Legal framework for enterprise mergers and acquisitions (M&A)
Purchasing and selling a business (also known as M&A stands for Mergers and Acquisitions) is the transfer of ownership of part or all of an enterprise in order to gain control of the acquired business. M&A activity is gradually becoming a popular investment trend in Vietnam and it is one of the business strategies of many investors in international investment and trade activities.
M&A offers many different but extremely attractive benefits for each party in the transaction. For the seller, the sale will help the seller gain an investment capital, help the business reorganize its business activities, build a business plan with new resources, etc. For the buyer, purchasing an enterprise can bring benefits to investors in penetrating the market, grasping business know-how, production lines, reducing time of market penetration, … This is also a form of is chosen by many investors when performing business investment in Vietnam.
However, the current legal framework governing M&A activity is inconsistent and scattered in many different legal documents, causing many difficulties for foreign investors. Luat Su Rieng summarizes and sends to Clients as follows:
- Law on Enterprises: Regulations of M&A as a form of business reorganization, including enterprise mergers and consolidation. It also governs to method and procedures for shares, capital purchases, private enterprise acquisitions, enterprise mergers and consolidation.
- Competition Law: Acknowledging M&A in terms of economic concentration, including mergers, acquisitions, consolidation and joint ventures, providing regulations to limit M&A transactions based on the combined market share of the parties to the transaction.
- Law on Investment: Considering M&A as a form of direct investment including investment in mergers and acquisitions of businesses, purchasing shares or capital contributions to participate in investment management. Provide regulations on the rate of capital contribution and share purchase by foreign investors for the industry sector and conditions for mergers and acquisitions of companies and branches. As for credit institutions, M&A activity is specifically governed in Circular 04/2010/TT-NHNN.
- Commercial Law and Civil Code: Mainly regulates M&A activities in aspects of contracts between parties.
- Tax Law: When implementing M&A, there will normally be significant changes in finance, corporate income taxes, personal income tax, value added tax …
- Accounting Law: Regulations on the merging of financial statements. In addition, it is also specified in the documents as Circular No. 21/2006/TT-BTC, Circular No. 161/2007/TT-BTC …
- Law on Auditing: Examining the financial activities of the business to determine the enterprise’s asset value.
- Intellectual Property Law: Governing aspects of transfer of copyrights, technology, and business secrets between parties.
- Labor Law: Requiring M&A parties to execute their obligations to employees, ie plans to use employees when the deal is successful.
For more details please contact:
LUAT SU RIENG (LSR) LAW FIRM
Address: no. 16 Nguyen Quy Canh Street, An Phu Ward, District 2, Ho Chi Minh City
Hotline: 1900252503. Press No. 1
Email: i[email protected]