Currently, most enterprises are finding the opportunity for merger to strongly promote manufacturing activities, especially foreign enterprises. How is the merger for foreign enterprises regulated? The below article will help readers clearly understand related provisions.
I/ Current status of the merger for foreign enterprises
The merger for foreign enterprises is one of common foreign direct investment methods (FDI) in Vietnam. According to sastifics of the Foreign Investment Agency and the Ministry of Planning and Investment in a period from 2016 to 2022, there were 1.357 FDI projects with merging elements that total registered capital achieves 109,1 billion USD accounting for 28, 6% per total capital of such the period.
II/ Legal regulations on the merger for foreign enterprises
1. Definition of the merger for foreign enterprises
Pursuant to Clause 1, Article 200 of Law on Enterprise 2020, the merger means two or many enterprises that combine together to set up a new enterprise and terminate merged enterprises’ existence.
The merger for foreign enterprises means two or some of foreign enterprises (hereinafter referred to as the merged enterprise) combine together to establish a new enterprise (hereinafter referred to as the merging enterprise).
2. Conditions for merging foreign enterprises
Applicable Law on Enterprise doesn’t still specifically regulate conditions for merging foreign enterprises, it can be known that two or many enterprises shall transfer all of their legal assets, rights, obligations and interests into establishing a new enterprise and terminating all business operations or the existence of merged enterprises.
Accordingly, merged enterprises often agree upon procedures, processes and conditions for implementing the merger, as well as a plan for using labor resources, and duration, procedures and conditions for conversing assets, etc through merger contracts.
Pursuant to Article 200 of Law on Enterprise 2020, owners, shareholders and members of merged enterprises are based on merger contracts and the Charter of a merging enterprise
to vote or appoint the Chairman of the Board of Members, Chairman of the company, Board of Directors, Director or General Director of the merged enterprise. Merger contracts must be sent to creditors and notify employees of knowing it.
It is required to submit a notice to the Viet Nam Competition Commission before implementing the merger if the merger is conducted beyond the territory of Vietnam with the transaction value of 1.000 billion VND or more and a combined market share of the merging enterprises of 20% or more regarding the adjacent fiscal year preceding the year expected to perform economic concentration operations.
3. Legal procedures for merging foreign enterprises
Pursuant to Clause 2, Article 200 of Law on Enterprise 2020, procedures for implementing the merger of foreign enterprises, as follows:
- Merged enterprises are obligated to prepare the merger contract and draft the Charter of the merging enterprise. The merger contract must involve the following primary contents: Name and headquarters address of merged enterprises; Name and headquarters address of a merging enterprise; procedures and conditions for the merger; plan for using employees; duration, procedures and conditions for converting assets; conversion of merged enterprises’ capital contributions, stocks and bonds into merging enterprise’s capital contributions, stocks and bonds; and the implementation time of the merger.
- Owners, shareholders and members of merged enterprises are based on merger contracts and the Charter of a merging enterprise to vote or appoint the Chairman of the Board of Members, Chairman of the company, Board of Directors, Director or General Director of the merging enterprise; and implement the enterprise registration for the merging enterprise as defined by Law. The merger contract must be sent to creditors and notify employees of knowing it within 15 days from the date of approval.
III/ Questions regarding the merger for foreign enterprises
1. Can it merge a foreign enterprise into a Vietnamese enterprise?
Pursuant to Clause 1, Article 200 of Law on Enterprise 2020, the merger means two or many enterprises that combine together to set up a new enterprise and terminate merged enterprises’ existence.
Thus, it is able to merge a foreign enterprise into a Vietnamese enterprise as defined by Law.
2. Are taxes basically concerned after implementing the merger for foreign enterprises?
After the merger, the merging enterprise shall be subject to inheriting all assets, debts, rights and obligations of merged enterprises. Thus, the merging enterprise is required to completely implement all related tax obligations in cases of owning.
Thus, the implementation of taxes is an important element after the merger.
3. After the merger, does a merged foreign enterprise receive preferential policies as a new company?
Pursuant to Article 200 of Law on Enterprise 2020, the merging enterprise is an enterprise that is established from combining two or many enterprises. It will inherit all assets, debts, rights and obligations of merged enterprises.
Thus, merging enterprises aren’t subject to receiving preferential policies as for a new enterprise because this type policy only applies for new enterprises that haven’t operated in Vietnam yet.
The above is all the information about the merger of foreign enterprises. If Clients wish to further understand information or legal provisions on this issue, please do not hesitate to contact us. NPLaw, with a team of professional lawyers and specialists, will provide Clients with the best legal services.
