Procedures for merging foreign-invested enterprises in Viet Nam

Business merger is always a problem that makes businesses, especially foreign-invested enterprises, difficult in preparing documents with complicated processes. Understanding that situation, LSX Law firm will provide you with the necessary information and procedures for merging foreign-invested enterprises to meet the merger of businesses in Vietnam.

Legal grounds

Enterprise Law 2020

Decree 47/2021/ND-CP detailing the Law on Enterprises;

Decree 01/2021/ND-CP on enterprise registration;

Competition Law 2018.

Procedures for merging foreign-invested enterprises

Accordingly the spirit of the Enterprise Law 2020, which does not change much compared to the 2014 Enterprise Law; merger is when one or several companies are merged into another company by transferring assets, rights, obligations and legitimate interests law for the company that it is merging into; and at the same time will terminate the existence of the merged company; (Clause 1, Article 201 of the Enterprise Law 2020).

The order and procedures for merging enterprises shall comply with Clause 2, Article 201 of the Law on Enterprises 2020; Decree 47/2021/ND-CP and Decree 01/2021/ND-CP, whereby

Step 1

The companies involved in the merger will prepare the merger contract and the draft charter of the merged company. According to Clause 2, Article 201, Enterprise Law 2020; a merger contract between the merged company and the merging company must contain all of the following core contents:

• Firstly, the name and address of the head office of the merging company;
• Secondly name and head office address of the merged company;
• Thirdly, the merger procedures and conditions are agreed upon by the two parties;
• Fourthly the employment plan;
• Fifthly, procedures, methods, deadlines and conditions for converting assets, converting capital contributions, bonds and shares of the merged company into the merging company;
• Lastly, time limit for merger implementation.

Step 2

The members or owners of the company or the shareholders of the related company need to approve the merger contract and the company’s charter. Then make enterprise registration of the merging company in accordance with the provisions of Decree 01/2021/ND-CP . Creditors and employees must be sent the merger contract within 15 days from the date of approval.

Step 3

The merging company will change the business registration content according to Clause 2, Article 61 of Decree 01/2021/ND-CP, need to prepare the following documents:

• In addition to the necessary documents such as the business registration certificate, a merger contract needs to be provided.

• Resolution or decision on the approval of the merger contract and copies of meeting minutes; depending on the form depending on the type of enterprise; mentioning the approval of the above contract of the merging company.

• Resolution or decision on the approval of the merger contract and a copy of the minutes of the meeting; depending on the form depending on the type of enterprise; referring to the approval of the above contract of the merged company; except for the following cases: In case the merged company is also a limited liability company or a partnership with members; or shareholders owning more than 65% of the charter capital being the merging company; or the merging company has shares have voting rights if the merged company is a joint stock company.

Step 4

The business registration office receives and checks the validity of the above documents. If all requirements are met the enterprise will be issued with an enterprise registration certificate together with a confirmation of the change of registration contents of the merged enterprise.

Step 5

The Business Registration Office terminates the existence of the merged company according to Article 73 of Decree 01/2021/ND-CP . Accordingly, the Business Registration Office where the merged company is located will make necessary adjustments and update the legal status on the National Database.

Step 6

The merged company automatically inherits and continues to exercise all the rights, obligations, and legitimate interests of the merged companies; including the adjustment of investment projects in accordance with the Law. Investment and related guidance documents.

Cases where mergers are prohibited accordingly the provisions of law

In order to limit the cases where enterprises collude with each other to take advantage of market share, or perform unfair competition tricks, the law also stipulates cases where mergers are prohibited.

Accordingly Clause 1, Article 29 of the 2018 Competition Law calls mergers and acquisitions in general a form of economic concentration. Next, Article 30 contains content that prohibits enterprises from carrying out mergers that significantly affect or are likely to cause competition-restrictive effects in the Vietnamese market.

In order to assess the impact or potential of a significant anticompetitive effect of a merger; many factors such as market share; competitive advantage; relationships between enterprises, concentration level, etc. on the market are specified in Article 31 of the Competition Law 2018 and Article 15 of Decree 35/2020/ND-CP.

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