Merger Procedure in Vietnam

A merger is a corporate strategy of combining different companies (merged companies)  into a single company (merging company) in order to enhance the financial and operational strengths of both organizations, which terminates the existence of the merged companies . In Vietnam, the procedure of merger is a lot involved in Administrative formalities and this procedure is governed by The Law on Enterprise 2014.

The conditions for merger:

Arcording to The Law on Enterprise 2005, only same type companies can merge. However, when The Law on Enterprise 2014 becomes effective and replaces the former, merger is no longer restricted in same type companies.

In the case of a merger that the merging company holds a market share of between 30% and 50% in the relevant market, the legal representative of the company shall inform the competition authority before the merger.

It is prohibited when the merging company holds more than 50% market share in the relevant market, except the circumstances provided in Article 19 of the 2004 Competition Law: one or more enterprises is in danger of being dissolved or falling into bankruptcy; The merger has the effect of expanding exports or contributing to social economic development, technological advancement.

The procedures of merger:

• Related companies prepare the merger contract and the draft charter of the merging company. The merger contract must have the following contents:
  • Name and address of the head office of the merging company; Name and address of the head office of the merged company
  • Procedures and conditions for the merger
  • Employer plan
  • Method, procedure, time and conditions for conversion of assets, conversion of shareholding, shares, bonds of the merged company into the capital contributions, shares and bonds of the merging company
  • The time limit for the implementation of the merger
• The members, owners or shareholders of related companies shall approve the merger contract and the charter of the merging company. The merger contract must be sent to all creditors and notified to the employee within 15 days from the date of approval.
• The merged companies carry out the formality to close their Tax Registration Numbers at tax offices.The documents needed:
  • The Report about the meeting and decision of the merged company’s owner / member’s council / general meeting of shareholders about merger, the merger contract and the charter of the merging company;
  • The official dispatch asking for certifying the fulfillment of taxes obligations and closing Tax Registration Numbers.
  • Enterprise merger contract (copy with the seal of the enterprise).
• Carrying out the formality to apply for The Business registration certificate of the merging company. The documents should be prepared for the registration depending on whether the merging company changes the contents in its business registration.
  • If the merging company does not change the contents of the business registration:
    • Notification of supplementation, updating of enterprise registration information;
    • Enterprise merger contract;
    • Resolution and report of the meeting passing the merger contract of the merging company;
    • The resolution and report of the meeting passing the merger contract  of the merged companies, except for the case that the merging company is a member holding more than 65% of the charter capital of the merged company;
    • A valid copy of the enterprise registration certificate or other equivalent papers of the merged companies.
  • If the merging company changes the contents of the business registration:
    • Enterprise merger contract;
    • Resolution and report of the meeting passing the merger contract of the merging company;
    • Resolution and report of the meeting passing the merger contract of the merged companies, except for the case that the merging company is a member holding more than 65% of the charter capital of the merged company;
    • A valid copy of the enterprise registration certificate or other equivalent papers of the merging companies.
    • Include the documents stipulated in Chapter VI of Decree 78/2015 / ND-CP on business registration. (Depending on the content of the company want to change such as company name; head office address; charter capital; legal representative’s information (To limited companies, there is member’s information ); business lines …)

Notes:

• The merged enterprises have the responsibility to fulfill all the tax obligations before the merger. If they have not done that yet, the merging enterprises shall have to fulfill their tax obligations.
• After applying for The Business registration certification, the merged companies are no longer exist; The merging company inheriting legal rights and benefits is liable for unpaid debts, labor contracts and other property obligations of the merged companies.