Mergers in Vietnam are common and they happen for a lot of strategic business reasons. The most important reasons for any mergers in Vietnam are economic at their fundamental basis. The rules for foreign companies conducting mergers are not always clear and the laws are fluid, but it’s a common practice conducted by many international firms with offices in the country.
Companies often opt for mergers as the most convenient and powerful approach to strengthen their market position. Here are reasons, benefits, requirements, requirements and more for conducting a successful merger in Vietnam.
Reasons and Benefits of a Merger in Vietnam
Below we will highlight several reasons mergers in Vietnam, along with its benefits:
- Increase capabilities such as research and development, manufacturing, and technological advancement opportunities
- Obtain a larger market share
- Cut costs and share financial burdens
- Diversify products and services
- Eliminate competitions
Requirements for a Merger in Vietnam
Under the 2005 Vietnamese Law on Enterprise, only the identical type of companies can conduct a merger in Vietnam. However, this restriction was lifted with the issuance of the 2014 and 2020 Vietnamese Law on Enterprise – a merger in Vietnam is no longer limited to the same type of businesses.
There are several requirements that both merging and merged companies must fulfill as per the 2020 Vietnamese Law on Enterprise:
- The merging company can have a market share starting from 30% up to 50% in the related market
- The merging company is prohibited to own more than 50% of market share in the related market with the exception in these two circumstances: A) one or more companies in the merger is on the edge of having a dissolution or bankruptcy; B) it can help expand exports in Vietnam and contribute to the country’s various developments socially, economically, and technologically.
- Before the merger, the merging company’s legal representative must notify the competition authority, except for cases of the merging company owns more than 30% related market share, or cases where the merging company is still a small-sized or medium-sized enterprise.
Merger Process in Vietnam
This section will give you a description of the process of the merger in Vietnam:
1. Parties involved in the merger in Vietnam shall prepare a draft charter of the merging company and a merger contract. The details of the merger contract include the following:
- Name and address of the merging company’s head office
- Name and address of the merged company’s head office
- The merger’s conditions and procedure
- Employer plan
- Particulars related to assets conversion, and shareholding, bonds, and shares conversion of both merging company and merged company. i.e. procedure, method, time, and conditions
- Duration for the merger implementation
2. The related companies’ shareholders, owners, or members will have to approve the merging company’s charter and the merger contract.
3. Once the contract and charter are approved, the related companies must then send the merger contract to all creditors. They should also notify their employees within 15 days of approval.
4. The merged company shall then terminate its tax identification number by submitting the following documents:
- All reports related to merger decision and meeting, the merging company’s charter, and the merger contract
- The official request for certifying the completion of tax obligations and termination of tax number
- The merger contract with the company’s seal copy
5. The merging company shall then apply for the business registration certificate. The application requirements depend on whether there are any changes to the business registration contents.
How Cekindo can Assist
Cekindo’s merger specialists support business owners, shareholders, investors, and management teams with insightful advice and effective solutions. Our unique breadth and depth of experience allow us to provide professional and no-nonsense assistance to cut through complicated transactions for business mergers in Vietnam.
Our hands-on and bespoke approach, a specialist team of experienced senior advisers, and a dedicated global merger network differentiate us. When you partner with Cekindo, your business and related parties will be genuinely involved in our merger delivery.
So what’s your plan of merger in Vietnam? Let us know by filling out the form below.