WHAT ARE THE PROVISIONS ON THE ENTERPRISE MERGER?

Our company is a public company. We’re currently listed on the Stock Exchange. Now joint-stock company A wants to merge into my company (joint-stock company A is not a public company yet). I would like to ask in this case whether company A must become a public company to merge with ours? What are the procedures for this merger?

Yours faithfully!

FDVN’s opinions:

[1] What are the provisions of the merger?

Under the provisions of Clause 1, Article 195 of the Law on Enterprises 2014, “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.”

According to the above provisions, joint-stock company A may merge into your public company by transferring all assets, legitimate rights, obligations, and legal interests to your company. Then Joint-stock company A will be ceased to exist.

The merger cases, if acquirer companies have a market share of between 30% and 50% in the relevant market, the legal representative of the company shall notify the competition authority before proceeding merger, unless otherwise prescribed by Law on Competition. Besides, the law prohibits mergers of companies in which the acquirer has a market share of more than 50% in the relevant market unless otherwise provided in the Law on Competition.

[2] What are the procedures for a merger?

Under the provisions of Clause 1, Article 25 of the Law on Securities 2006:

“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.”

Pursuant to this provision, a public company is a joint-stock company, and company A is also a joint-stock company. Therefore, the merger of joint-stock company A into a public company will be applied according to the provisions of Clause 2, Article 195 of the 2014 Law on Enterprises:

a. Procedures:

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, 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. Documents

Documents you need to prepare to merge your business are specified in Clause 4 of the Law on Enterprises 2014, including:

- The acquisition contract;

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

- The Resolution and meeting minutes 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. State agencies receiving Documents.

- Submit merger documents to the Department of Planning and Investment;

- If the merger documents are complete and valid, the department receiving and returning results will issue a receipt and make an appointment to return the results.

After completing all documents, the business registration authority will update the legal status of the acquirer company on the National Enterprise Registration Database and make changes to the business registration content for the acquirer company. In case the acquired company has the headquarter address outside the province or centrally city where the acquirer company is located, the business registration authority where the acquirer company is located shall notify the business registration authority where the acquired company is headquartered to update the legal status of the acquired company on the National Enterprise Registration Database.

FDVN Law Firm

CONTACT US

Lawyers in Da Nang:

99 Nguyen Huu Tho, Quan Hai Chau, Da Nang city

Lawyers in Hue:

336 Phan Chu Trinh, Hue City, Thua Thien Hue

Lawyers in Phu Quoc:

65 Hung Vuong, Duong Dong town, Phu Quoc island district

Lawyers in Quang Ngai:

359 Nguyen Du, Quang Ngai City, Quang Ngai Province.

Lawyers in Ha Noi

Room 501, 5th Floor, No. 11, Lane No. 183, Dang Tien Dong Street, Dong Da District, Ha Noi

Website: www.fdvn.vn    www.fdvnlawfirm.vn  www.diendanngheluat.vn  www.tuvanphapluatdanang.com

Email: fdvnlawfirm@gmail.com    luatsulecao@gmail.com

Phone: 0935 643 666    –  0906 499 446

Fanpage LUẬT SƯ FDVN: https://www.facebook.com/fdvnlawfirm/

Legal Service For Expat:  https://www.facebook.com/fdvnlawfirmvietnam/

TỦ SÁCH NGHỀ LUẬT: https://www.facebook.com/SayMeNgheLuat/

DIỄN ĐÀN NGHỀ LUẬT: https://www.facebook.com/groups/saymengheluat/