In the trend of economic globalization, the wave of merging countries with developed economies took place strongly. Especially, after joining the WTO, Vietnam is facing great opportunities to attract foreign investment capital for industrialization and modernization. So what are the current regulations in order to conduct merger favorable activities? How are the benefits and drawbacks of conducting a merger regulated? Let’s find out with Pham Consult through the article below!
WHAT IS A BUSINESS MERGER
According to the Enterprise Law, enterprises merger is understood as a form of economic concentration whereby one or several companies (hereinafter referred to as the merged company) transfer all their assets, rights and obligations to the merged company, and at the same time terminate the existence of the merged company.
CONDITIONS OF MERGER
Merger of enterprises is considered a type of economic concentration according to Article 29, Competition Law 2018. Accordingly, one of the conditions to satisfy the form of economic concentration is:
- In case of a merger where the merging company holds between 30% and 50% of the market share of the relevant market, the legal representative of the merging company is required to notify the Competition Authority before the merger. conduct the merger, unless otherwise provided for in the Competition Law.
- Prohibit mergers in which the merged company holds more than 50% of the market share of the relevant market, unless otherwise provided for in the Competition Law.
Step 1: Related companies prepare the merger contract and draft the charter of the merging company. Contents of the merger contract:
- Name and head office address of the merged company
- Name and address of the head office of the merged company
- Merger procedures and conditions
- Labor utilization plan
- Methods, procedures, time limit and conditions for converting assets, converting contributed capital, shares and bonds of the merged company into shares and bonds of the merged company
- Deadline for implementation of the merger
* Note: The merger agreement must be sent to all creditors and notified to employees within 15 days from the date of approval.
Step 2: Members, company owners or shareholders of related companies through the merger contract, the charter of the merged company.
Step 3: Proceed to register the merged company. The registration dossier includes:
- Merger contract;
- Minutes of meetings and decisions of the merging company through the merger contract;
- Minutes of meetings and decisions of the merged company through the merger agreement. Unless the merging company accounts for 65% of the contributed capital, the voting shares of the merged company;
- Valid copies of Business Registration Certificates or other equivalent documents of the merged companies;
- Notice of supplementation and update of business registration information (Form Appendix II-5 issued together with Circular 20/2015/TT-BKHDT)
Step 4: The business registration agency shall update the legal status of the merged company on the National Business Registration Database and make changes to the business registration content for the merged company.
After the merging enterprise is granted business registration, the merged company moves into the merged legal status. The Business Registration Office where the merged company is headquartered sends information to the Tax Office. Tax authorities are responsible for sending information to the Business Registration Office about the fact that the enterprise has completed the settlement and transfer of tax obligations. In addition, the merged enterprise must also carry out procedures for closing the tax code at the tax office with the tax authority, the dossier includes:
- Minutes of the meeting and Decision of the owner/Members’ Council/General Meeting of Shareholders of the merged company on the merger of the company, approval of the merger contract and the charter of the merged company
- A letter confirming the completion of tax obligations and paying the tax code;
- Enterprise merger contract (stamped copy of the enterprise)
DIFFICULTIES AND DISADVANTAGES
The merger brings many benefits to both parties and promotes business development, creating a position in the market g. In addition, it also helps businesses expand business scale, increase distribution scope in the market. However, business mergers help enhance competitiveness with rival businesses, creating many new business opportunities.
The merger will bring a lot of benefits, but along with that, there are still potential risks. Businesses will somewhat face difficulties in management, risk losing customers and markets before the merger and can take a lot of time and effort.
Law on Enterprise 2020 takes effect on January 1, 2021.
Decree 01/2021/ND-CP on business registration takes effect from January 4, 2021.
Competition Law 2018 takes effect from July 1, 2019.
The above is the basic content of the order of business merger procedures. Business merger procedures are generally not too complicated. However, depending on the type of merged enterprises, the detailed documents vary. In addition, if you do not understand the law, the merger process may be longer and more difficult. Our company with a team of professional staff, has many years of experience in carrying out business registration procedures as well as procedures related to taxation and accounting,… Pham Consult is committed to providing high quality services at reasonable fees, you can rest assured and accompany us in carrying out business dissolution procedures.
To better understand the business dissolution procedure as well as related issues, please contact Pham Consult – a unit specializing in providing tax consulting services, financial consulting, accounting services, salary preparation and payment. Customers can contact us via hotline: (84-28) 3930 2487 or Facebook communication channel if you need support.
PHAM CONSULT is a unit specializing in providing tax consulting services, financial consulting, accounting services, preparing and paying salaries. Customers can contact us via hotline: (84-28) 3930 2487 or Facebook communication channel: http://bit.ly/phamconsult if you need support.