Company consolidation procedures: Detailed instructions from A – Z

Company consolidation procedures is a procedure that helps businesses optimize operations and improve competitiveness. This procedure includes many steps, from preparing documents to business registration and terminating the existence of the merged companies. The article below will provide detailed information about company consolidation procedures, helping customers clearly understand the process to perform effectively.

What is corporate consolidation?

Company consolidation is a form of business reorganization whereby two or more companies (the merged company) merge into a new company (the consolidated company). The merged company will terminate its operations after completing the procedures. The consolidated company inherits all rights, obligations, and legal interests of the merged companies.

Corporate consolidation brings many benefits, including enhancing financial strength, expanding market share, optimizing resources and improving operational efficiency. However, this process requires careful preparation and strict compliance with legal regulations.

>>> See more: How to Merge a Subsidiary Company into the Parent Company

Company consolidation procedures

Procedures for company consolidation are detailed in Article 200 of the Law on Enterprise 2020 and Decree 01/2021/ND-CP, including the following steps:

Through the company consolidation contract

The consolidated company prepares the consolidation contract and draft charter of the consolidated company. The consolidation contract should have 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.

Members, company owners or shareholders of the consolidated company shall approve the consolidation contract, charter of the consolidated company, elect or appoint the Chairman of the Board of Members, President of the company, Board of Directors, Director or General Director of the consolidated company.

The consolidation contract must be sent to creditors and notified to employees within 15 days from the date of approval.

>>> See more: Distinguish between forms of merger and consolidation of businesses.

Business registration for companies formed on the basis of consolidation

According to Clause 3, Article 25 of Decree 01/2021/ND-CP, the business registration dossier for the consolidated company needs to include:

• Application for business registration.
• Company charter.
• Copies of personal legal documents for the legal representative of the business.
• Copies of legal documents of individuals for owners who are individuals, of organizations for owners who are organizations. Legal documents of the individual for the authorized representative and document appointing the authorized representative. For company owners who are foreign organizations, copies of the organization’s legal documents must be consular legalized.
• Consolidation contract.
• Resolution and decision on approving the company consolidation contract of the merged companies and copy of the meeting minutes of the Board of Members for limited liability companies with two or more members, partnerships, of the General Meeting of Shareholders for joint stock companies on approving the consolidation contract to establish a new company.

Where to submit application: Business registration agency where the merged company’s headquarters is located

Resolution deadline: The Business Registration Office issues the business registration certificate within 03 working days from receipt of valid documents.

Note:

• The business registration agency updates the legal status of the merged company on the national business registration database when issuing a business registration certificate to the merged company.
• In case the consolidated company has its headquarters address outside the province or centrally run city where the consolidated company’s headquarters is located, the business registration agency where the consolidated company’s headquarters is located must notify the business registration to the business registration office where the consolidated company’s headquarters is located to update the legal status of the merged company on the national database on business registration.

Termination of existence of the merged company

• After the merged company is granted business registration, the merged company changes to the merged legal status. The business registration agency where the merged company is headquartered sends information to the Tax Authority. The tax authority is responsible for sending information to the Business Registration Authority about the enterprise’s completion of settlement and transfer of tax obligations.
• Within 01 working day from the date of receiving information from the Tax Authority, the Business Registration Authority where the merged company is headquartered will update the legal status of these companies in the National Database according to the process on the National Business Registration Information System.
• The business registration agency terminates the existence of branches, representative offices, and business locations of the merged company before terminating the existence of these companies in the National Database.
• In case the consolidated company has a headquarters address outside the province or centrally run city where the consolidated company’s headquarters is located, the Business Registration Authority where the consolidated company is located sends information to the Business Registration Authority where the merged company’s headquarters is located to terminate the existence of these companies in the National Database.

Things to note when carrying out company consolidation procedures

Before consolidating the company, the parties need to pay attention to the following issues to ensure the consolidation process takes place effectively:

• First, it is necessary to carefully evaluate the financial situation, operations and related factors of the companies participating in the merger.
• Second, the merger contract needs to be drafted in detail and clearly, ensuring the rights of the parties and complying with the law.
• Third, notification to creditors and employees is mandatory to ensure their rights.
• Finally, it is necessary to prepare complete documents and follow the correct order of business registration procedures at the competent state agency.

Consulting services and guidance on company consolidation in Long Phan Consulting Company

Long Phan Consulting Company provides comprehensive consulting and support services during the company consolidation process. With a team of experienced experts, we provide customers with optimal solutions, ensuring the consolidation process takes place smoothly and effectively. Our services include:

• Comprehensive advice on legal aspects of the merger process.
• Due diligence of companies participating in the merger.
• Draft and negotiate the consolidation contract and charter of the consolidated company.
• Consulting and support in handling labor, financial, tax and other related legal issues.
• Representing customers in working with competent state agencies.
• Consulting on building organizational structure, management and operation of the company after the merger.
• Support post-merger procedures.
• Consulting on labor use plans after consolidation.
• Negotiate with creditors and resolve debts of the merged company.
• Consulting and answering other related issues.

Frequently asked questions about company consolidation procedures

Customers can refer to the frequently asked questions below:

Does corporate consolidation affect employee rights?

The consolidation contract must have a labor use plan, ensuring the rights of employees according to the provisions of law. The merged company inherits obligations to employees from the merged companies.

How long does it take to complete company consolidation procedures?

The time to complete company consolidation procedures depends on many factors, including the complexity of the transaction, document preparation and processing time of competent state agencies.

After consolidation, is the consolidated company responsible for the debts of the merged company?

Yes, the merged company inherits all rights and obligations, including debts, of the merged company.

What content does a company merger contract need to contain?

The company consolidation contract needs to have the following main contents: name and head office address of the merged company and the consolidated company; merger procedures and conditions; labor use plan; deadlines, procedures and conditions for converting assets, converting capital contributions, shares, and bonds; time limit for implementing the merger.

What documents need to be prepared for business registration for the consolidated company?

Documents include: Business registration application, company charter, copies of legal documents of relevant individuals and organizations, consolidation contract, resolution/decision approving the consolidation contract..

Is it necessary to notify creditors when consolidating a company?

Yes, the merged company must notify creditors within 15 days from the date of approval of the consolidation contract.

What costs can corporate consolidation help optimize?

Company consolidation can help optimize costs such as management costs, operating costs, marketing costs and financial costs.

What potential risks may arise during the company merger process?

Potential risks include: corporate culture conflicts, system integration difficulties, legal risks and financial risks.

Conclude

Merging a company is an important strategic decision, bringing many opportunities but also many potential challenges. Mastering the implementation process is a factor in ensuring the success of this process. With extensive experience and expertise, Long Phan Consulting Company is confident to be a reliable partner, accompanying customers on the path of sustainable development. Customers who need advice and support on company consolidation procedures, please contact the hotline: 0906735386.