diff --git a/app/models/validations/setup_validations.rb b/app/models/validations/setup_validations.rb
index c9515b0fa..78ece1d82 100644
--- a/app/models/validations/setup_validations.rb
+++ b/app/models/validations/setup_validations.rb
@@ -48,6 +48,32 @@ module Validations::SetupValidations
       record.errors.add :owning_organisation_id, I18n.t("validations.setup.owning_organisation.invalid")
       record.errors.add :managing_organisation_id, I18n.t("validations.setup.managing_organisation.invalid")
     end
+
+    if owning_organisation.present?
+      if owning_organisation&.merge_date.present? && owning_organisation.merge_date < record.startdate
+        record.errors.add :owning_organisation_id, I18n.t("validations.setup.owning_organisation.inactive_merged_organisation",
+                                                          owning_organisation: record.owning_organisation.name,
+                                                          owning_organisation_merge_date: record.owning_organisation.merge_date.to_formatted_s(:govuk_date),
+                                                          owning_absorbing_organisation: record.owning_organisation.absorbing_organisation.name)
+      elsif owning_organisation&.absorbed_organisations.present? && owning_organisation.created_at > record.startdate
+        record.errors.add :owning_organisation_id, I18n.t("validations.setup.owning_organisation.inactive_absorbing_organisation",
+                                                          owning_organisation: record.owning_organisation.name,
+                                                          owning_organisation_available_from: record.owning_organisation.created_at.to_formatted_s(:govuk_date))
+      end
+    end
+
+    if managing_organisation.present?
+      if managing_organisation&.merge_date.present? && managing_organisation.merge_date < record.startdate
+        record.errors.add :managing_organisation_id, I18n.t("validations.setup.managing_organisation.inactive_merged_organisation",
+                                                            managing_organisation: record.managing_organisation.name,
+                                                            managing_organisation_merge_date: record.managing_organisation.merge_date.to_formatted_s(:govuk_date),
+                                                            managing_absorbing_organisation: record.managing_organisation.absorbing_organisation.name)
+      elsif managing_organisation&.absorbed_organisations.present? && managing_organisation.created_at > record.startdate
+        record.errors.add :managing_organisation_id, I18n.t("validations.setup.managing_organisation.inactive_absorbing_organisation",
+                                                            managing_organisation: record.managing_organisation.name,
+                                                            managing_organisation_available_from: record.managing_organisation.created_at.to_formatted_s(:govuk_date))
+      end
+    end
   end
 
   def validate_managing_organisation_data_sharing_agremeent_signed(record)
diff --git a/config/locales/en.yml b/config/locales/en.yml
index 113f56c41..56ed869c1 100644
--- a/config/locales/en.yml
+++ b/config/locales/en.yml
@@ -284,9 +284,13 @@ en:
       owning_organisation:
         invalid: "Please select the owning organisation or managing organisation that you belong to"
         data_sharing_agreement_not_signed: "The organisation must accept the Data Sharing Agreement before it can be selected as the owning organisation."
+        inactive_merged_organisation: "The owning organisation must be active on the tenancy start date. %{owning_organisation} became inactive on %{owning_organisation_merge_date} and was replaced by %{owning_absorbing_organisation}."
+        inactive_absorbing_organisation: "The owning organisation must be active on the tenancy start date. %{owning_organisation} became active on %{owning_organisation_available_from}."
       managing_organisation:
         invalid: "Please select the owning organisation or managing organisation that you belong to"
         data_sharing_agreement_not_signed: "The organisation must accept the Data Sharing Agreement before it can be selected as the managing organisation."
+        inactive_merged_organisation: "The managing organisation must be active on the tenancy start date. %{managing_organisation} became inactive on %{managing_organisation_merge_date} and was replaced by %{managing_absorbing_organisation}."
+        inactive_absorbing_organisation: "The managing organisation must be active on the tenancy start date. %{managing_organisation} became active on %{managing_organisation_available_from}."
       created_by:
         invalid: "Please select the owning organisation or managing organisation that you belong to"
       lettype:
diff --git a/spec/models/validations/setup_validations_spec.rb b/spec/models/validations/setup_validations_spec.rb
index b2ef0f809..8b29e72ff 100644
--- a/spec/models/validations/setup_validations_spec.rb
+++ b/spec/models/validations/setup_validations_spec.rb
@@ -701,6 +701,82 @@ RSpec.describe Validations::SetupValidations do
       expect(record.errors["owning_organisation_id"]).to be_empty
       expect(record.errors["managing_organisation_id"]).to be_empty
     end
+
+    context "when organisations are merged" do
+      let(:absorbing_organisation) { create(:organisation, created_at: Time.zone.local(2023, 2, 1), name: "Absorbing org") }
+      let(:merged_organisation) { create(:organisation, name: "Merged org") }
+
+      around do |example|
+        Timecop.freeze(Time.zone.local(2023, 5, 1))
+        merged_organisation.update!(merge_date: Time.zone.local(2023, 2, 2), absorbing_organisation:)
+        example.run
+        Timecop.return
+      end
+
+      context "and owning organisation is no longer active" do
+        it "does not allow organisation that has been merged" do
+          record.startdate = Time.zone.local(2023, 3, 1)
+          record.owning_organisation_id = merged_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["owning_organisation_id"]).to include(match "The owning organisation must be active on the tenancy start date. Merged org became inactive on 2 February 2023 and was replaced by Absorbing org.")
+        end
+
+        it "allows organisation before it has been merged" do
+          record.startdate = Time.zone.local(2023, 1, 1)
+          record.owning_organisation_id = merged_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["owning_organisation_id"]).to be_empty
+        end
+      end
+
+      context "and owning organisation is not yet active during the startdate" do
+        it "does not allow absorbing organisation before it had been created" do
+          record.startdate = Time.zone.local(2023, 1, 1)
+          record.owning_organisation_id = absorbing_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["owning_organisation_id"]).to include(match "The owning organisation must be active on the tenancy start date. Absorbing org became active on 1 February 2023.")
+        end
+
+        it "allows absorbing organisation after it has been created" do
+          record.startdate = Time.zone.local(2023, 2, 2)
+          record.owning_organisation_id = absorbing_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["owning_organisation_id"]).to be_empty
+        end
+      end
+
+      context "when managing organisation is no longer active" do
+        it "does not allow organisation that has been merged" do
+          record.startdate = Time.zone.local(2023, 3, 1)
+          record.managing_organisation_id = merged_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["managing_organisation_id"]).to include(match "The managing organisation must be active on the tenancy start date. Merged org became inactive on 2 February 2023 and was replaced by Absorbing org.")
+        end
+
+        it "allows organisation before it has been merged" do
+          record.startdate = Time.zone.local(2023, 1, 1)
+          record.managing_organisation_id = merged_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["managing_organisation_id"]).to be_empty
+        end
+      end
+
+      context "when managing organisation is not yet active during the startdate" do
+        it "does not allow absorbing organisation before it had been created" do
+          record.startdate = Time.zone.local(2023, 1, 1)
+          record.managing_organisation_id = absorbing_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["managing_organisation_id"]).to include(match "The managing organisation must be active on the tenancy start date. Absorbing org became active on 1 February 2023.")
+        end
+
+        it "allows absorbing organisation after it has been created" do
+          record.startdate = Time.zone.local(2023, 2, 2)
+          record.managing_organisation_id = absorbing_organisation.id
+          setup_validator.validate_organisation(record)
+          expect(record.errors["managing_organisation_id"]).to be_empty
+        end
+      end
+    end
   end
 
   describe "#validate_scheme_has_confirmed_locations_validation" do