1. What is a company or business consolidation?
A business consolidation is an organization that redefines an enterprise, including two or more companies, which can be combined or remade into a new company by transferring all assets, rights, obligations, and legal obligations. To the consolidation of the company, and at the same time the existence of the consolidating company.
The new company does not have to have the same legal status as the previously merged company. Because after merging into a new company, there must also be a change in the organizational structure, so it is mandatory for the new company to have the same legal form as the old company for the reason of limiting the inconsistency between the new company and the previous company is not really necessary.
2, Regulations on company consolidation
– Business consolidation creates a new company and terminates the existence of old companies.
– The consolidating company enjoys lawful rights and interests and is responsible for performing all obligations of the consolidated companies.
– The consolidated company shall register for an enterprise in accordance with the provisions of the Enterprise Law 2020.
3. Procedures for company consolidation
The consolidated company prepares the consolidation contract and draft the charter of the consolidated company.
Members, company owners or shareholders of the consolidated company approve the consolidation contract, the charter of the consolidated company, elect or appoint the Chairman of the Members' Council, the President of the company, Board of Directors, Director or General Director of the consolidating company and conduct business registration for the consolidating company in accordance with this Law. The consolidation contract must be sent to creditors and notified to employees within 15 days from the date of approval.
The business registration authority updates the legal status of the consolidated company on the national business registration database when issuing the Business Registration Certificate to the incorporated company.
4. Consequences of business and company consolidation
In terms of assets
The consolidating enterprise enjoys lawful rights and interests, is responsible for unpaid debts and labor contracts, and property obligations of the consolidated enterprises, from the time the consolidating enterprise was formed and is now registered as a business – the consolidated (previously individual) businesses cease to exist.
Related to the provisions of the law on competition
Post consolidation, it is necessary to pay attention to the provisions of lawful competition, otherwise the merger will not be carried out. If the consolidation results in the consolidated enterprise accounting for more than 50-percent (50%), it will not be approved by the competent authority.
If the market share is between 30-50-percent (30-50%), the enterprise must notify the competition authority before conducting the consolidation. Only after obtaining approval from the competition authority will the enterprise be allowed to carry out the consolidation procedure.
Above is some brief information about business consolidation and related legal issues. Business consolidation is a rather complicated procedure, and may require professional legal consultation and intervention. Further inquiries or requests for legal advice and/or assistance, please contact us via hotline +84-916-545-618 or email hung.le@cnccounsel.com and thanh.tran@cnccounsel.com We’re available to provide effective and efficient advice and resolutions at the most reasonable cost to you.
