Conditions and procedure for merger in Vietnam
Company A (Limited Liability Company) and Company B (Joint Stock Company) are operating in the field of manufacturing electronic components. At the moment, Company A (The Acquired Company) wants to merge with Company B (The Acquirer). Company A wants to know about the conditions and procedures for conducting the merger.
I. Conditions for conducting the merger
In Article 195 of Enterprise Law 2014, “The market share that the acquired Company holds in the relevant market” will be the basis for determining whether enterprises can conduct the merger or not. According to the question, Company A and Company B are operating in the field of manufacturing electronic components, this will help Company A easily know how much the market share of Company B holds in the relevant market. The possibility of a merger depends on the following regulatory threshold of market share in the relevant market:
- Company B’s market share is below 30% in the relevant market, the enterprises are able to perform the merger under the law;
- Company B’s market share is from 30% to 50% in the relevant market, the enterprises must make a prior notification to Competition Authority about the acquisition unless otherwise prescribed by Competition Law.
Under Competition Law 2018, a merger is a form of economic concentration. Before conducting an economic concentration, the enterprises must submit a dossier of economic concentration notification to National Competition Commission (if it falls within the notification threshold of economic concentration), the National Competition Commission will conduct a formal evaluation and make a decision whether or not the enterprises are allowed to merge; or
- Company B’s market share is over 50% in the relevant market: the enterprises cannot perform the merger unless otherwise prescribed by Competition Law
II. Procedure at Business Registration Office (“BRO”)
1. 04-step procedure
Step 1: Company A and Company B must notify Competition Authority before merging (in case Company B’s market share is from 30% to 50% in the relevant market)
Step 2: Company A and Company B must prepare
- A merger contract (“MC”); and
- A draft amended charter of Company B
Step 3: Members, owners, and shareholders of Company A and Company B consent to the MC and the draft charter of Company B.
Note: MC shall be sent to all creditors and notified to all employees within 15 days from the date of consent.
Step 4: Within 10 working days after completing the merger, the representative of Company B shall conduct procedures to change the business registration content for Company B under Enterprise Law as follows:
a) Requisite applications
Requisite application consist and is divided into 02 groups as follows:
Group 1: Company B’s business registration dossier, including
- A request for business registration;
- A charter;
- A list of founding shareholders and shareholders who are foreign investors. A list of authorized representative for the shareholder is a foreign organization; and
- A valid copy of the following documents: Verification documents of individuals or organizations establishing Company B
Group 2: Merger dossier, including
- A MC;
- A Resolution and a meeting minute of Company B about consenting MC;
- A Resolution and a meeting minute of Company A about consenting MC, unless Company B is a member holding over 65% voting shares of Company A; and
- A valid copy for Enterprise registration certificate or other equivalent documents of Company B and Company A
b) Number of application: 01 set
c) Processing time-limit: Within 03 (three) working days from the date of receipt the valid application
d) Regulatory registration fee:
- Enterprise registration fee is VND 50,000 if the application is registered directly at the BRO or is exempted if the application is registered online
- Publication fee: VND 100,000
e) Licensing authority:
1. BRO located in the province where Company A and Company B are headquartered. The BRO will update Company A’s legal status on the Database of national business registration and change the business registration content for Company B; or
2. BRO located in the province where Company B is headquartered if Company A is not located in such province. The BRO will change the business registration content for Company B and notify BRO where Company A is headquartered to update Company A’s legal status on the Database of national business registration.
III. Procedure at the tax bureaus
- Reporting on the situation of using invoices under the law on invoices (Article 27 of Circular No. 39/2014/TT-BTC, point a Clause 3, Article 16 of Circular No. 95/2016/TT-BTC);
- Fulfilling the tax obligation before the merger, the deadline for submitting the tax finalization dossier is 45 days from the date of the decision to merge (Clause 3 Article 10 of Circular No. 156/2013/TT-BTC). If the tax obligation is not fulfilled, Company B is responsible for fulfilling the tax obligation for Company A (Clause 2, Article 42 of Circular No. 156/2013/TT-BTC);
- Terminating the tax code with Tax Authorities (Clause 3, Article 22 of Circular No. 95/2016/TT-BTC; Article 18 of Circular No. 95/2016/TT-BTC).