Legal regulations on corporate mergers in Vietnam

Business mergers are one of the common forms of corporate restructuring in Vietnam, offering significant benefits in terms of scale and operational efficiency. However, to successfully and legally carry out merger transactions, businesses must have a clear understanding of the relevant legal regulations. This article provides a comprehensive overview of the conditions, procedures, and rights of the parties involved in the merger process, helping businesses ensure legal compliance and optimize the merger process.

Merger Conditions

Legal Status of Merging Companies:

• The companies involved in the merger must be legally operating under Vietnamese law.
• They must not be in the process of dissolution or bankruptcy.
• Compliance with Competition Law: The merger must not create or potentially create a significant anti-competitive impact on the market.

Conditions Regarding Procedures and Decisions:

• A merger contract must be signed by the relevant parties, including the main contents as prescribed by the Law on Enterprises and the draft charter.
• Merger Resolution/Decision: A resolution from the General Meeting of Shareholders (for joint-stock companies) or a decision from the Members’ Council/owner (for limited liability companies) must be made regarding the merger.
• Notification to Relevant Parties: The merger contract must be sent to creditors and the employees must be notified within 15 days from the date of approval of the merger contract.
• The parties have conducted the necessary disclosures about the Merger Transaction as required by the Securities Law (if applicable).

The general conditions for corporate mergers in Vietnam are aimed at ensuring legal validity, protecting the interests of relevant parties, and maintaining a healthy business environment. Businesses need to pay particular attention to the legal status, compliance with form and capital regulations, non-violation of legal prohibitions, and the full implementation of necessary procedures. Meeting these conditions is the first and crucial step in the merger process, laying a solid foundation for the success of the transaction.

Merger Procedures

The company merger procedure in Vietnam is detailed in the Law on Enterprises 2020, specifically in Clauses 2, 3, and 4 of Article 201. This process includes three main stages, ensuring transparency and protecting the rights of the relevant parties.

Stage 1: Preparing Documents

• The companies involved in the merger must draft a merger contract and a new charter for the merging company.

Stage 2: Approval and Disclosure

• Members, owners, or shareholders of the relevant companies must approve the merger contract and the new charter of the merging company. Once approved, the merger contract must be sent to all creditors and notified to employees within 15 days. This step is important to ensure the rights of the relevant parties and to provide them with an opportunity to respond or take measures to protect their interests.

Stage 3: Completing Legal Procedures

• The merging company must proceed with business registration in accordance with the law. Once this procedure is completed, the merged company will cease to exist. The merging company will inherit all legal rights, obligations, and benefits of the merged company, including unpaid debts, labor contracts, and other property obligations.

Rights and Obligations of the Relevant Parties

Merged Company

• Rights: Be notified of the merger and have the right to participate in the negotiation of merger terms.
• Obligations: Transfer all assets, rights, obligations, and legal interests to the merging company and cease business operations after the merger.

Shareholders

• Rights: Be notified of the merger and have the right to vote on the merger decision.
• Obligations: Participate in the shareholder meeting to decide on the merger.

Employees

• Rights: Be notified of the merger and have their rights ensured according to labor law.
• Obligations: Continue to perform labor contracts with the merging company or receive compensation as prescribed.

Creditors

• Rights: Receive the merger contract and have the right to request the merging company to pay debts.
• Obligations: Continue to fulfil obligations under the signed contract.

Business Partners

• Rights:
  • Continue to perform contracts signed with the merged company.
  • Renegotiate contract terms if necessary due to changes in company structure.
• Obligations: Respect commitments signed with the merged company.

State Management Agencies

• Rights:
  • Require the merging company to comply with legal regulations related to the merger.
  • Inspect and supervise the merger process to ensure legal compliance.
• Obligations:
  • Guide and support the company in carrying out legal procedures related to the merger.
  • Update company information on the business registration system and relevant databases.

Understanding the legal regulations on corporate mergers in Vietnam not only helps companies comply with the law but also facilitates the process of consolidation and post-merger development. Companies need to pay special attention to the legal conditions, execution process, and rights of the involved parties to ensure success and sustainability in the merger transaction. Consulting with legal experts and thorough preparation will help businesses achieve merger goals effectively and with legal safety.

• Harley Miller Law Firm “HMLF”
• Address: 14th floor, HM Town Building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
• Phone: +84 937215585
• Website: hmlf.vn
• Email: miller@hmlf.vn