Is the company entitled to carry out the procedure of merging branches into the company when it wants to end the branch operation? How does the current law regulate the merger of branches into the company? In the article below, NPLaw will answer questions related to the current merger of branches into the company.

I. The reality of merging branches into the company

Currently, when wanting to terminate the branch's activities, many companies want to implement the procedure of merging branches into the company to save capital and ensure the interests of the business. However, there are many cases where people have little understanding of the merger specified by current regulations. 

The merger is not set out in the current law. “Merger" only happens between one or several companies. The branch is a dependent unit of the enterprise, so the merger of the branch into the company, in this case, means the termination of the branch's activities.

II. Law on merging branches into companies

1. Concept of merging branches into the company 

According to Clause 1, Article 201 of the Law on Enterprise 2020, “one or more companies (hereinafter referred to as merging companies) may merge into another company (hereinafter referred to as receiving companies) by transferring all legitimate assets, rights, obligations, and interests to the receiving company, and at the same time terminating the existence of the merging company.”

According to Clause 1, Article 44 of the Law on Enterprise 2020: “The branch is a dependent unit of the enterprise, tasked with performing all or part of the function of the enterprise, including the function of an authorized representative. Business lines of the branch must be aligned with the business lines of the enterprise."

According to the above regulation, a merger can take place between one or several companies. Currently, there are only regulations on merging the company, while the branch is a dependent unit of the enterprise, so it is impossible to merge with the company. The above case is the termination of the branch operation .

2. Conditions for merging branches into the company

The termination of branch operations is provided for in Clause 1 Article 213 of the Law Enterprise 2020 as follows:

“1. The branch, representative office, and business location of the enterprise shall be terminated at the discretion of the enterprise or upon the decision to revoke the certificate of registration of branch activities, the representative office of the competent state agency".

Thus, the condition for the termination of branch operation is the enterprise's decision or the decision to revoke the certificate of registration of branch activity of the competent state agency.

3. Termination of branch operations after the merger

According to Clause 1, Article 213 of the Law on Enterprise 2020, the branch of the enterprise shall be terminated at the discretion of the enterprise or upon the decision to revoke the certificate of registration of the branch of the competent authority.

The business registration office will update the information about the termination of branch operation on the national business registration database and issue written notification as prescribed.

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III. Some questions when merging branches into the company

1. The debt of the merging branch must be paid by the receiving company.

According to Clause 3, Article 213 of the law on enterprises 2020: “Enterprises with branches whose operation is ceased responsible for the contract performance, debt payment, including tax liabilities of branches and continue to employ or resolve sufficient legal rights for employees who have worked at branches in accordance with the law”.

When the branch ceases to operate, the company will assume obligations related to the contract and debts, including the branch's tax liabilities.

2. Time to terminate business operation of the branch when merging

The time to terminate the branch operation is stipulated as follows:

- Within 10 days from the date on which the decision to terminate branch operation is issued, the company will send a written notice of termination to the Business Registration Office where the branch is located.

- The business registration office sends information about the termination of the branch operation to the Tax Authority.

- Within 5 working days from the date of receiving the application for termination of branch operation, the Business Registration Office shall perform the termination on the national database and issue a written notice of termination of branch operation if there is no refusal from the tax authorities.

Thus, the time to terminate the business operation of the branch is 05 working days from the date of receiving the application for termination. During this time, the Business Registration Office shall terminate the branch operation if there is no refusal from the tax authorities.

3. The competent authority allows merging branches into the company

According to Article 72 of Decree 01/2021 / ND-CP, the termination of branch operation is under the jurisdiction of the Business Registration Office where the branch is located. In case of termination of branches overseas, the competent authority performing this is the Business Registration Office where the enterprise is located.

4. Is it mandatory to have a resolution on the merger

According to Clause 1, Article 213 of the Law on Enterprise 2020, the branches shall be terminated at the discretion of the enterprise or upon the decision to revoke the certificate of registration of the branch of the competent authority.

Therefore, the company wishing to terminate the branch operation should have: resolutions, written decisions and copies of minutes of meeting of the member council for multi-member limited liability company, the partnership company, and that of the board of directors for the joint stock company; resolutions, written decisions of the owner of the company for single-member limited liability company on the termination of the branch operation. 

IV. Legal consulting services related to merging branches into the company

This is the article of NPLaw analyzing some regulations on the merger. With a team of experienced lawyers and legal executives, NPLaw provides reliable, professional legal services, ensuring legitimate rights and benefits for customers.