HOW IS VIETNAMESE LAW ON MERGERS AND ACQUISITIONS (M&A) DEFINED? - OTIS LAWYERS

How are M&A transactions regulated under current law?

M&A derives from the English terms Mergers and Acquisitions. M&A activities can be seen as a method for a company to gain control over another through merging or acquiring that company. Vietnamese law has taken initial steps in establishing a legal framework for these activities as follows:

- According to the Enterprise Law 2020, mergers and consolidations are listed as two forms of corporate restructuring:

+ Article 200 of the Enterprise Law 2020 defines consolidation as "Two or more companies (hereinafter referred to as consolidating companies) can consolidate into a new company (hereinafter referred to as the consolidated company), simultaneously ceasing the existence of the consolidating companies."

+ Article 201 of the Enterprise Law 2020 defines a merger as "One or more companies (hereinafter referred to as merged companies) can merge into another company (hereinafter referred to as the merging company) by transferring all assets, rights, obligations, and lawful interests to the merging company, simultaneously ceasing the existence of the merged companies."

The Enterprise Law also regulates the rights to establish, contribute capital, buy shares, and manage enterprises, which is also an expression of M&A activities. These rights are specified in the regulations for each type of enterprise.

- The Competition Law 2018 also lists M&A activities as forms of economic concentration:

+ Clause 2 of Article 29 of the Competition Law 2018 defines a merger as "One or more enterprises transfer all assets, rights, obligations, and lawful interests to another enterprise, simultaneously ceasing the business operation or existence of the merged enterprise."

+ Clause 3 of Article 29 of the Competition Law 2018 defines consolidation as "Two or more enterprises transfer all assets, rights, obligations, and lawful interests to form a new enterprise, simultaneously ceasing the business operation or existence of the consolidated enterprises."

+ Clause 3 of Article 29 of the Competition Law 2018 defines an acquisition as "An enterprise directly or indirectly purchases all or part of the capital or assets of another enterprise sufficient to control, dominate the acquired enterprise or its business sector."

Although the regulations on M&A activities are still preliminary, they provide the state with a basis to manage and regulate these activities.

What are the procedures for conducting M&A under the Enterprise Law 2020?

The procedure for consolidating companies is regulated in Clause 2, Article 200 of the Enterprise Law 2020:

Step 1: The consolidating companies prepare a consolidation contract and the draft charter of the consolidated company.

The consolidation contract must include the following main contents: names and addresses of the consolidating companies' headquarters; name and address of the consolidated company's headquarters; consolidation procedures and conditions; employee utilization plan; timeline, procedures, and conditions for asset conversion, conversion of capital contributions, shares, and bonds of the consolidating companies into those of the consolidated company; consolidation timeline.

Step 2: Members, company owners, or shareholders of the consolidating companies approve the consolidation contract, the charter of the consolidated company, and elect or appoint the Chairman of the Members' Council, the Chairman of the company, the Board of Directors, the Director or General Director of the consolidated company.

The consolidation contract must be sent to creditors and notified to employees within 15 days from the approval date.

Step 3: Register the enterprise for the consolidated company according to the Enterprise Law 2020.

The procedure for merging companies is regulated in Clause 2, Article 200 of the Enterprise Law 2020:

Step 1: The involved companies prepare a merger contract and the draft charter of the merging company.

The merger contract must include the following main contents: names and addresses of the merging company's headquarters; names and addresses of the merged companies' headquarters; merger procedures and conditions; employee utilization plan; methods, procedures, timeline, and conditions for asset conversion, conversion of capital contributions, shares, and bonds of the merged companies into those of the merging company; merger timeline.

Step 2: Members, company owners, or shareholders of the involved companies approve the merger contract and the charter of the merging company.

The merger contract must be sent to all creditors and notified to employees within 15 days from the approval date.

Step 3: Carry out the enterprise registration procedures for the merging company according to the Enterprise Law 2020.

What should be included in the post-M&A enterprise registration dossier?

- The enterprise registration dossier for companies established through consolidation is regulated in Article 25 of Decree 01/2021/ND-CP, including:

+ The application for enterprise registration;

+ The company's charter;

+ Copies of the following documents:

++ Legal documents of the individual representing the enterprise;

++ Legal documents of the individual if the company owner is an individual; legal documents of the organization if the company owner is an organization (except for cases where the owner is the state); legal documents of the individual representing the authorized entity and the authorization document;

++ For a company owner being a foreign organization, a consular legalized copy of the legal documents of the organization;

+ The consolidation contract;

+ The resolution or decision approving the consolidation contract and the minutes of the Members' Council meeting for limited liability companies with two or more members.

- The enterprise registration dossier for companies established through merger:

+ The application for enterprise registration;

+ The company's charter;

+ Copies of the legal documents of the legal representative and the company owner;

+ The merger contract;

+ The resolution or decision approving the merger contract and the minutes of the Members' Council meeting for limited liability companies with two or more members.

- For merged enterprises, the dossier for changing the enterprise registration information of the merging company must include the corresponding documents regulated in Chapter VI and Clause 2, Article 61 of Decree 01/2021/ND-CP, including:

+ The merger contract;

+ The resolution and minutes of the meeting approving the merger contract of the merged companies, except in cases where the merging company holds more than 65% of the charter capital of the merged company;

+ A valid copy of the enterprise registration certificate or equivalent documents of the merged companies.

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