Mergers and acquisitions can be a rather unfamiliar concept as they rarely occur in actual business practice. However, understanding the merger process will help you carry it out effectively. Below is a detailed guide on the procedures for business mergers according to the latest regulations.
According to Article 201 of the 2020 Enterprise Law and Clause 2, Article 29 of the 2018 Competition Law, a business merger is defined as follows:
Mergers are the process in which one or more companies (referred to as the merged companies) merge into another company (referred to as the acquiring company). The merged company will transfer all of its assets, rights, obligations, and legal interests to the acquiring company, and the merged company will cease to exist.
Simple explanation:
- Company A (the merged company) will merge into Company B (the acquiring company).
- Company A will cease to exist; all assets and liabilities of Company A will be transferred to Company B.
- Company B will continue to operate after the merger.
- The merger agreement needs to include:
- The name and address of the headquarters of the merging company.
- The name and address of the headquarters of the merged company.
- Procedures and conditions for merging.
- Labor utilization plan.
- The methods and procedures for transferring assets, capital contributions, shares, and bonds of the merged company to the acquiring company.
- Deadline for the merger implementation.
- Within 15 days from the date of the merger agreement, the merged company must notify employees and creditors about the merger.
- The procedure for terminating operations and closing the tax code includes:
- Submit the report on the usage of invoices.
- Complete tax obligations.
- Submit the application for tax code registration, including:
- Document requesting the termination of tax identification number validity.
- Certified copy of the business registration certificate.
- A copy of the decision and the minutes of the dissolution meeting.
- A certificate confirming the completion of tax obligations from the General Department of Customs if there are import-export activities.
- Submit the application at the Business Registration Office - Department of Planning and Investment where the merging company is headquartered.
- Case 1: The company receiving the merger changes its business registration content.
- The application documents include:
- Notice of changes to the business registration content.
- Merger agreement.
- The resolution and minutes of the meeting approving the merger contract of the related companies.
- The business registration certificate of the merged company.
- Documents proving the change in business registration content.
- Case 2: The merging company does not change the content of its business registration.
- The application documents include:
- Notification of additional information and updates about the business.
- Merger agreement.
- The resolution and minutes of the meeting approving the merger contract of the related companies.
- The business registration certificate of the merged company.
Note:
- Within 10 working days from the date of completion of the merger, the merging company must send a written notification to the Business Registration Office to carry out the termination of the existence of the merged company.
- After registration, the merged company will cease to exist; the acquiring company will enjoy the legal rights and benefits, while also being responsible for any outstanding debts, employment contracts, and other asset obligations of the merged company.
In addition to complying with the provisions of the Enterprise Law, business mergers must also adhere to the regulations of the Competition Law, including:
- Assessment of competitive impact: According to Article 29 of the Competition Law, the merger of enterprises must be evaluated for its potential to restrict competition in the market.
- The content of the impact assessment includes:
- Combined market share before and after the merger.
- The level of concentration in the market and the risk of creating market power.
- The relationship in the supply chain among the participating businesses.
- Competitive advantage and the ability to increase prices or profits.
- The ability to prevent other businesses from entering the market.
For any details, please contact Á Đông for assistance.
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