What is a business merger under Vietnamese Law?

by QuynhHuong

A business merger is in fact a fairly common form of business re-organization at the moment. However, many pupils are yet to distinguish between mergers and other forms of business re-organization. So, what exactly is a business merger? What are the benefits of it? Let’s find out in this article.

  • 2020 Enterprise Law
  • 2018 Law on competition

What is a business merger?

Accordingly, a business merger means that one or several companies (hereinafter referred to as the merged company) may merge into another company (hereinafter referred to as the merging company); by transferring all transfer of assets, rights, obligations, and legitimate interests to the merging company, and at the same time terminate the existence of the merged company.

It can be seen that the provision of the law only stipulates on mergers of enterprises; without stipulating other factors. Therefore, businesses participating in the merger may stay under the same enterprises, or even in other forms of business.

Features of business mergers

By understanding the definition of a business merger; you may see that the features of business mergers will contain:

  • Firstly, regarding the subject: including the merged enterprise and the merged enterprise
  • Secondly, merding methods: the merged enterprise transfers all assets; permission; obligations and legitimate interests to the merging company; through the signing of the merger contract
  • Thirdly, regarding legal consequences:
    • The merged enterprise ceases to exist from the time the merging enterprise completes the procedures for registration of changes in business registration contents
    • The merged enterprise shall enjoy the rights; obligations and legitimate interests; responsible for unpaid debts; on labor contracts and other property obligations of the merged enterprise. Only the merging enterprise has the right to decide, operate and manage.

Advantages of business mergers

Indeed, the business merger brings many benefits to both parties; promote business development, create a position in the market, specifically the following benefits:

Firstly, in terms of scale: business mergers will help to expand the scale of the business; when merging businesses, it means merging in terms of capital; labor; technical system;… enterprises will have more capital to use and access to capital will also be higher; share business risks and enhance financial transparency.

Secondly, regarding the business performance: When the scale of the enterprise expands, it can easily penetrate new markets; have more distribution coverage; market expansion; minimize duplication in the distribution network; save on operating and administrative costs.

Thirdly, in terms of competitiveness: business mergers will strengthen the competitiveness compare with rivals, creating new business opportunities.

Hope that the article could help you solve your problem. In case you have any questions, please contact Lawyer X for quick and best legal services: 0833102102.

In what cases is it forbidden to merge companies?

Basically, your company will be banned from merging if it has more than 50% market share of the relevant market. Unless otherwise provided for in the Competition Law.

Does the merged company have to carry out the procedures to close the tax code at the tax authority?

After the merger contract is signed, merged companies must submit dossiers of application for certification of the fulfillment of tax obligations and affixing tax identification numbers to the managing tax authority, a social insurance agency (if any), General Department of Customs (if any)…

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