LEGAL PROVISIONS ON ENTERPRISE ACQUISITION

Our company is a public joint-stock company and we are posting our share certificates in the Stock Exchange. Then, joint-stock company A, which is not a public joint-stock company, wants to be merged into my company. I would like to know if it’s necessary for company A to become a public joint-stock company to be merged into our company. What is the acquisition procedure? Thank you so much.

FDVN’s opinions:

Thank you for concerning and trusting in FDVN’s legal services. We have studied the law provisions on your request. Please kindly see the answer below

[1]. Legal provisions on enterprise acquisition:

It is stipulated in Clause 1 Article 195 of Law on enterprise 2014 that “One or some companies (hereinafter referred to as acquired companies) may be merged into another company (hereinafter referred to as the acquirer) by transferring all assets, legitimate rights, obligations, and interests to the acquirer. After that, the acquired companies shall cease to exist.”

Accordingly, joint-stock company A may be merged into your company by transferring all assets, legitimate rights, obligations, and interests to your company and terminating its operation.

If the acquirer reaches 30% - 50% of the market share, legal representatives of the companies shall notify the competition management authority before initiating the acquisition process, unless otherwise prescribed by Law on Competition. Acquisition is prohibited if the acquirer has more than 50% of the market share after acquisition, unless otherwise prescribed by the Law on Competition.

[2]. Acquisition procedures:

According to Clause 1 Article 25 of Law on Securities:

“1. A public company is a joint-stock company that:

a/ Has already conducted the public offering of its stocks;

b/ Has its stocks listed at the Stock Exchange or the Securities Trading Center; or,

c/ Has its stocks owned by at least one hundred investors, excluding professional securities investors, and has a contributed charter capital of VND 10 billion or more.”

According to the above provisions, a public company is a joint-stock company, so is company A. Therefore, the procedure for merging joint-stock company A into a public company shall comply with the provisions of Clause 2, Article 195 of the 2014 Law on Enterprise as follows:

a. Procedure

Step 1: Relevant companies shall prepare the acquisition contract and draft the charter of the acquirer. The acquisition contract must contain the acquirer’s names, headquarter addresses; the acquired company’s name and headquarter address; procedures and conditions for acquisition; employment plan; time limit and procedures for transferring assets, stakes, shares, bonds of the consolidating companies to the acquirer; time limit for acquisition;

Step 2: Members, the owners, or shareholders of each of the relevant companies shall ratify the acquisition contract, the charter of the acquirer, and apply for registration of the acquirer as prescribed by this Law. The acquisition contract shall be sent to all creditors and notified to all employees within 15 days from the ratification date;

After business registration, the acquired companies shall cease to exist; the acquirer shall inherit the lawful rights and interests as well as unpaid debts, employment contracts, and other liabilities of the acquired companies.

b. The application consists of:

The documents prepared for merging companies are prescribed in Clause 4 Article 195 of Law on Enterprises 2014:

- The acquisition contract;

- The Resolutions and meeting minutes that ratify the acquisition contract of the acquirer.

-  The Resolution and meeting minutes that ratify the acquisition contract of the acquired companies, unless the acquirer is a member/partner or shareholder that holds more than 65% of charter capital or voting shares of the acquired company.

c. Reception agency:

- Department of Planning and Investment is responsible for receiving the applications of acquisition;

- If the application is complete and valid, the receiving and returning division will issue a receipt and make an appointment to return the result.

The business registration authority shall update the legal status of the acquired companies on the National Business Registration Database and adjust the Certificate of Business Registration of the acquirer.

If the headquarter of an acquired company is outside the province in which the acquirer’s headquarter is situated, the business registration authority of the province in which the acquirers headquarter is situated shall notify the business registration authority of the province in which the acquired company’s headquarter is situated in order to update the legal status of the acquired company on National Enterprise Registration Database.

Above is FDVN Law Firm's legal opinion regarding your request. Hopefully, FDVN's advice will be helpful to you.

Legal expert: Ngo My Tram

FDVN Law Firm