WHEN THE POST-M&A PAYROLL PLAN IS LEFT UNADDRESSED: THE AMBIGUITY TRAP AND THE LESSON ON UPHOLDING EMPLOYEE RIGHTS

1. Summary of the Real-World Case

Mr. M and Mr. K are two founders who have been close neighbors for many years in the [LOCAL] residential area. In 2024, they pooled their capital to establish TechAcquire Digital Solutions JSC [LOCAL]. Mr. M served as Chief Executive Officer (CEO), overseeing business operations and external relations. Mr. K served as Chief Technology Officer (CTO), responsible for the company’s technology infrastructure. Because of their close neighborhood relationship, Mr. K entrusted Mr. M with full authority to negotiate the acquisition agreement and restructure the workforce following the merger.

At the beginning of 2026, TechAcquire [LOCAL] spent VND 2 billion to acquire 100% of the shares of a competing software company in order to take over its core application. The transaction was successfully completed from a licensing and regulatory perspective. However, after taking control, Mr. M made a careless management decision. Driven by a desire to squeeze payroll costs and improve the company’s short-term financial statements, he deliberately failed to execute a written agreement concerning new salary and bonus arrangements for the existing employees. Mr. M instructed them verbally to continue working temporarily and made informal promises. When monthly and quarterly payroll periods arrived, the company made unclear and insufficient payments because there was no written agreement clearly documenting and reconciling the compensation arrangements.

Deeply frustrated by what they perceived as a failure to honor their employment and welfare commitments, all 10 core engineers of the acquired company simultaneously engaged in collective work stoppage and filed complaints against TechAcquire [LOCAL] with the labor inspectorate. The software system became completely inoperable because there was no longer anyone available to maintain and operate it.

Facing severe cash-flow deficits, the company was at risk of bankruptcy. Believing that Mr. M’s authoritarian and negligent management had squandered his family’s intellectual assets, Mr. K became extremely angry. He demanded that Mr. M compensate the company for all resulting losses with his personal assets. Their longstanding neighborly relationship immediately collapsed. The two families engaged in heated arguments and exchanged insults in the neighborhood. They threw dirty substances at each other’s homes, causing public-order disturbances and forcing local police to intervene.

2. Legal Perspective – “A Strong Shield”

From the perspective of civil, corporate, and labor law, avoiding written documentation of a labor utilization plan and salary arrangements during corporate restructuring may constitute a serious violation of legal obligations.

• Obligation to formulate a labor utilization plan and continue existing salary arrangements: Pursuant to Article 47 of the 2019 Labor Code, in cases of merger, consolidation, division, separation, or acquisition of ownership of an enterprise’s shares, the succeeding employer is responsible for continuing to perform existing employment contracts. Where all existing employees cannot be retained, the employer must formulate and implement a Labor Utilization Plan in accordance with Article 44 of the 2019 Labor Code. The plan must involve the employee representative organization and be publicly disclosed. Any change to the form or amount of remuneration paid to employees must be documented in a written amendment to the employment contract based on voluntary agreement pursuant to Article 33 of the 2019 Labor Code. Mr. M’s use of verbal instructions to postpone and obscure the salary mechanism constitutes a direct violation of the applicable administrative and managerial procedures, as well as the management obligations prescribed under Article 162 of the 2020 Law on Enterprises. Such an arbitrary management decision may trigger legal consequences under Article 122 of the 2015 Civil Code, potentially requiring the company to bear liability for damages under Article 584 of the 2015 Civil Code.
• Civil liability for damages using personal assets: Under Article 165 of the 2020 Law on Enterprises, managers are required to exercise their assigned rights and perform their duties with due care and in the best interests of the company. Mr. M’s negligent failure to document salary arrangements, resulting in the disruption of the experienced workforce and depletion of the organization’s acquisition capital, may constitute a direct personal fault. Pursuant to Article 585 of the 2015 Civil Code, Mr. M may be legally required to bear responsibility for compensating the company and shareholder K for economic losses caused by his conduct, subject to the applicable legal conditions and the determination of his personal liability.

3. Psychological – Educational – Management Perspective: “The Human-Centered Key”

Psychological and Educational Perspective

• Short-term material greed creates a mindset of exploiting labor: Because Mr. M wanted to optimize the company’s cash position, he chose an ambiguous solution that placed the acquired employees in an administratively constrained position and effectively pressured them to work for inadequate compensation. His short-term self-interest made him insensitive to the employees’ immediate rights and dignity. When the crisis occurred, Mr. K became panicked and fearful of losing his family’s accumulated intellectual assets, triggering intense distrust and ultimately destroying their longstanding relationship as neighbors.
• Insufficient education in fairness and integrity in human-resource management: Many startup business executives may adopt a flawed mindset: “The employees of the acquired company now work for me anyway; we can figure out their salaries and bonuses later. What’s the big risk?” This reflects a lack of awareness of administrative compliance and the rule of law in corporate governance. It also confuses the flexibility required for day-to-day workforce management with the fundamental obligation to establish clear, fair, and legally compliant compensation arrangements for the people directly responsible for maintaining the legal entity’s technological operations.

Management Perspective

• A critical failure in post-merger integration risk management: Mr. M effectively bet the survival of a VND 2 billion transaction on the emotional tolerance of the newly acquired engineering team. Managing a business through ambiguity and informal trust is a potentially disastrous strategy. The absence of an effective HR Compliance Audit process removed an important layer of protection for management against the risk of collective work stoppages.
• A gap in the process for controlling post-M&A compensation policies: TechAcquire [LOCAL] failed to establish an appropriate process for issuing and implementing its post-acquisition HR policies. A properly governed enterprise should establish clear procedures requiring a written Labor Utilization Plan for the integration of an acquired workforce, clearly documented salary and bonus arrangements, and appropriate approval by the Board of Directors through a formal resolution before the transfer and integration of the workforce.

4. Comprehensive Solution Proposed by Expert Nguyễn Hữu Long

Step 1: Reconcile the Neighborhood Dispute and Immediately Stabilize the Workforce Crisis (Short Term)

• Immediate neighborhood mediation: Mr. M and Mr. K must immediately stop throwing dirty substances at each other’s homes to avoid potential civil, administrative, or criminal consequences arising from property damage or public-order violations. Mr. M should remain calm, set aside his ego, and proactively invite the neighborhood representative to act as a mediator and organize a private meeting. The objective is to prepare a written record of the mediation and commit to maintaining safety and security for both families before addressing the underlying economic dispute.
• Execute supplementary salary documentation and engage in a sincere dialogue: Mr. M must immediately work with Mr. K to convene an emergency dialogue with the 10 former engineers. They should acknowledge the serious shortcomings in the company’s internal administrative and HR management procedures. The company should calculate and fully pay any outstanding salary amounts and immediately issue written remuneration arrangements in accordance with the 2019 Labor Code, thereby addressing the employees’ concerns, resolving their grievances through lawful procedures, and facilitating the restoration of the core software system.

Step 2: Restructure HR Procedures and Restore Internal Financial Stability (Medium Term)

• Agreement on personal financial responsibility for correcting management failures: To compensate for budget deficits caused by project disruption and alleviate Mr. K’s concerns, the two parties may enter into a supplementary agreement based on the 2015 Civil Code. Mr. M may voluntarily use his personal assets or agree to reduce his future dividend entitlement, subject to applicable corporate and legal requirements, to fulfill his obligation to reimburse legitimate costs arising from his negligent and authoritarian management decisions. The objective is to rapidly rebuild trust and restore the company’s financial stability.
• Establish post-M&A HR governance and dual-approval mechanisms for compensation policies: TechAcquire should immediately draft and implement a new Post-Merger Integration HR Governance Policy based on the 2020 Law on Enterprises and applicable labor legislation. The policy should expressly prohibit the CEO from unilaterally changing employee compensation arrangements through verbal instructions. Monthly salary and bonus schedules for the integrated workforce should be subject to HR reconciliation and appropriate approval procedures, with quarterly co-approval by the CEO and CTO where appropriate, ensuring effective internal controls.

Step 3: The Long-Term Lesson: Separate Personal Relationships from Business Assets

• Written clarity is the most civilized way to protect capital: The hard-earned lesson for business managers is this: “Post-M&A employee compensation is not an area where founders can rely on emotional trust. Without clear procedures, the collapse of the workforce can automatically wipe out the entire business.” Clear and disciplined HR financial governance, together with strict compliance with labor laws from the outset, does not constitute unnecessary expenditure. On the contrary, it is an essential shield for protecting personal assets, safeguarding corporate capital, and preserving longstanding relationships in the face of the pressures of the business world.

EXPERT PERSPECTIVE

• This article was developed based on the professional consultation and expertise of Nguyễn Hữu Long, M.A. – a specialist in Leadership, Law, Psychology, and Education. Through an integrated multidisciplinary approach, we aim not only to provide a strong legal shield but also to offer comprehensive risk-management and psychologically informed solutions for the sustainable development of the community.
• If you or your organization are facing similar difficulties involving land-related matters or educational issues, please contact us via our hotline or submit your questions through the website tuvanphapluattamlygiaoduc.vn or call 0898.627.762 for timely assistance.