ACS Legal Vietnam Law Company Limited is advising on procedures for a merger, capital contribution, purchase of shares/stakes for a 100% foreign-invested enterprise with branches in many localities. Through the Receipt and Reply System to Business Recommendations, the Company requests the competent authorities to answer some problems regarding these issues.

ACS Legal Vietnam Law Company Limited's client is a group including companies with 100% foreign-owned capital established in Vietnam. These companies have headquarters located in Hanoi and Ho Chi Minh City and have branches in other provinces and cities such as Da Nang, Nha Trang, Binh Duong, Dong Nai, and Can Tho.

The client of ACS Legal Vietnam Law Company Limited plans to merge all of the above companies to make it easier to manage and operate the business.

According to Clauses 2 and 5, Article 195 of the Law on Enterprises 2014, Article 61 of Decree 78/2015/ND-CP, and Article 7 of Circular 20/2015/TT-BKHDT, ACS Legal Vietnam Law Company Limited understands that to register for a merger, the merging company will submit an enterprise registration dossier following the law and after the merging company is granted an Enterprise Registration Certificate, Business Registration Offices in provinces will terminate the existence of branches, representative offices and business locations of the merged companies and terminate the existence of such merged companies.

In fact, the merged companies in the group of the ACS Legal Vietnam Law Company Limited’s client have a total of nearly 30 branches and business locations in many different provinces, so if it is necessary to terminating the operation and closing the tax code of each branch and business location before the merger, it will take a lot of time and expense, prolong the merger process and affect business operation of the enterprises.

Therefore, to carry out the merger quickly and effectively, the Company requested the authorities to have further guidance on the merger process and comments on the Company's understanding.

In case the above interpretation is not consistent with the spirit of the law, the Company asks for more specific instructions so that the enterprise can carry out the merger in compliance with regulations.

Regarding the procedures for registration of capital contribution, purchase of shares/stakes, the merged companies are all single-member limited liability companies with 100% foreign investment capital established in Vietnam. These companies all operate mainly in the field of fitness, fitness and yoga center services. After completing the merger, the merging company will become a multiple-member limited liability company with 100% foreign investment capital (with charter capital equivalent to the total charter capital of the merged companies), and the investors of the merged companies will become investors as well as members of the merging company.

Although there is a change in the number of investors as well as the amount of charter capital in the merging company, in this case, there is no actual contribution of capital or purchase of shares in the merging company.

ACS Legal Vietnam Law Company Limited understands that investors do not need to carry out the procedures for registration of capital contribution, purchase of shares/stakes as prescribed in Article 26 of the Law on Investment 2014 before proceeding with the procedures for a merger of enterprises.

However, in case the understanding of the Company is not consistent with the spirit of the law, the Company requests the authorities to give specific instructions for the enterprise to carry out the merger in compliance with regulations.

In this regard, the Ministry of Planning and Investment replied as follows:

Clause 1, Article 195 of the Law on Enterprises stipulates “One or some companies (hereinafter referred to as merged company) may be merged into another company (hereinafter referred to as the merging company) by transferring all assets, legitimate rights, obligations, and legitimate interests to the merged company, and at that time the merged company shall cease to exist”.

Documents, orders, and procedures for merging enterprises are specified in Article 195 of the Law on Enterprises.

Clause 1, Clause 3, Article 61 of the Government's Decree No. 78/2015/ND-CP dated September 14, 2015, on business registration stipulates:

"1. Within 3 working days from the day on which the transferee companies (after a full division), the consolidated company, the merging company is granted the Certificate of Business Registration, the Business Registration Office where the transferor company, the consolidating company, the merged company located shall remove them from the National Enterprise Registration Database.

3. In case the headquarters of the transferor company, the consolidating company, the merged company is located outside the province or centrally run city where the headquarters of the transferee company, the consolidated company, or the merging company is situated, the Business Registration Office in the province of the transferee company, the consolidated company, the merging company shall send information to the Business Registration Office in the province of the transferor company, the consolidating company, or the merged company to remove the existence of the transferor company, consolidating company, or the merged company from the National Enterprise Registration Database”.

Clause 3, Article 7 of Circular No. 20/2015/TT-BKHDT dated December 1, 2015, of the Ministry of Planning and Investment guiding on business registration stipulates: “Before termination of the existence of a transferor company, consolidating company, or merged company as regulated in Clause 1, Clause 3, Article 61 of Decree No. 78/2015/ND-CP, the Business Registration Office shall terminate the existence of all branches, representative offices, business locations of the transferor company, the consolidating company, the merged company”.

Procedures for capital contribution, purchase of shares/stakes

Clause 2, Article 46 of Decree No. 118/2015/ND-CP dated November 12, 2015, of the Government detailing and guiding the implementation of some articles of the Law on Investment, stipulates that any economic organization invested by a foreign investor through capital contribution or purchase of shares/stakes shall follow procedures for registration of change of members or shareholders at a business registration authority under regulations of law on enterprises and other regulations of law relevant to its type of economic entity, except for the following cases:

a) Foreign investor contributes capital to or purchases shares/stakes of the economic organization whose business lines are subject to conditions applied to foreign investors;

b) The capital contribution or purchase of shares/stakes that leads to a foreign investor or economic organization specified in Point a, Point b, and Point c Clause 1 Article 23 of the Law on Investment holding 51% of charter capital of the economic organization or more in the following cases: Increase the charter capital held by the foreign investor from less 51% to 51% or more and increase the charter capital held by the foreign investor while such foreign investor is holding 51% charter capital of the economic organization or more”.

Documents, orders, and procedures for capital contribution and share purchase by foreign investors are specified in Clause 2, Article 26 of the Law on Investment and Clause 3, Article 46 of Decree No. 118/2015/ND-CP.