To expand the scope and scale of operations, enterprises may choose to merge companies in accordance with legal regulations and actual operational needs. Among these, mergers of joint stock companies are particularly common.
So what is the current situation regarding the merger of joint stock companies? What are the legal regulations concerning such mergers? What are the existing obstacles that need to be clarified?
To answer these questions, Ngoc Phu Law Firm would like to share the following information:
I. Current situation of Joint Stock Company mergers
The practice of merging joint stock companies has become quite common. However, in reality, the following issues are often encountered:
- Companies agree to transfer all their assets and legal interests to form a new company but fail to complete the proper procedures for establishing a merged company as required by law. In practice, the merged companies transfer all assets to the newly established company, but other financial obligations remain with the original companies and are not properly transferred according to merger procedures.
- Some companies do complete the procedures to establish the new merged entity but fail to fulfill the requirements for notifying economic concentration as prescribed by the Law on Competition, either due to a lack of knowledge about thresholds, procedures, and processes or deliberately avoiding compliance.
II. Legal provisions on the Merger of Joint Stock Companies
1. When is a merger of joint stock companies conducted?
The merger of joint stock companies occurs when two or more joint stock companies agree to transfer all their assets, rights, obligations, and legal interests to form a new company, while terminating the existence of the merging companies. This is only allowed if it meets the legal conditions for mergers.
(According to Article 200 of the Law on Enterprises 2020 and Clause 3, Article 29 of the Law on Competition 2018).
2. Conditions for merging Joint Stock Companies
The conditions include:
- The merged companies must agree upon the merger contract, labor use plan, duration, procedures, and conditions for asset transfer, and the charter of the new company.
- The merged companies must send the merger contract to creditors and notify employees within 15 days from the date of approval.
- The merged companies must comply with the requirement to notify economic concentration if it meets the threshold under Article 33 of the Law on Competition 2018.
- The merger must not fall under prohibited cases as stipulated in Article 30 of the Law on Competition 2018.
(According to Clauses 2 and 3, Article 200 of the Law on Enterprises 2020; Articles 30, 33 of the Law on Competition 2018; Article 13 of Decree No. 35/2020/ND-CP).
3. Dossier and procedures for merging Joint Stock Companies
This section focuses on dossier and procedures of the most common case where mergers are not subject to economic concentration notification under the Competition Law 2018.
Dossier for enterprise registration based on the merger of joint stock companies includes:
- Merger contract as per Article 200 of the Law on Enterprises.
- Resolutions or decisions of the merged companies approving the merger contract, with minutes of the shareholders’ general meeting.
- Application for enterprise registration.
- Charter of the merging company.
- List of founding shareholders and foreign investor shareholders.
- Copies of the following documents:
+ Legal documents of the legal representative of the enterprise.
+ Legal documents of founding shareholders and foreign investor shareholders (individuals or organizations); and Legal documents of authorized representatives (individuals) of founding shareholders and foreign investors shareholders (organizations), and documents appointing authorized representatives. In addition, for members and shareholders who are foreign organizations, copies of legal documents of the organization must be consularized.
+ Legalized copies of documents for foreign organizational members.
- Investment registration certificate if the enterprise is founded or joined by foreign investors or economic organizations with foreign investment capital as prescribed in the Law on Investment and its implementing documents.
- Power of attorney for an individual implementing the procedures for business registration and copy of ID of the authorized person (in case of authorizing to implement)).
(According to Clause 1, Article 12; Article 23; Clause 3, Article 25 of Decree No. 01/2021/ND-CP).
Procedures include the following steps:
- Step 1: Prepare the dossier, hold a meeting to approve the draft merger contract, draft new company charter, and elect/appoint the Board of Directors and Director/General Director.
+ Shareholders of the merged company prepare sufficient documents according to regulations and organize a meeting to approve the merger contract, the Charter of the merging company, elect or appoint the Board of Directors, Director or General Director of the merging company.
+ Merged companies must send the approved merger contract to creditors and notify employees within 15 days.
- Step 2: Submit the enterprise registration dossier for the merging company.
+ Submit the application through the National Business Registration Portal at https://dangkykinhdoanh.gov.vn.
Guidance: Download electronic documents, sign business registration documents via the electronic information network and pay business registration fees according to the process stated in the Portal.
- Step 3: Receive application receipt.
+ After submission, an electronic receipt will be issued.
- Step 4: Process application.
+ The Business Registration Office will grant enterprise registration within 3 working days if the dossier is valid. If not, a notice will be sent requesting amendments.
- Step 5: Public registration content.
+ The information of the merging company will be published on the National Business Registration Portal.
+ The legal status of the merged companies will be updated in the national database.
(According to Clauses 2, 4, 5, Article 200 of the Law on Enterprises 2020; Articles 32–35, 42–44 of Decree No. 01/2021/ND-CP).
III. Questions about merging Joint Stock Companies
1. Is the merger format the most important factor when merging joint stock companies?
Yes. The merger format is crucial to ensure legality and efficiency. Accordingly, drafting a detailed merger contract and company charter, and meeting to adopt the drafts and electing management positions is essential.
(According to Clause 2, Article 200 of the Law on Enterprises 2020).
2. Is the new merging joint stock company liable for the debts of the merged companies?
Yes. The newly merging company assumes liability for all debts and obligations of the merged entities.
(According to Clause 4, Article 200 of the Law on Enterprises 2020).
3. What is the duration to complete a merger?
The merger must be completed within 10 working days from the date the merger contract is approved.
(According to Clause 2, Article 30 of the Law on Enterprises 2020).
IV. Legal consulting services related to the merger
Ngoc Phu Law Company Limited has experience in consulting and implementing joint stock company merger procedures. Our services include:
- Receiving client information and initiating relevant procedures.
- Consulting and guiding clients on document preparation.
- Drafting documents and representing clients in dealings with competent authorities.
- Receiving and delivering final results to clients.
Above is the information provided by NPLAW regarding mergers of joint stock companies. If you have any related questions or need further clarification, please contact us through the following information:
