Various provisions of the Enterprise Law 2014 can now allow parties to an M&A deal in Vietnam to have more flexibility in designing a closing mechanics. In particular,
· Multiple legal representatives – In a M&A deal involving a change of control, the buyer would want to control the legal representative position on the closing date. But this involves registration with the Business Registration Authority. Many sellers are reluctant to change the legal representative position before closing without receiving payment of the purchase price.
In the past, a company can only have one legal representative. However, under the Enterprise Law 2014, a company can have two or more legal representatives. As such, the parties can agree that the target company will have two legal representatives appointed by the seller and the buyer. The legal representative appointed by the seller will continue to run the target company up until closing and will resign on closing. The legal representative of the buyer will assume control on closing. And after closing, the target company will deregister the legal representative appointed by the seller.
· Multiple corporate seals – Before the Enterprise Law 2014, a company can only have one corporate seal. Now, multiple corporate seals are permitted. To support multiple legal representative mechanics, the parties can agree that each legal representative will have its own seal. This arrangement could be useful if after closing (i) payment to seller needs to be via the DICA of the target company or (ii) the seller needs to perform certain tasks for the company. In such case, the seller can request have control over the DICA account by registering the seller’s legal representative and the corporate seal with the DICA bank.
· Online ERC submission – It is now quite common that application for an amendment to the Enterprise Registration Certificate (ERC) can (and sometimes must) be scanned and submitted online to the business registration portal first. After reviewing the online ERC application, the business registration authority could issue a confirmation that the online ERC application is in order and that the company can submit the original hard copy of the online ERC application to the authority for issuance of the amended ERC. If the company fails to submit the original hard copy within 30 days then the online ERC application will lapse.
In the past, if the application for the ERC amendment is submitted in paper form, the parties do not have control when the amended ERC is issued. On the other hand, if the application for ERC amendment is submitted online, the parties will have the control over the timing of the issuance of the amended ERC (since the parties can decide when to submit the original hard copy of the original ERC application). In addition, by submitting the ERC application online, the parties could also reduce the uncertainties arising from the ERC application process. This is because the parties will know with much better certainty that the amended ERC will be issued when submitting the paper ERC amendment application.
This post is written by Le Minh Thuy and Nguyen Quang Vu.