M&A transaction structure
M&A Transaction Structure
The structure of an M&A transaction is a crucial factor determining the success of the deal, directly impacting legal issues, taxes, and risks for all parties involved. Choosing the right transaction structure requires careful consideration.
Buying and selling shares/equity stakes.
Characteristic:
- The buyer acquires a portion or all of the existing shareholders/members.
- The target business continues to maintain its legal status, and its rights and obligations remain unchanged.
- The buyer becomes a new shareholder/member of the target company.
Advantages:
- The procedure is simple; there's no need to establish a new business or dissolve an existing one.
- The target company's licenses, contracts, and assets remain in place.
- Maintain relationships with customers, suppliers, and partners.
Disadvantages:
- Inherit all obligations and potential risks of the target business.
- A thorough assessment is needed to identify potential risks.
- There may be restrictions on foreign ownership ratios in certain sectors.
Legal procedures:
- Signing of a share/capital contribution transfer agreement.
- Complete the procedures for registering changes in shareholders/members at the business registration authority.
- For publicly traded companies, compliance with regulations regarding information disclosure and public tender offers is required.
Buying and selling assets
Acquisition of specific assets or entire businesses.
Characteristic:
- The buyer acquires part or all of the target company's assets.
- The owner of the transferred assets is the target enterprise.
- Ownership of assets is transferred from the target business to the buyer.
Advantage:
- The buyer gets to choose the assets they purchase, avoiding unwanted assets or obligations.
- Minimize the risk of inheriting legal issues and potential risks of the target business.
- It usually has fewer restrictions compared to buying and selling shares/equity.
Disadvantages:
- The procedure for transferring each asset can be complex and time-consuming.
- It is necessary to consider issues related to corporate income tax obligations, value-added tax (VAT, corporate income tax, registration fees, etc.).
- Procedures are needed for transferring contracts, personnel, and business relationships.
- New permits, contracts, and agreements may need to be obtained.
Legal procedures:
- Sign the property sale contract, detailing the assets being transferred.
- Registration of transfer of ownership for special assets (land, real estate, vehicles, industrial property rights, etc.)
- Addressing tax issues arising from property transfers.
Business mergers
Characteristic:
- One or more companies (merged companies) transfer all their assets, rights, obligations, and legal interests to another company (acquired company).
- The merged company ceases to exist after the merger process is completed.
- The acquiring company inherits all the rights and obligations of the merged company.
Advantage:
- Combining the resources and strengths of both companies.
- Transfer all assets, licenses, and contracts without requiring separate procedures.
- Tax advantages and operational efficiency can be leveraged.
Disadvantages:
- The procedures are complicated and take a long time to complete.
- Inheriting all obligations and potential risks of the merged company.
- There may be difficulties in cultural integration and activities.
Legal procedures:
- Develop and approve merger plans at the Board of Directors/Board of Trustees/General Meeting of Shareholders of the companies.
- Signing of the merger agreement between the relevant parties.
- Register changes to business registration details at the business registration authority.
Legal procedures:
- Develop and approve merger plans at the Board of Directors/Board of Trustees/General Meeting of Shareholders of the companies.
- Signing of the merger agreement between the relevant parties.
- Register changes to business registration details at the business registration authority.
Cite relevant legal provisions
Legal regulations regarding M&A:
- Enterprise Law 2020: Articles 200-202 regulate the merger and consolidation of enterprises.
- Investment Law 2020: Articles 24-28 stipulate the investment conditions for foreign investors.
- Competition Law 2018: Articles 29-39 regulate economic concentration.
- Securities Law 2019: Article 35 stipulates the provisions on public tender offers for shares.
- Decree 155/2020/ND-CP: Detailed guidelines for the implementation of the Securities Law.
- Decree 151/2018/ND-CP: Detailed guidelines for the implementation of the Competition Law.
- Circular 01/2021/TT-BKHĐT: Business registration guide
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