WHY IS COMPANY MERGER NECESSARY?

In the context of a highly competitive market economy, many companies are implementing mergers and acquisitions as a development strategy to transform their business profile and operational scale. The primary purpose of corporate mergers is to enhance the enterprise’s share value in the market, thereby delivering numerous benefits to enterprises in their business and production activities. At the same time, mergers help create stronger competitive capacity and open up broader markets for exploitation and development.

I. Legal Regulations on Company Merger

Pursuant to Clause 1, Article 201 of the Law on Enterprises 2020, the provisions on company merger are as follows:

“Article 201. Company merger

1. One or more companies (hereinafter referred to as the merged companies) may merge into another company (hereinafter referred to as the receiving company) by transferring all lawful assets, rights, obligations, and interests to the receiving company, and concurrently terminating the existence of the merged companies.

[…]”

Accordingly, a company merger refers to the case where one or more companies merge into another company by transferring all lawful assets, rights, obligations, and interests to the receiving company, and concurrently terminating the existence of the merged companies. Companies carrying out a merger must ensure compliance with the provisions of the Law on Competition 2018 regarding company mergers.

(Pursuant to Clauses 1 and 3, Article 201 of the Law on Enterprises 2020).

II. Procedures for Company Merger

The procedures for company merger are prescribed in Clauses 2, 3 and 4, Article 201 of the Law on Enterprises 2020, specifically as follows:

(i) The involved companies prepare a merger contract and a draft charter of the receiving company.

The merger contract must contain the following principal contents:

• Name and head office address of the receiving company;

• Name and head office address of the merged company;

• Procedures and conditions for the merger;

• Plan for the use of employees;

• Methods, procedures, time limits and conditions for the transfer of assets, and the conversion of contributed capital portions, shares and bonds of the merged company into contributed capital portions, shares and bonds of the receiving company;

• Time limit for implementation of the merger.

(ii) Members, company owners or shareholders of the involved companies approve the merger contract and the charter of the receiving company, and carry out enterprise registration for the receiving company in accordance with the guidance set out in Section 3 below.

(iii) The merger contract must be sent to all creditors and notified to employees within 15 days from the date of approval.

(iv) After the receiving company completes enterprise registration, the merged company ceases to exist; the receiving company enjoys all lawful rights and interests, and bears responsibility for all obligations, outstanding debts, labor contracts and other property-related obligations of the merged company. The receiving company automatically inherits all lawful rights, obligations and interests of the merged companies in accordance with the merger contract.

Companies carrying out a merger must ensure compliance with the provisions of the Law on Competition regarding company mergers.

The business registration authority shall update the legal status of the merged company in the National Enterprise Registration Database and carry out amendments to the enterprise registration contents of the receiving company. In case the merged company has its head office located in a province or centrally-run city different from that of the receiving company, the business registration authority of the locality where the receiving company has its head office shall notify the business registration authority of the locality where the merged company has its head office for the purpose of updating the legal status of the merged company in the National Enterprise Registration Database.

III. Registration of Changes to Enterprise Registration Contents for the Receiving Company

Pursuant to Clause 2, Article 61 of Decree No. 01/2021/NĐ-CP, in the case of merging one or more companies into another company, the dossier for registration of changes to the enterprise registration contents of the receiving company shall include the following documents:

(i) The merger contract.

(ii) The resolution or decision approving the merger contract and a copy of the minutes of the meeting of the Members’ Council in the case of a multi-member limited liability company or a partnership, or of the General Meeting of Shareholders in the case of a joint-stock company, regarding the approval of the merger contract of the receiving company.

(iii) The resolution or decision approving the merger contract and a copy of the minutes of the meeting of the Members’ Council in the case of a multi-member limited liability company or a partnership, or of the General Meeting of Shareholders in the case of a joint-stock company, regarding the approval of the merger contract of the merged company, except where the receiving company is a member or shareholder holding more than 65% of the charter capital in the case of a limited liability company or a partnership, or more than 65% of the voting shares in the case of a joint-stock company of the merged company.

(iv) Other documents corresponding to the contents of enterprise registration changes as prescribed in Chapter VI of Decree No. 01/2021/NĐ-CP.

Place of submission:The Business Registration Office (under the Department of Planning and Investment) of the locality where the receiving company has its head office.

After receiving the enterprise registration dossier, the Business Registration Office shall issue a receipt, examine the validity of the dossier, and issue the Enterprise Registration Certificate and the Certificate of Changes to Enterprise Registration Contents to the receiving company.

IV. Handling of Assets upon Company Merger

a. Case where the receiving company does not change its enterprise registration contents

Pursuant to Clause 4, Article 73 of Decree No. 01/2021/NĐ-CP on registration of changes to enterprise registration contents applicable to divided companies and receiving companies, in the event that, after the merger, the enterprise registration contents of the receiving company remain unchanged, within 10 working days from the date of completion of the enterprise merger, the receiving company shall send a written notice to the Business Registration Office where it has its head office in order to carry out the termination of the existence of the merged company.

b. Case where the receiving company changes its enterprise registration contents

Pursuant to Clause 2, Article 61 of Decree No. 01/2021/NĐ-CP on registration of changes to enterprise registration contents applicable to divided companies and receiving companies, in the case of merging one or more companies into another company, the dossier for registration of changes to the enterprise registration contents of the receiving company must include the corresponding documents as prescribed in this Chapter and the following documents:

a) The merger contract in accordance with Article 201 of the Law on Enterprises;

b) The resolution or decision approving the merger contract and a copy of the minutes of the meeting of the Members’ Council in the case of a multi-member limited liability company or a partnership, or of the General Meeting of Shareholders in the case of a joint-stock company, regarding the approval of the merger contract of the receiving company;

c) The resolution or decision approving the merger contract and a copy of the minutes of the meeting of the Members’ Council in the case of a multi-member limited liability company or a partnership, or of the General Meeting of Shareholders in the case of a joint-stock company, regarding the approval of the merger contract of the merged company, except where the receiving company is a member or shareholder holding more than 65% of the charter capital in the case of a limited liability company or a partnership, or more than 65% of the voting shares in the case of a joint-stock company of the merged company.

After receiving the enterprise registration dossier, the Business Registration Office shall issue a receipt, examine the validity of the dossier, and issue the Enterprise Registration Certificate and the Certificate of Changes to Enterprise Registration Contents to the enterprise.

V. Termination of the Existence of the Merged Company

Pursuant to Article 73 of Decree No. 01/2021/NĐ-CP on the termination of the existence of merged companies, the following provisions apply:

• After a divided company, a consolidated company, or a receiving company is granted enterprise registration, the divided company, the consolidated company, or the merged company shall be converted to the legal status of having been divided, consolidated, or merged. The Business Registration Office where the divided, consolidated, or merged company has its head office shall send information to the tax authority. The tax authority shall be responsible for sending information to the Business Registration Office on the enterprise’s completion of tax finalization and transfer of tax obligations.

• Within 01 working day from the date of receipt of information from the tax authority confirming that the divided company, consolidated company, or merged company has completed tax finalization and transferred tax obligations, the Business Registration Office where such company has its head office shall update the legal status of these companies in the National Database on Enterprise Registration to the status of termination of existence in accordance with the procedures on the National Enterprise Registration Information System.

• The Business Registration Office shall carry out the termination of existence of branches, representative offices, and business locations of the divided company, consolidated company, or merged company before terminating the existence of such companies in the National Database on Enterprise Registration in accordance with the procedures on the National Enterprise Registration Information System.

• In the event that, after the enterprise merger, the enterprise registration contents of the receiving company remain unchanged, within 10 working days from the date of completion of the enterprise merger, the receiving company shall send a written notice to the Business Registration Office where it has its head office in order to carry out the termination of the existence of the merged company. Such notice must be accompanied by the documents specified at Points a and b, Clause 2, Article 61 of this Decree.

• In the case where the divided company, consolidated company, or merged company has its head office located in a province or centrally governed city different from that of the divided company, consolidated company, or receiving company, the Business Registration Office where the divided company, consolidated company, or receiving company has its head office shall send information to the Business Registration Office where the divided company, consolidated company, or merged company has its head office in order to carry out the termination of existence of such companies in the National Database on Enterprise Registration in accordance with the procedures on the National Enterprise Registration Information System.

Accordingly, upon termination of the existence of the merged company, the Business Registration Office shall carry out the termination of existence of branches, representative offices, and business locations of the merged company before terminating the existence of such company in the National Database on Enterprise Registration in accordance with the procedures on the National Enterprise Registration Information System, pursuant to Clause 3, Article 73 of Decree No. 01/2021/NĐ-CP.