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.
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