.
Beyond the formalities, the notary adds value by checking the registry status of assets, reviewing the corporate documentation and properly documenting the transfer. In complex or high-value transactions, the notary usually works together with both parties’ lawyers.
Taxes on the Sale of a Company in Uruguay
The taxes on the sale of a company in Uruguay depend on the structure of the transaction and the seller’s tax status:
- IRPF (12%): if the seller is an individual who is a Uruguayan tax resident, the capital gain on the sale of shares or quotas is taxed as a capital gain (with the option, in certain cases, of a deemed gain equal to 20% of the price, i.e. an effective 2.4%).
- IRNR (12%): if the seller is a non-resident, the Uruguayan-source gain is subject to IRNR, with similar calculation options; the resident buyer may have to withhold it.
- IRAE (25%): if the seller is a company paying IRAE, the gain is added to its taxable income.
- ITP: may apply to the transfer of certain real estate assets included in the transaction and should be analysed case by case.
- VAT: generally does not apply to the sale of shares or quotas, but may apply to the sale of assets as a going concern.
Prior tax planning is, in many cases, the factor with the greatest impact on the seller’s net result. Structuring the sale properly can make a significant difference to the final tax burden.
Selling a Company in Uruguay to a Foreign Buyer
Selling a company in Uruguay to a foreign buyer is perfectly legal and, in most sectors, requires no special state authorisation. Uruguay imposes no general restrictions on foreign investment in local companies, which makes it especially attractive for regional acquisitions.
However, the transaction has some additional particularities:
- The foreign buyer must fully identify themselves to the notary and meet the due diligence (AML/KYC) requirements of Uruguayan rules.
- If the buyer has no RUT in Uruguay and needs one, it must be obtained as a non-resident individual or legal entity before or at closing.
- The beneficial owner declaration with the BCU must be updated to reflect the new ownership structure with the foreign buyer’s details.
- IRNR on the seller’s gain, where applicable, must be withheld by the resident buyer or paid directly, depending on the structure.
- In regulated sectors (financial, health, media, public concessions), prior authorisation from the competent regulator may be required.
Advisers experienced in international transactions are key to structuring the closing correctly and meeting all regulatory obligations in both jurisdictions.
Conclusion
The sale of a company in Uruguay can be carried out quickly and safely when it is properly planned and the right professional team is involved. From the initial valuation to the final closing, each stage — due diligence, the agreement, the notary’s involvement and the payment of taxes — has its importance and logical sequence.
Whether it is the sale of an SA through its shares, an SRL through its quotas or a going concern, Uruguay offers a predictable legal framework and solid legal tools to protect all parties. At sociedadesanonimas.uy we support company sales from start to finish, coordinating the legal, notarial and tax aspects so the transaction reaches a successful conclusion.
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