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Procedures for merging businesses

Enterprise 21/07/2023

Business mergers are a very popular form of M&A today. The form of merger is chosen by many businesses to increase their competitiveness in the business environment. The following article will analyze regulations on business merger procedures. If you have any questions, please contact immediately Apolo Lawyers Law Firm via email contact@apolo.com.vn or hotline - 0903.419.479 for legal advice and support.

Procedures for merging businesses

Business mergers are a very popular form of M&A today. The form of merger is chosen by many businesses to increase their competitiveness in the business environment. The following article will analyze regulations on business merger procedures. If you have any questions, please contact immediately Apolo Lawyers Law Firm via email contact@apolo.com.vn or hotline - 0903.419.479 for legal advice and support.

1. What is a business merger?

Business merger is a form of business reorganization. Accordingly, the fact that one or several companies of the same type may merge into another company by transferring all assets; rights and obligations along with legitimate interests to the merging company; terminate the operations of the merged company.

This can be understood as a transaction in which the merged enterprise gives up its legal status to join another enterprise. The merged enterprise will inherit all rights; obligations and legitimate interests of the merged enterprise; At the same time, the merged company also ceases to exist.

procedures - for - merging - businesses - 01Procedures for merging businesses

It is important to distinguish between merger and consolidation. Accordingly, business consolidation is also a form of enterprise reorganization; However, consolidation is different from a merger in that the companies merge to create a new company and terminate the activities of the consolidated companies to bring mutual benefits to all the consolidated businesses. The new company is the only entity inheriting all rights; obligations and legitimate interests of the companies performing the consolidation.

2. Conditions for business merger

  • The merging companies must be companies of the same type.
  • In case of merger in which the merging company has a market share of between 30 percent and 50 percent in the relevant market, the legal representative of the company shall notify the competition authority before conducting the merger; unless otherwise provided by the Competition Law.
  • The merger of companies in which the merging company has a market share of more than 50 percent in the relevant market is strictly prohibited; unless otherwise provided by the Competition Law.

3. Business merger process

- Step 1. Prepare legal documents

The related companies prepare the merger contract and draft the charter of the merging company.

The merger contract must include the following main contents:

  • Name and head office address of the merging company;
  • Name and head office address of the merged company;
  • Procedures and conditions for merger; labor use plan;
  • Methods, procedures, deadlines and conditions for converting assets, converting capital contributions, shares and bonds of the merged company into contributed capital, shares and bonds of the merging company;
  • Time limit for merger implementation;

- Step 2. Approving the merger contract

Members; company owner; shareholders of related companies through the merger agreement; Charter of the merging company and conducting business registration of the merging company in accordance with the law on enterprises.

The merger contract must be sent to all creditors and notified to employees within 15 days; from the date of its adoption.

- Step 3. Register to change business registration content

When merging a; some company into another company; The application for registration of changes in business registration contents of the merging company must contain the corresponding papers specified in Chapter VI of Decree 01/2021/ND-CP and the following papers:

  • The above merger contract;
  • Resolution; decide on the approval of the merger contract and a copy of the minutes of the Council Member meeting, for limited liability companies with two or more members; partnerships; of the General Meeting of Shareholders for joint-stock companies on the approval of the merger contract of the merging company;
  • Resolution; decide on the approval of the merger contract and a copy of the minutes of the Council Member meeting, for limited liability companies with two or more members; partnerships; of the General Meeting of Shareholders for joint-stock companies on the approval of the merger contract of the merged company; except where the merging company is a member; shareholders owning more than 65 percent of charter capital for limited liability companies; partnerships; voting shares for the joint stock company of the merged company.

Note: After receiving the enterprise registration dossier; Business Registration Office awarded the Receipt; check the validity of the application and issue the Certificate of Business Registration; Certificate of change of business registration contents for enterprises.

- Step 4. Terminate the merged company

After the merger of an enterprise, the enterprise registration contents of the merging company do not change; within 10 working days from the date of completion of the merger; the merging company sends a written notice to the Business Registration Office where the merging company is headquartered to terminate the existence of the merged company. The notice must be enclosed with the papers specified at Points a and b, Clause 2, Article 61 of Decree No. 01/2021/ND-CP.

In case the merged company has its head office located outside the province; the city directly under the central government where the head office of the merged company is located; The Business Registration Office where the merged company sends information to the Business Registration Office where the merged head office of company is located to terminate the existence of these companies in the National Database. information on business registration according to the process on the National Information System on Business Registration.

The Business Registration Office terminates the existence of branch; representative office; business locations of the merged company before the termination of their existence in the National Database of Business Registrations according to the process on the National Information System on Business Registration.

4. Legal consequences after merger

For the merged company: After the merging company registers its business; merged company ceases to exist.

For the merged company: To enjoy legal rights and interests; responsible for the obligations; unpaid debts; labor contract and other property obligations of the merged company under the merger contract.

- Tax obligation

After the merging company is granted business registration; the merged company changes to the merged legal status. The Business Registration Office where the merged company is headquartered shall send information to the tax authority. The tax authority is responsible for sending information to the Business Registration Office about the completion of the final settlement and the transfer of tax obligations.

Within 01 working day from the date of receipt of information from the tax authority on the completion of the tax settlement and transfer of tax obligations by the merged company; The Business Registration Office where the merged company is headquartered shall update the legal status of these companies in the National Business Registration Database to the de-existence status according to regulations. submitted on the National Information System on Business Registration.

- Labor plan

In case of merger affecting the employment of many employees, the employer must develop a labor use plan according to the following provisions:

The labor use plan must have the following main contents:

  • Number and list of employees who continue to be employed, employees who are retrained to continue using, employees who are transferred to part-time work;
  • Number and list of retired employees;
  • Number and list of employees who have to terminate labor contracts
  • Rights and obligations of employers, employees and related parties in the implementation of the labor use plan;
  • Measures and financial sources to ensure the implementation of the plan.

Note:

When formulating a plan on using labor; The employer must exchange opinions with the employee representative organization at the grassroots level with respect to the place where there is a representative organization of workers at the grassroots level. The labor use plan must be publicly notified to the employees within 15 days from the date of approval.

The current employer and the next employer are responsible for implementing the approved employment plan.

5. Opportunities and challenges when implementing business mergers

The merger of enterprises brings a lot of benefits to enterprises in their production business activities. Create better competition and bring more markets to exploit and develop.

5.1. Opportunity

The merging company has the right to control all the work of the merged company.

Will take advantage of the potential customer source of the merged company in creating its products and business markets.

Expand the scope of activities, competitiveness with other large enterprises in the same field.

5.2. Challenge

Merger is both a job with high benefits, but the associated risks are quite large. In addition to receiving benefits, the obligations of the merged company are also transferred to the merging company. If you do not take advantage of the benefits of the merger, you will run the risk of having to bear the weight of the merged apparatus of company. Enterprises need to carefully consider as well as accurately assess the financial situation of the merged companies.

In addition, the challenge of reconciling corporate culture and personnel of the merged companies is a difficult problem to solve.

Therefore, if you decide to merge a business into operating with your business, the business owner needs to consider how to suit many options, it is necessary to choose reputable business consulting units. credit, quality. Only then can it help to conduct transactions smoothly and efficiently.

procedures - for - merging - businesses - 02Procedures for merging businesses

What if you do not have time to do the changing procedures yourself? Apolo Lawyers Law Firm will advise and get an authorized representative to carry out the necessary formalities to meet your business needs. Fees for consulting services and carrying out legal procedures will be adjusted depending on each case. Immediately contact Apolo Lawyers Law Firm via email contact@apolo.com.vn or hotline - 0903.419.479 for the best advice and support.

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