LEGAL PROVISIONS ON ENTERPRISE ACQUISITION

Our company is a public joint-stock company and we are posting our share certificates in the Stock Exchange. Then, joint-stock company A, which is not a public joint-stock company, wants to be merged into my company. I would like to know if it’s necessary for company A to become a public joint-stock company to be merged into our company. What is the acquisition procedure? Thank you so much.

FDVN’s opinions:

Thank you for concerning and trusting in FDVN’s legal services. We have studied the law provisions on your request. Please kindly see the answer below

[1]. Legal provisions on enterprise acquisition:

It is stipulated in Clause 1 Article  of Law on enterprise 2020 that “One or some companies (hereinafter referred to as acquired companies) may be merged into another company (hereinafter referred to as the acquirer) by transferring all assets, legitimate rights, obligations, and interests to the acquirer. After that, the acquired companies shall cease to exist.”

Accordingly, joint-stock company A may be merged into your company by transferring all assets, legitimate rights, obligations, and interests to your company and terminating its operation.

If the acquirer reaches 30% – 50% of the market share, legal representatives of the companies shall notify the competition management authority before initiating the acquisition process, unless otherwise prescribed by Law on Competition. Acquisition is prohibited if the acquirer has more than 50% of the market share after acquisition, unless otherwise prescribed by the Law on Competition.

[2]. Acquisition procedures:

According to Clause 1 Article 32 of Law on Securities :

1. A joint-stock company will become a public company in one of the following cases:

a) The company has a contributed charter capital of at least VND 30 billion, an equity of at least VND 30 billion and at least 10% of its voting shares held by at least 100 investors other than major shareholders;

b) The company has successfully made its IPO by registration with SSC as prescribed in Clause 1 Article 16 of this Law.

According to the above provisions, a public company is a joint-stock company, so is company A. Therefore, the procedure for merging joint-stock company A into a public company shall comply with the provisions of Clause 2, Article 201 of the 2020 Law on Enterprise as follows:

a. Procedure

Step 1: The acquiring company and acquired company shall prepare the acquisition contract and draft the charter of the acquiring company. The contract shall contain the name and address of the acquiring company; name and address of the acquired company; procedures and conditions for acquisition; employment plan; method, procedures, deadline and conditions for transfer of assets, shares/stakes, bonds of the acquired company to the acquiring company; acquisition time;

Step 2: The members, owners or shareholders of the companies shall ratify the acquisition contract and the acquiring company’s charter and apply for registration of the acquiring company in accordance with this Law. The acquisition contract shall be sent to the creditors and employees within 15 days from the day on which it is ratified;

After the acquiring company is registered, the acquired companies shall cease to exist. The acquiring company shall inherit the lawful rights and interests, liabilities, unpaid debts, employment contracts and other obligations of the acquired company under the acquisition contract.

The business registration authority shall update the status of the acquired company to the national enterprise registration database and revise the Certificate of Enterprise Registration of the acquiring company. In case the acquired company is headquartered outside the province in which the acquiring company is headquartered, the business registration authority of the province in which the acquiring company is headquartered shall request the business registration authority of the province in which the acquired company is headquartered to make the update. (Clause 4, Article 201 of the 2020 Law on Enterprise)

Above is FDVN Law Firm’s legal opinion regarding your request. Hopefully, FDVN’s advice will be helpful to you.

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