Before carrying out merger or acquisition (M&A), enterprises need to research carefully regulations of law to protect their rights and interests. Regulations on each aspect of M&A activities are referred to in various legal documents such as Law on Enterprises, Commercial Law, Competition law, Law on Investment, Civil Code …
When carrying out
M&A, enterprises should also pay attention to some basic terms in the
contract. The M&A lawyers should be referred to for effective process and
minimizing risks of the transaction. Definition, this term is used to define
words, phrase used many times or unified understanding between the parties or
abbreviations.
Entity, the parties
should specify the parties’ information such as: corporate names, address of
headquarter, name, position of legal representative, identity card number (or
passport number) of legal representative, corporate tax code, … according to
enterprise registration certificate or investment registration certificate.
When entering into contract, the parties can contact and ask partners to
provide copies of enterprise registration certificate or investment
registration certificate to ensure correct information and authority to sign.
M&A
conditions in M&A contract. Conditions for M&A are conditions agreed
by two parties to carry out M&A. M&A is carried out only when these
conditions have been met. These conditions include conditions agreed by General
Meeting of Shareholders, Board of Directors, the company owner; Conditions of
announcing company status, financial obligations, business activities …,
announcing to relevant third parties; Conditions of business activities,
company activities; Conditions of people, personnel.
Declaration and
commitment of both parties on the status of enterprises, contract need to have
term of affirmation and commitment of seller about corporate debt. This will
limit disputes and risks for the buyer.
Determination of assets
and financial obligations in M&A contract. This determination includes time
of determination, entity, related costs, methods for disposal of assets.
Transfer of rights and
obligations in M&A contract. The time of transfer, the time of enjoying
rights and generating obligations, the conditions for transfer, the mode for
transfer, the transfer procedures and the papers, documents needed to transfer,
includes: transfer of ownership rights, economic rights; transfer of effective
contract; Arising benefits enjoyed by merged company; Tax obligations,
insurance obligations, wages for employees and debt repayment obligations.
Methods and time of
payment, parties need to specify methods for payment and specific duration of
payment with amount of each installment payment. In order to ensure safety, the
parties should request a competent reputable organization to provide
intermediary financial services. This third party will stand out to ensure the
parties of the contract to comply correctly and legally with the agreement.
Conditions, time limit,
procedure of M&A, the buyer needs to specify attached conditions and specific
time in process of M&A to let the seller perform obligations of transfer of
asset, stocks, shares under regulations of contract. Procedures include
procedures under law and other procedures under company’s charter.
Legal rights and
obligations, parties need to detail obligations in previous period, during and
after contract performance as well as the specific time of termination.
Time limit of contract
performance, parties need to specify the time of taking effect and termination,
or arising grounds which result in the termination of the contract.
Term of dispute
resolution, dispute may be brought to the competent
Court or Commercial Arbitration for settlement.
Term of fines against
violations is also necessary to pay attention. This is a type of sanctions made
by the parties but this must be suitable for the regulations of law.
Force majeure clause.
Force majeure is a legal event arising out of subjective will of the parties.
These cases make one or both parties unable to perform or perform improperly
their obligations. When breaching the contract due to a force majeure event, the
law would not force to take responsibility for the asset.
Besides, merger
contract should have term of transfer of stock, term of employee utilization
plan after merger and acquisition.
ANT Lawyers is a
law firm in Vietnam located in the business centers of Hanoi, Danang, Ho
Chi Minh city. We provide convenient access to our clients. Please contact us
to book your time in advance to let us provide our best services.
Merger and Acquisition (M&A) activities in Vietnam have been rapidly increasing over the the years in value and number of transactions when Vietnam’s opening policies to attract foreign investments loosen up. The M&A due diligence and execution are therefore important steps to ensure a successful transaction.
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