Merger filing requirement
In general, a merger filing (“MF”) is triggered if a transaction (a) is considered as an economic concentration, and(b) meets the notification thresholds.
Economic Concentration
“Economic concentration” consists of, among others, shares acquisition in which a company (“Purchaser”) acquires, directly or indirectly, all or a part of assets or contribution capital of another company (“Target Company”) sufficient to control such Target Company or one of its businesses.
In this regard, under the laws, “control” means the Purchaser will have controlling rights over the Target Company in one of the following cases:
- The Purchaser will hold more than 50% of the target company’s charter capital or voting shares;
- The Purchaser owns or has the right to use over 50% of the target company's assets or assets in a specific business line.
- The Purchaser has one of the following rights:
- Directly or indirectly making decisions on appointment, dismissal, or discharge (i) the majority or all the BOM members, (ii) the president of the Members’ Council, (iii) director, or general director of the Target Company;
- Making decisions on revision or supplementation of the Target Company’s corporate charter;
- Making decisions on the Target Company’s important business matters, including selection of organization of business operation; or selection of business lines, locations, and business approaches; or selection of modification to business size and/or business lines; or selection of forms and methods of capital mobilization, allocation, and investment
If, after the transaction, the Purchaser has no right in item 3 above, MF shall not be triggered.
If the Purchaser has one of the rights in item 3 above, the Proposed Transaction shall be considered as an economic transaction. In such case, if the following notification threshold is met, the MF will be triggered.
Notification thresholds
The notification thresholds are based on (i) assets and revenue of Purchaser and Target Company in Vietnam market and (ii) combined market share of the Purchaser, the seller and Target Company on relevant market. Specifically:
- If total assets of the Purchaser and group of affiliated enterprises of Purchaser, or total assets of the Target Company and group of affiliated enterprises of Target Company in
the Vietnamese market in the previous financial year is VND 3 trillion or more; - Total sales revenue/total input purchase of the Purchaser and group of affiliated enterprises of Purchaser, or total sales revenue/total input purchase of Target Company and group of affiliated enterprises of Target Company in Vietnamese market in the previous financial year is VND 3 trillion or more;
- Combined market share of the Purchaser, seller and Target Company in the relevant market in the previous financial year is 20% or more.
If any of the above threshold is met, the MF will be triggered.
Timeline for MF
MF takes 37 days at laws. However, from our experience, the total timeline for an MF will be around 3 ~ 4 months due to the large volume of information to be collected and the review process practice of the authority.
Official appraisal
If, according to assessment of the authority, the combined market shares of the seller, Purchaser and Target Company in the relevant market falls into the following cases, the transaction will be allowed to conduct, otherwise, official appraisal will be triggered:
- Less than 20%;
- 20% or more, with the sum of the squared market shares of the enterprises after the economic concentration in the relevant market being less than 1,800;
- 20% or more, with the sum of the squared market shares of the enterprises after the economic concentration in the relevant market being 1,800 or more, and the increase in the sum of the squared market shares before and after the economic concentration being less than 100; and
- The enterprises are related within a chain of production, distribution, or supply, or their business activities are inputs to or complementary to each other, with market share of less than 20% in each relevant market.
The official appraisal takes 90~150 days at laws. In practice, this process may take 3~6 months.
