I. Definition

According to the 2020 Enterprise Law, two or more companies can merge into a new company, simultaneously terminating the existence of the merged companies.

After the merged company registers the business, the merged companies cease to exist; the merged company inherits the legal rights and benefits and is responsible for the obligations, unpaid debts, labor contracts, and other asset obligations of the merged companies. The merged company automatically inherits all rights, obligations, and legal benefits of the merged companies according to the merger agreement.

The simple formula is as follows: A + B = C

II. When to Merge a Business?

Merging businesses is a way to pool strength in the shortest time. The merger of companies within the same sector will create significant competitive power in the market.

Therefore, when you feel your business is limited in financial resources or workforce, you may start looking for partners. In reality, many companies are in this situation.

However, business mergers also have some limitations. When merging, businesses need to reorganize their management structure, personnel, and business model. If the merged companies have debts, the merger could become a burden. This is a significant challenge for businesses. Therefore, before deciding to merge a company, you should carefully evaluate and research the remaining companies.

III. Conditions for Merging Businesses

To merge businesses, certain conditions must be met:

• The companies merging must agree on the merger procedure and conditions, workforce utilization plan, asset conversion procedures and conditions, etc., through the merger agreement;
• The members, company owners, or shareholders of the merged companies must approve the merger agreement, the charter of the merged company, elect or appoint the Chairman of the Members’ Council, Chairman of the company, Board of Directors, CEO, or General Director of the merged company. The merger agreement must be sent to creditors and notified to employees within 15 days from the date of approval;
• It must be notified to the National Competition Committee before the merger if: the merger takes place outside of Vietnam, the transaction value is 1,000 billion VND or more, or the combined market share of the merging companies is 20% or more in the relevant market in the fiscal year immediately preceding the planned economic concentration.

IV. Merger Procedures

• The merged company prepares the merger agreement and the draft charter of the merged company.
• The members, owners, or shareholders of the merged companies approve the merger agreement and the charter of the merged company.
• Elect or appoint the Chairman of the Members’ Council, Chairman of the company, Board of Directors, CEO, or General Director of the merged company and proceed to register the business for the merged company.
• The merger agreement must be sent to creditors and notified to employees within 15 days from the date of approval.

V. Contents of the Merger Agreement

The merger agreement must include the following main contents:

• Name and address of the headquarters of the merged company;
• Name and address of the headquarters of the merged company;
• Merger procedure and conditions;
• Workforce utilization plan;
• The time limit, procedures, and conditions for converting assets, capital contributions, shares, and bonds of the merged company into the capital contributions, shares, and bonds of the merged company;
• Time limit for the merger.

VI. Legal Consequences of Merging Businesses

The legal consequences after merging businesses are as follows:

• The merger creates a new company (the merged company) and terminates the existence of the merged companies.
• The merged company enjoys all legal rights and benefits and is responsible for fulfilling all obligations of the merged companies.
• The companies involved in the merger will have decision-making rights in the Board of Directors of the merged company depending on each party’s capital contribution.
• The merged company proceeds to register the business in accordance with the 2020 Enterprise Law.

VII. Significance of Merging Businesses

1. For the Merged Business

• Improves the financial situation of the business: increases capital available for the business, improves access to funding, shares risks, and increases transparency.
• Strengthens the market position: increases market share, expands customer base, utilizes customer relationships, leverages cross-selling services, and enhances competitiveness.
• Reduces short-term costs: minimizes duplication in distribution networks, saves operating costs, and reduces administrative and management costs.
• Exploits long-term economies of scale: optimizes technology investment returns, leverages successful experiences from both parties, and reduces shared costs for each product unit.

2. For the Development of the Economy

Through business restructuring, the merger aims at restructuring the economy. In this process, weak businesses will either be eliminated or restructured more efficiently.

VIII. About Us, Hankuk Law Firm

■ Hankuk Law Firm – Introduction

The goal of the legal services provided by HANKUK LAW FIRM is to support businesses, investors, and people. Our organization employs skilled Korean lawyers, partners, and professionals to provide legal services to businesses related to corporations and litigation.

To support the startup process, our lawyers and staff provide a wide range of services, including business law consulting, tax and immigration law consulting, real estate services, business consulting, marketing and communications, human resources, product distribution, franchise options, etc. We provide expert advice on every aspect of your business needs.

To protect the legitimate rights and interests of our clients and achieve the best results, we provide legal advice and participate in civil lawsuits related to business, labor, marriage, family, and inheritance.

■ Contact us now

For reliable and effective legal advice, please contact HANKUK LAW FIRM now. We are committed to providing you with the best possible answers and our team of experienced lawyers has extensive knowledge in many legal fields. We are always here to provide the most competent and dedicated support, whether you are dealing with contractual issues, commercial disputes or need guidance on foreign investment. HANKUK LAW FIRM is honored to have assisted hundreds of domestic and international clients in skillfully resolving complex legal issues as their trusted legal partner. Do not let legal issues hinder your success. Let us accompany you towards legal achievement and comfort. For prompt guidance and support to ensure your rights are always maintained at the highest standards, contact HANKUK LAW FIRM now.

■ Contact Hankuk Law Firm:

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