Detailed instructions on business consolidation procedures 2024

Business consolidation is an important process for companies looking to expand their business. Business consolidation needs to comply with regulations on documents and procedures to ensure the consolidation process takes place as planned and ensures the validity of the consolidation process. The article below by Long Phan will provide detailed instructions on business consolidation procedures, helping businesses clearly understand the steps that need to be taken.

What is business consolidation? Characteristics of business consolidation

A business consolidation is the process of combining two or more companies into a new company. This process leads to the cessation of existence of the merged companies. The newly formed company will inherit all rights and obligations of the old companies.

Key features of business consolidation include:

• Creating a new legal entity: The consolidated company is a completely new organization, with separate legal status.
• Termination of existence of old companies: Companies participating in the merger will no longer legally exist after the process is completed.
• Inherit all rights and obligations: The new company will take over all assets, liabilities, contracts and legal obligations of the old companies.
• Compliance with legal regulations: The consolidation process must comply with the provisions of the Law on Enterprises and Competition Law.

Business consolidation is often done to enhance competitiveness, expand market share or optimize resources. However, this process also requires careful preparation and compliance with strict legal procedures.

Pursuant to the content of Clause 1, Article 200 of the Law on Enterprises 2020

Business consolidation procedures in 2024

Business consolidation is a method of reorganizing a business that has a clearly defined legal framework. This is a recommended method, especially among small and medium-sized companies. This is significant in promoting the competitiveness of companies, creating outstanding growth and great synergy.

The business consolidation procedure is a complicated procedure, requiring high consensus and consensus among the companies participating in the consolidation.

Step 1: Legal appraisal of the company participating in the merger

Before carrying out the merger, companies need to conduct a comprehensive appraisal of the Company participating in the merger. Depending on each different case, the parties can perform legal, financial, technical, market appraisal,…

The purpose of this activity is to comprehensively summarize and evaluate the company’s legal activities, ensuring the standardization of the company’s legal documents, documents, and records.

• Regarding legal documents: identify licenses, approvals, and specialized approvals granted by competent state agencies
• Regarding assets: The parties need to carry out an inventory of assets, prepare a list of debts, and handle the assets of the companies participating in the merger. At the same time, the consolidated company needs to evaluate the rate and percentage of depreciation of the real estate and the ability to transfer use rights and ownership rights that must be registered.
• Regarding labor: The consolidated company needs to receive labor or have a plan to restructure labor after the merger. The consolidated company needs to identify important personnel positions, the labor contract term of these positions, and the compliance with labor laws of the merged companies during the personnel management process. the.
• Regarding contracts: When merging a company, because the number of contracts, agreements, and commitments can be very large, when performing legal due diligence, it is necessary to determine which contracts, agreements, and commitments are evaluated. Price is important.

Then, identify the risks, legal consequences, and potential of the contracts, agreements, and commitments, and come up with a plan to liquidate or transfer rights and obligations to continue implementing the contracts and agreements. agree, commit.

Step 2: Plan to merge businesses

After performing legal appraisal of the businesses participating in the merger, relevant parties make assessments and plan the merger. Specifically:

• Building a consolidated transaction structure;
• Determine the obligations and tasks that need to be completed as the merged companies before carrying out the consolidation in stages;
• Prepare the necessary work to transfer rights, obligations, assets… from the merged company to the consolidated company;
• Prepare necessary issues for the consolidated company in terms of finance, legal, labor… when operating as a new legal entity.

Step 3: Internal approval

This is an important document in the process of implementing business consolidation. When doing so, merged companies can prepare internal approval documents in the following two directions:

First: merged companies make two types of internal approvals. This helps new companies manage their internal affairs in their own way while still complying with legal regulations

Second: The merged company only makes one type of internal approval. This document includes both separate and specific agreement issues according to the actual operations of the merged Company and issues clearly stipulated in legal documents. The limitation of internal approval in this case is that it may be refused or requested to be removed by state agencies for contents related to the company’s operational practices that have not been specified in the documents. legal regulations.

Step 4: Negotiate the contract

The consolidation contract is an important basis for the parties to carry out the business consolidation process. Drafting the consolidation contract is done after the merged company and the consolidating company have completed the above procedures.

Based on the content of Clause 2, Article 200 of the Law on Enterprises 2020, the consolidation contract must include the following main contents:

• Name and head office address of the merged company;
• Name and head office address of the consolidated company;
• Procedures and conditions for consolidation;
• Labor use plan;
• Time limit, procedures and conditions for converting assets, converting capital contributions, shares, and bonds of the merged company into capital contributions, shares, and bonds of the consolidated company;
• Time limit for consolidation implementation

Step 5: Sign the consolidation contract and notify relevant parties

Signing a consolidation contract is an important step in the process of integrating businesses. At this signing step, the parties have almost completed the business consolidation procedures. The parties need to ensure the conditions for the merger contract to be legally effective. It should be noted that the consolidation contract must be sent to creditors and notified to employees within 15 days from the date of approval.

Notification must be done officially and completely. Parties requiring notification include shareholders, customers, suppliers, employees and state regulatory agencies. The purpose of the notification is to ensure all relevant parties are aware of this change, avoiding unnecessary misunderstandings or disputes.

Step 6: Carry out business consolidation

The consolidated company carries out the business consolidation plan according to the agreed roadmap and progress. This process may cause changes in time, implementation progress and other practical issues that the business cannot foresee. Therefore, the parties involved in the consolidation need to coordinate and work closely with relevant parties and closely monitor the consolidation progress to ensure the consolidation plan.

The issue of termination of existence of the merged company

The termination of the existence of merged companies is an inevitable consequence of the business consolidation process. Some points to note when the merged company ceases to exist in reality are as follows:

• Time of termination: The merged companies officially cease to exist from the time the merged company is granted a Business Registration Certificate.
• Transfer of rights and obligations: All rights, obligations and legal interests of the merged companies are transferred to the merged company.
• Handling assets and debts: The merged company inherits and is responsible for unpaid debts, labor contracts and other property obligations of the merged companies.
• Update legal status: The business registration agency will update the legal status of merged companies on the National Business Registration Database.

The process of terminating the existence of merged companies needs to be carried out transparently and in compliance with legal regulations, ensuring the rights of all stakeholders.

Pursuant to the content specified in Clause 4, Article 200 of the Law on Enterprises 2020, Article 73 of Decree 01/2021/ND-CP of the Government dated January 4, 2021 on business registration.

Professional business merger procedure consulting services

Long Phan’s business consolidation procedure consulting service provides professional and effective support during the consolidation process, with the following service scope:

• Analyze the feasibility and benefits of business consolidation
• Drafting merger contracts and related legal documents.
• Consulting on developing new company charter and/or shareholder and member agreements as required;
• Plan and monitor the consolidation process.
• Support in preparing documents and carrying out business registration procedures after company merger

Professional consulting services help businesses save time, minimize legal risks and optimize benefits from the merger process.

Business consolidation is an important process that helps companies expand their business operations. The above article has provided guidance on business consolidation procedures, providing information on documents, processes, and steps to be taken. If your business has difficulty during the consolidation process, please contact Long Phan via hotline: 0906.735.368 for support.