Corporate Merger in Vietnam

What is a corporate merger?

Under Article 201(1) of the Law on Enterprises 2020, one or more companies (the absorbed companies) may merge into another company (the surviving company) by transferring all assets, rights, obligations, and lawful interests to the surviving company, while the absorbed companies cease to exist. In other words: A + B → A — the surviving company continues to exist and grows, the absorbed company disappears legally.

The key point of a merger is universal succession: the surviving company automatically inherits all rights, obligations, and lawful interests of the absorbed company under the merger contract — including unpaid debts, labor contracts, and other property obligations. There is no “taking only the good assets, leaving the bad debts”: the law does not allow picking and choosing.

Merger vs. consolidation

This is the most confused pair of concepts in practice. The table below clarifies:

Strategically, a merger is usually chosen when there is already a “pillar” company (e.g., the parent merges a subsidiary, or subsidiaries merge into one lead). Consolidation fits better when two companies are of equal standing and neither wants the stigma of being “swallowed”. See also business consolidation in Vietnam.

Conditions for a merger

The law imposes no complicated prohibitions on mergers, but companies must satisfy two groups of conditions:

• Company type: mergers apply to limited liability companies and joint stock companies. A private enterprise cannot be a party to a merger under Article 201 — to “fold” a private enterprise into a company, convert its type first.
• Competition: Article 201(3) requires merging companies to comply with the Competition Law’s provisions on corporate mergers. If the transaction reaches the economic concentration notification thresholds (total assets, total revenue, transaction value, or combined market share), the parties must notify the National Competition Commission before implementing and may only proceed after approval or expiry of the review period. Skipping this step can lead to sanctions and even a requirement to restore the original state.

Merger procedure under Article 201 of the Law on Enterprises

Article 201(2) sets out a three-step procedure:

Step 1 — Prepare the merger contract and draft charter

The companies involved jointly build the merger contract and the draft charter of the surviving company (post-merger). This is the central document of the whole transaction — its contents determine how assets transfer, how labor is handled, and how obligations are allocated. Details below.

Step 2 — Approval, notification, and registration

Members, owners, or shareholders of the companies involved approve the merger contract and the surviving company’s charter, then proceed with business registration for the surviving company. Two mandatory information duties: the merger contract must be sent to all creditors and notified to employees within 15 days of approval. The change-registration dossier of the surviving company follows Article 55 of Decree 168/2025/ND-CP, including the merger contract and each involved company’s approving resolution.

Step 3 — Termination and succession

After the surviving company completes business registration, the absorbed company ceases to exist. The surviving company enjoys the lawful rights and interests and is responsible for the obligations, unpaid debts, labor contracts, and other property obligations of the absorbed company.

Mandatory contents of the merger contract

Article 201(2)(a) lists the principal contents a merger contract must have:

• Names and head office addresses of the surviving company and the absorbed companies;
• Merger procedures and conditions;
• Labor utilization plan;
• Methods, procedures, time limits, and conditions for asset conversion; conversion of capital contributions, shares, and bonds of the absorbed company into those of the surviving company;
• Merger implementation timeline.

In practice, the merger contract should also provide: asset transfer valuation principles, handling of ongoing contracts, dispute resolution between the parties, and conditional effectiveness clauses (e.g., subject to economic concentration approval). A sloppy merger contract is the source of most post-merger internal disputes.

Protecting creditors and employees

For creditors: sending the merger contract to all creditors within 15 days is not just an administrative formality — it is the mechanism for creditors to know who their debtor will be after the merger. Unlike a company split (where the law gives creditors the right to demand payment), in a merger the law does not provide creditors a prepayment demand right, because obligations are wholly inherited by the surviving company. However, credit and loan agreements often contain “change of control” or “reorganization” clauses allowing lenders to demand early repayment — companies must review all key contracts before merging.

For employees: the labor utilization plan is a mandatory content of the merger contract. Under Articles 43 and 44 of the Labor Code 2019, where a merger affects the employment of many workers, the employer must build a labor utilization plan and consult the employee representative organization. The surviving company inherits all labor contracts of the absorbed company — it may not unilaterally terminate contracts on “merger” grounds.

Tax consequences of a merger

Two key tax points to note:

• Tax incentives do not transfer: Article 18(1) of the Law on Corporate Income Tax 67/2025/QH15 provides that CIT incentives for new investment projects (Articles 13, 14) do not apply to mergers, consolidations, splits, separations, owner conversions, or company type conversions. The surviving company does not automatically continue the new-project CIT incentives the absorbed company enjoyed — each incentive type and its post-merger conditions must be re-assessed.
• VAT refunds: from 01/7/2025, the law abolished VAT refunds in conversion, merger, consolidation, split, and separation cases — refunds remain only on dissolution or bankruptcy with overpaid tax. Uncredited input VAT of the absorbed company must be handled through carry-forward inheritance, not the refund mechanism.

See also tax advice for FDI companies and tax review in corporate restructuring.

When to choose a merger?

• Streamlining a group: the parent merges subsidiaries (or subsidiaries merge into each other) to reduce legal entities and compliance costs.
• Preparing for M&A: the buyer merges the target into its existing company after acquisition, instead of maintaining two entities.
• Leveraging a “good-history” entity: keeping the company with complete sub-licenses, good credit history, and stable banking relationships as the surviving company.
• Handling a loss-making company: merging a loss-making subsidiary into a profitable one — note that loss carryover to the surviving company is subject to strict tax law conditions; specific advice is needed.

Common merger risks

• Forgetting the 15-day notice: failing to send the merger contract to creditors or notify employees on time — procedural violations can challenge the transaction’s validity.
• Skipping economic concentration review: merging companies with large market shares without notifying economic concentration.
• Sub-licenses: some licenses attach to a specific entity — even though the surviving company continues, each license still needs review for adjustment procedures.
• Change-of-control contract clauses: loan, distribution, and long-term land lease contracts may allow counterparties to terminate upon reorganization.
• Valuation of capital contribution/share conversion: unfair conversion ratios are a source of disputes among shareholder groups.

How FLAT LAW FIRM supports mergers

We accompany companies through the entire merger transaction: advising on choosing between merger, consolidation, and other reorganization forms; reviewing economic concentration conditions and completing notification procedures if needed; drafting and negotiating the merger contract; building the labor utilization plan; reviewing tax consequences; carrying out business registration procedures; and handling post-merger issues (sub-licenses, contracts, internal disputes). See also M&A and corporate restructuring services.

Frequently asked questions

Useful links

You should talk to a lawyer if:

• You are considering merging a subsidiary into the parent or merging companies within one group.
• You are unsure whether the merger triggers economic concentration notification.
• You need to draft a merger contract and labor utilization plan.
• You worry about hidden debts of the absorbed company.
• You need to assess the tax consequences of the merger.