Through the Receipt and Reply System to Business Recommendations, ACS Legal Vietnam Law Company Limited (HCMC) requested the competent authorities to guide the implementation of procedures for social insurance in case of mergers of enterprises.

ACS Legal Vietnam Law Company Limited's client is a group including many companies with 100% foreign-owned capital established in Vietnam. These companies have headquarters located in Hanoi and Ho Chi Minh City. The Company's client plans to merge all of the above companies to make it easier to manage and operate the business.

During the planning of implementation process, the Company had questions about the procedures related to employees' insurance when implementing the merger as follows:

According to the Law on Enterprises, “merger” means that one or some companies (“the merged company”) can merge into another company (“the merging company”) by transfer of all legal assets, rights, obligations, and lawful interests to the merging company. After completing the merger procedures, the merged company ceases to exist, the merging company inherits lawful rights and interests, is responsible for unpaid debts, employment contracts, and other property obligations of the merged company.

So, after completing the merger procedures, all obligations of the merged companies, including obligations related to the use of labor, will be taken over by the merging company.

In fact, according to the plan, the merging company is expected to receive all employees of the merged companies after completing the merger.

Through studying the provisions of the law, ACS Legal Vietnam Law Company Limited found that no regulations are guiding the implementation of procedures related to employees' insurance in the case of business mergers.

In this case, although there is a change in the employer, this is considered an inevitable consequence of the merger process. In essence, after completing the merger, the merging company will receive employees as well as all rights and obligations of the merged companies, and employees continue to work as before.

Moreover, according to Clause 1, Article 45 of the 2012 Labor Code, the merging company only needs to amend and supplement the labor contracts but does not need to terminate the old labor contracts and re-sign new ones.

The merged companies do not need to notify the decrease of employees participating in social insurance and close the insurance books for employees. Instead, the merging company will take over the obligation and be responsible for registering the adjustment of information on participation in social insurance after amending the labor contract (as specified in Clause 1, Article 98 of the Law on Social Insurance 2014 and Article 23 Decision 595/QD-BHXH) and continue to pay insurance premiums for employees as per regulations.

For the merger to be carried out quickly, efficiently, and in compliance with the law, ACS Legal Vietnam Law Company Limited requested the competent authority to guide the procedures for insurance for employees that the enterprise is required to follow in the event of a merger.

Regarding this issue, Vietnam Social Security has the following comments:

In Decision No. 595/QD-BHXH dated April 14, 2017 of the Vietnam Social Security, promulgating the procedures for collection of social insurance contributions and premiums of health insurance, unemployment insurance, occupational accident and occupational disease insurance; management of social insurance books and health insurance cards guides in case units are merged into a new one, the following actions shall be taken:

- The merged unit shall make a dossier of notification of decrease (stop) of participation in social insurance, health insurance, unemployment insurance, and occupational accident and occupational disease insurance and fully pay the social insurance, health insurance, unemployment insurance, and occupational accident and occupational disease insurance up to the time of the merger for certification of social insurance books for employees.

- The merging unit shall make a registration dossier (increase report) to participate in social insurance, health insurance, unemployment insurance, occupational accident and occupational disease insurance for employees from the time the merged unit stops participating.

Procedures for stopping or reporting an increase in participation in social insurance, health insurance, unemployment insurance, and occupational accident and occupational disease insurance is following the List of employees participating in social insurance, health insurance, unemployment insurance, and occupational accident and occupational disease insurance (Form D02-TS, issued together with Decision No.595/QD-BHXH).

In case the merging unit changes its information, a declaration of participating units and adjustment of information on social insurance and health insurance shall be made (Form TK3-TS, issued together with Decision No. 595/QD-BHXH).

It is requested that ACS Legal Vietnam Law Company Limited should follow the above instructions and notify the Company's customers to contact the social insurance agency managing the unit’s collection of social insurance, health insurance, unemployment insurance, occupational accident and occupational disease insurance for specific instructions.