Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other business organizations, or their operating units are transferred or consolidated with other entities. Acquisition is the purchase of one business or company by another company or other business entities and the acquiring company becomes the new owner of the target company. In fact, the acquired company no longer exists, the acquiring company will take over all the acquired company’s business. In essence, the buyer’s motivation in most cases of acquisitions is to increase profits, expand business operations, and increase revenue. In legal procedures, mergers and acquisitions is actually the procedure to transfer of shares of the old shareholders in a joint-stock company or buy the contributed capital of the old owner in the limited company to conduct business activities in a new direction.
Step 1: Review and evaluate the target company
This stage is very important for the buyer.
The tasks to review and evaluate the acquired business include: financial statements, receivable and payable accounts, staff, customers, business locations, facility status, competitors, business registrations, licenses and division of business sectors, corporate images …
The due diligence process is usually conducted in three main categories: (1) legal status, (2) financial situation and (3) business performance, business strategy.
Stage 2: Valuation and price negotiation
After researching and deciding to buy a business, the next step will be the valuation of the target company.
- Select the method of conducting the mergers and acquisitions;
- Determine the financial source for the business sale;
- Determine business value, negotiate prices;
- Conduct specific negotiations for each term of the sale and purchase contract of the enterprise.
Step 3: Completing the business purchase and sale
- Complete the transfer of business ownership ;
- Solve outstanding issues after buying a business such as labor, finance, legal, governance …
For each type of business, buying and selling businesses will have different requirements for documents and procedures:
The procedure for M&A with a private enterprise
Under Vietnamese law, only a private enterprise is allowed to sell entirely because a private enterprise is an enterprise owned by only one individual and is solely responsible with all of his / her assets for all business activities. Therefore, according to the provisions of Law on Enterprise, the owner of a private enterprise has the right to sell his entire business to others.
A dossier for acquiring a private enterprise
- Notice of change ownership of a private business signed by seller and buyer;
- A valid copy of one of the buyer’s identity papers;
- Enterprise sale contract and documents proving completion of the transferring of private enterprise;
- A valid copy of ID card, passport or other personal identification of the private enterprise owner;
- The written certification of the legal capital of the competent agency or organization, for the enterprise conducting the business lines for which legal capital is required by law;
- Valid copies of practice certificates of one or several individuals as prescribed for private enterprises conducting business lines for which practice certificates are required by law.
A process of acquiring a private enterprise
Proceed to acquire an enterprise with a buyer
- Drafting a purchase and sale of business agreement;
- Define buyer of an enterprise must be the person who has the right to establish, contribute capital to the establishment, purchase shares and manage an enterprise in accordance with the Law on Enterprises and is not in the case of not having the right to establish and manage an enterprise at Vietnam in accordance with this law;
- Documents proving the purchase and sale of a private enterprise has been completed (receipt of purchase and sale of a private enterprise, a minutes of liquidation of the sale and purchase of a private enterprise contract, and register enterprise for the buyer).
Register a new business for buyers
- Within 15 days from the date of transferring the enterprise to the buyer, the business owner must notify the business registration office in writing;
- Content of notice of change ownership of a private enterprise: Name and head office of the enterprise; name and address of the buyer; total outstanding debt of the enterprise; name, address, amount of the debt and due date of payment for each creditor; Labor contracts and other contracts signed that have not been completed yet and the way contracts will be resolved.
A process of acquiring a joint-stock company
The acquisition of a joint stock company is performed by transferring the company’s shares.
- Relating parties sign and perform share purchase agreement;
- Proceed to make a record to confirm the completion of the share transfer procedure;
- Organize the General Meeting of Shareholders to approve the share transfer;
- Modify, supplement information in the Register of Shareholders of the company;
- Proceed to register to change shareholders according to regulations;
- Declare and pay personal income tax for stock transfer procedures.
A process of acquiring a limited liability company
The acquisition of a limited liability company is conducted through the transfer of capital contributions in the company.
- Such capital must be offered to the remaining members in proportion to their stake in the company under the same terms;
- Only transfer to non-members if the remaining members of the company do not purchase or do not fully purchase within 30 days from the date of offering.
- If a list of members is changed due to capital transfer within 10 days from the date of the decision to change, the Company sends a notice to the business registration office where the company has registered its business.
- Pay and declare capital transfer income tax for capital transfer activities.
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