A Q&A guide to public mergers and acquisitions law in Vietnam.

The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stake building and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; and any proposals for reform.
M&A Activity
1. What is the current status of the M&A market in your jurisdiction?
Vietnam has remained an attractive destination for foreign investors. In the first 11 months of 2022, the total amount of foreign direct investment (FDI) was USD25.1 billion, 95% of 2021’s figure. Investment in the form of capital contribution and share purchase valued at USD9.54 billion, while capital adjustment was USD9.54 billion, and new capital registration was USD11.52 billion. Foreign investment concentrated in business in the following sectors:
• Consumption (USD 1.2 billion).
• Real estate (USD 1.5 billion).
• Energy (USD 600 million).
Most investors come from:
• Singapore (~USD 1.2 billion).
• United States (~USD 570 million).
• Korea (~USD 370 million).
Up to October 2022, there were 40 large transactions, of which there are 20 large transactions in real estate sector, 10 in retail sector and 7 in food sector.
2. What have been the largest or most noteworthy sector-specific public M&A transactions in the past 12 months?
Real Estate
The most notable deals in the real estate sector were:
• CapitaLand Development has successfully transferred Grade A office building Capital Place for USD550 million
• Keppel Land has signed an agreement to buy 49% shares in 3 land plots in Hoai Duc, Hanoi of Phu Long Real Estate Joint Stock Company with a total value of about USD 119 million.
• US investment fund Warburg Pincus has poured USD 250 million into Novaland
• VinaCapital and Dragon Capital has invested USD 103 million in Hung Thinh Land
• Boustead Singapore has acquired 6 logistics projects under the investment portfolio of Khai Toan Joint Stock Company in industrial parks in Dong Nai and Bac Ninh, with a value of USD 84.2 million.
• Masan spent 110 million USD (equivalent to 2,500 billion VND) to buy 31% more shares and become the parent company of Phuc Long milk tea chain. After the transaction, Masan Group owns a total of 51% shares of Phuc Long.
• Singapore United Overseas Bank (UOB) acquired Citigroup’s retail business in four Southeast Asian countries, Indonesia, Malaysia, Thailand and Vietnam for about S$4.915 billion.
• The Gioi Di Dong has a joint venture with PT Erafone Aratha Retailindo, a subsidiary of Erajaya Corporation to establish PT Era Blue Elektronic.
• Temasek, SeaTown Private Capital Master Fund (Singapore) and Periwinkle Pte Ltd acquired a 35.95% stake in Golden Gate from Prosperity Food Concepts Pte. Ltd (Singapore) and other individual shareholders
• M&A transaction between Nova Consumer and Sunrise Foods Co., Ltd., through which Nova Consumer owns Anco Family Food company Other
3. How were the largest or most noteworthy public M&A transactions financed?
They were financed by leveraged buyouts (LBO), share issuances, and acquisition of the target company’s assets.
Obtaining Control
4. What are the main means of obtaining control of a public company?
In Vietnam, the term public company refers to a joint-stock company whose shares meet one of the following criteria:
• They have been put up for a public offer.
• They are listed on the stock exchange or a securities trading centre.
• They are owned by at least 100 investors (excluding major shareholders) with at least 10% of voting shares and the company’s paid-up charter capital is VND30 billion or more.
A joint-stock company is a company whose paid-up charter capital is divided into equal parts called shares. Only joint-stock companies can be listed on the stock exchange.
Shares or charter capital can be bought by purchasing shares:
• From the existing shareholders of the company.
• From the stock exchange.
• Through a public share purchase offer.
Securities of public companies must be registered and deposited at the Vietnam Securities Depository Centre before being traded.
The most common means of obtaining control over a public company are as follows.
Acquisitions of Shares/Charter Capital
Depending on the numbers of shares purchased, an investor can become a controlling shareholder. A shareholder that directly or indirectly owns 5% or more of the voting shares of an issuing organisation is a major shareholder (Law on Securities). The State Securities Commission (SSC) must approve any transaction that results in more than 10% ownership of the paid-up charter capital of a securities company.
There are restrictions on the purchase of shares/charter capital of local companies by foreign investors in certain sensitive sectors. There are no legal restrictions on business spin-off transactions where a foreign investor is a party.
The 2020 Law on Enterprises sets out the procedures for company mergers by a transfer of all lawful assets, rights, obligations, and interests to the new merged company, and for the simultaneous termination of the merging companies.
To merge, the related companies prepare the merger contract and draft the new merged company’s charter. The members, company owners, and shareholders of both companies approve the merger contract and the charter. The new business must be registered in accordance with the provisions of the Enterprise Law. After registration, the merged company is a legal entity, responsible for unpaid debts, labor contracts, and any property obligations. The merger contract must be sent to all creditors for their approval and employees must be notified within 15 days from the date of their approval.
Any enterprise intending to participate in M&A activities, except credit institutions, insurance companies, or securities companies, must notify the National Committee on Competition if one of the following applies:
• It, or a group of companies of which it is an affiliate, has total assets available in the Vietnamese market of VND3,000 billion or more in the fiscal year preceding the planned year of M&A activity.
• It, or a group of companies of which it is an affiliate, has total sales or purchases in the Vietnamese market of VND3,000 billion or more in the fiscal year preceding the planned year of M&A activity.
• The value of the M&A transaction will exceed VND1,000 billion.
• The joint market share of the companies intending to participate in the M&A activity is 20% or more in the fiscal year preceding the planned year of M&A activity.
The merger of companies that results in or that may result in significant restriction of competition in the Vietnamese market is prohibited. The National Committee on Competition determines a merger’s effect on competition.
There are no legal restrictions on mergers involving foreign investors.
Asset Acquisitions
There are no legal restrictions on foreign investors acquiring assets.
Hostile Bids
5. Are hostile bids allowed? If so, are they common?
Hostile bids are neither defined nor regulated under Vietnamese law. There is also no express prohibition on this type of transaction. Recommended bids often outnumber hostile bids due to limited publicly available information about the target and a general reluctance to disclose information.
However, the number of hostile bids in Vietnam has been increasing in the last ten years, for example:
• Singapore-based Platinum Victory Ptl Ltd became Refrigeration Electrical Engineering Corp (REE)’s largest shareholder, accumulating a 10.2% interest in the company.
• Chile’s CFR International Spa acquired a 46% stake in healthcare equipment company Domesco Medical Import-Export Co (DMC), making it the first foreign deal in the pharmaceutical sector.
During 2010 and 2011, there were two takeover deals in Vietnam:
• The acquisition of Ha Tay Pharmacy in 2010.
• The acquisition of Descon, a construction company, in 2011. Binh Thien An Company acquired a 35% shareholding in Descon, officially took over Descon and made significant changes to its management body.
The Government’s Decree No. 155/2020/ND-CP lifted the foreign equity cap regarding public companies, with some exceptions (a 49% cap was previously in force). Specifically, the rules on foreign ownership in a listed company can be generally classified into the five following groups:
• If Vietnamese law, including international treaties, provides for a specific ownership cap, the maximum foreign ownership (MFO) must not exceed such a cap (group 1).
• If Vietnamese law treats a business activity as conditional on foreign investment (pursuant to the list of conditional sectors under the Investment Law) but does not yet provide any ownership limit, MFO must not exceed 50% (group 2).
• In cases that do not fall within group 1 and group 2, MFO can be up to 100% (group 3).
• In case a public company operates in multiple industries and trades with different regulations on the foreign ownership rate, the foreign ownership rate must not exceed the lowest level in the industries and trades with determined foreign ownership rates (group 4).
• Where a public company decides on the maximum foreign ownership ratio lower than the rate specified above, the specific rate must be approved by the General Meeting of Shareholders and included in the company’s charter.
This lift of the foreign equity cap can introduce more hostile bids in Vietnam.
Regulation and Regulatory Bodies
6. How are public takeovers and mergers regulated, and by whom?
The relevant rules are contained in several laws and regulations governing general corporate and investment issues. These laws and regulations include:
• Investment Law No. 61/2020/QH14 and Enterprise Law No. 59/2020/QH14 issued by the National Assembly on 17 June 2020, with amendments, and their guiding documents, Decree No. 01/2021/ND-CP and Decree No. 31/2021/ND-CP. These laws set out the general legal framework, conditional sectors, and investment procedures. The authorities responsible for enforcing these laws are the:
• Prime Minister;
• local People’s Committee;
• Ministry of Planning and Investment;
• Ministry of Industry and Trade;
• Ministry of Health; and
• Other ministries depending on the business activities of the target companies.
• Law on Securities No. 54/2019/QH14 issued by the National Assembly on 26 November 2019, and its implementing documents, in particular Decree No. 155/2020/ND-CP issued by the government on 31 December 2020. This law regulates the acquisition of shares in a public company in Vietnam, including public tender offers. The authorities responsible for enforcing this law include the:
• SSC;
• Vietnam Securities Depository Centre; and
• Ministry of Planning and Investment.
• Competition Law No. 23/2018/QH14 issued by the National Assembly on 12 June 2018, which is enforced by the Vietnam Competition Authority (VCA). Under this law, any M&A transaction that causes or may be likely to cause substantial anti-competitive effects in the Vietnamese market is prohibited.
• Foreign exchange regulations. An investment capital account in Vietnamese dong is a condition, among others, for capital contribution/share purchase or subscription. These regulations are enforced by banks and the State Bank of Vietnam.
• Vietnam’s WTO Schedule of Specific Commitments on Services. This sets outs the ratio of shares that can be owned by foreign investors in various specific sectors.
• Other specific regulations for the acquisition of shares in Vietnamese companies operating in certain sectors, for example banking and finance or insurance. These sectors are highly regulated by the relevant authorities.
Due Diligence
7. What due diligence enquiries does a bidder generally make before making a recommended bid and a hostile bid? What information is in the public domain?
Recommended Bid
Before officially contacting the potential target, the bidder conducts a preliminary assessment based on publicly available information. The bidder then contacts the target and expresses its intention of buying shares/subscribing for its shares. The parties sign a confidentiality agreement before the due diligence process, which also sets out their confidentiality obligations during the transaction. Courts’ enforcement of confidentiality agreements remains untested. The confidentiality agreement typically contains terms regarding the:
• Permitted use of information, where the parties agree that shared confidential information is for the sole purpose of evaluating the transaction.
• Legal obligations to disclose material to the government only where necessary.
• Governing law.
• Remedies in case of default.
• Non-binding nature of the contractual relationship during the preliminary assessment phase.
A bidder’s legal due diligence usually covers the following:
• Corporate details of the target and its subsidiaries, affiliates, and other companies that form part of the target.
• Contingent liabilities (from past or pending litigation).
• Employment matters (including employment contracts, key employees, and compliance reports).
• The target’s contractual agreements.
• Statutory approvals and permits for the target’s business activities.
• Insurance, tax, intellectual property, debts, and land-related issues.
• Antitrust, corruption, and other regulatory issues.
Hostile Bid
There is no legal distinction between recommended bids and hostile bids (see Question 5).
Public Domain
Information on local companies available in the public domain includes:
• Financial statements, including information on the company’s assets, debts, owner’s capital, financial status, and business results.
• Listed companies’ prospectuses including their corporate details, their commitments, bidders’ basic rights, information on share issuance, and their business prospects.
• Enterprise registration certificates including information on companies’ names, addresses, legal representatives, members, and charter capital.
• Other information from online sources or newspapers.
8. Are there any rules on maintaining secrecy until the bid is made?
There is no legal requirement that a bidder keep information about the bid secret until the bid is made. However, leaking information before the bid is finalised can lead to:
• An increase of the target’s share price.
• Difficulties in negotiating the terms of the transaction.
• Competition in the market.
In addition, leaking information can be considered a contractual violation if the parties to the transaction have committed to secrecy in writing.
Agreements with Shareholders
9. Is it common to obtain a memorandum of understanding or undertaking from key shareholders to sell their shares? If so, are there any disclosure requirements or other restrictions on the nature or terms of the agreement?
A preliminary agreement, for example a memorandum of understanding or letter of intent, is a starting document used to limit the expectations of both parties and outline the intended M&A structure. These agreements are quite common in Vietnam. Contractual negotiations can be long or short, tense or smooth, depending on the details of the agreement. There is no requirement to disclose the agreement. And there are no restrictions on the nature and terms of these agreements.
Under the Law on Enterprise 2020, founding shareholders can only transfer their shares to the company’s other founding shareholders within three years from the issuance of the Enterprise Registration Certificate. After that, the shares can be transferred freely. The approval of the general meeting of shareholders is always required if:
• The company increases its capital by issuing new shares.
• The founding shareholders propose to transfer their shares within the above three-year period.
If the sale and purchase is a direct agreement between the company and the seller in relation to an issuance of shares, the selling price must be lower than the market price at the time of selling, or in the absence of a market price, the book value of the shares at the time the plan to sell the shares is approved. In addition, the sale price for foreign and domestic buyers must be the same.
10. If the bidder decides to build a stake in the target (either through a direct shareholding or by using derivatives) before announcing the bid, what disclosure requirements, restrictions or timetables apply?
Shares can be bought before the bid announcement provided that the number of shares sold does not exceed the thresholds requiring a tender offer. A tender offer is required in the following cases:
• Purchase of a company’s circulating shares that result in a purchaser, with no shareholding or less than a 25% shareholding, acquiring a 25% shareholding or more.
• Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or more of circulating shares of the company.
• Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to 10% of currently circulating shares of the company within less than one year from the date of completion of a previous offer.
There is no guidance on building a stake by using derivatives. In addition, the bidder cannot purchase shares or share purchase rights outside the offer process during the tender offer period.
The bidder must publicly announce the tender offer in three consecutive editions of one electronic newspaper or one written newspaper, and (for a listed company only) on the relevant stock exchange within seven days from the receipt of the SSC’s opinion regarding the registration of the tender offer. The tender offer can only be implemented after the SSC has provided its opinion, and following the public announcement by the bidder.
Agreements in Recommended Bids
11. If the board of the target company recommends a bid, is it common to have a formal agreement between the bidder and target? If so, what are the main issues that are likely to be covered in the agreement? To what extent can a target board agree not to solicit or recommend other offers?
The shareholders’ general meeting must agree to a tender offer if the acquisition consists of an existing shareholder transferring their shares and results in 25% ownership or more of the voting shares in a public company (see Question 10). This approval is also required when a joint-stock company’s founding shareholder transfers their shares within three years from the issuance of the Enterprise Registration Certificate. The approval normally includes the:
• Number of shares offered.
• Price of the offer.
• Conditions of the offer.
If it is a recommended bid, there tends to be an agreement between the bidder and target company that covers similar content to that which requires the shareholders’ approval.
There is no statutory requirement that prohibits a target board from soliciting or recommending other offers before completion of a transaction. However, in practice, the parties can and often agree on these restrictions.
Break Fees
12. Is it common on a recommended bid for the target, or the bidder, to agree to pay a break fee if the bid is not successful?
There are no legal provisions on break fees. In practice, both parties can agree on break fees, which do not normally exceed 8% of the transaction value. When the transaction is between affiliated entities, transfer pricing issues can be triggered. If the transaction involves a foreign party, that party’s payment of fees will also raise foreign exchange issues.
The bid solicitor is responsible for returning or releasing the bid security to an unselected bidder within the time limit specified in the bidding documents but not exceeding 20 days from the date the successful party is approved (Article 11(7), Law on Bidding 2013).
Bidders’ security is non-refundable in the following cases:
• They withdraw their bid after the bid closing time while their bidding documents and proposals are still valid.
• They break the law leading to the cancellation of their bid.
• They fail to take measures to secure contract performance.
• They fail to proceed or refuse to execute the contract within 20 to 30 days from the date they receive notice of their winning bid from the bid solicitor (unless there is a force majeure event).
Committed Funding
13. Is committed funding required before announcing an offer?
If an offer that contains cash elements, the bidder must include in its offer announcement a financial statement that there are satisfactory financial resources available to carry out the cash element in full.
Announcing and Making the Offer
Making the Bid Public
14. How (and when) is a bid made public? Is the timetable altered if there is a competing bid?
The offer timetable is as follows:
• The bidder prepares registration documents for its public bid to purchase shares.
• The bidder sends the bid registration documents to the SSC for approval and, at the same time, sends the registration documents to the target.
• The SSC reviews the tender documents within seven days.
• The bidder must publicly announce the tender offer within 7 days from receipt of SSC’s opinion regarding the registration of the tender offer
• The target’s board must send its opinions on the offer to the SSC and its shareholders within 14 days of receipt of the tender documents.
• The bid is announced in the mass media (although this is not a legal requirement).
• The length of the offer period is between 30 and 60 days.
• The bidder reports the results of the tender to the SSC within ten days of completion.
Companies operating in specific sectors (for example banking or insurance) can be subject to a different timetable.
Offer Conditions
15. What conditions are usually attached to a takeover offer? Can an offer be made subject to the satisfaction of pre-conditions (and, if so, are there any restrictions on the content of these pre-conditions)?
A takeover offer usually contains the following conditions:
• The terms and conditions of the offer apply equally to all of the target’s shareholders.
• The relevant parties are allowed full access to the tender information.
• The shareholders have full rights to sell their shares.
• Applicable laws are fully respected.
An offer can also be subject to conditions precedent. Conditions precedent are set out in the share sale and purchase agreement or the capital contribution transfer agreement. There is no specific restriction on conditions precedent other than the requirement that they cannot be contrary to law and conflict with social ethics (although the legal definition of social ethics is unclear). The most common conditions precedent are:
• Amendments to the target’s charter/relevant licence.
• Obtaining the necessary approvals to conduct the transaction.
• Changes to the target’s management body.
Payment of the contract price will only be made after the conditions precedent are met.
There is no regulatory requirement that a certain percentage of the target’s shares must be offered/bid.
Bid Documents
16. What documents do the target’s shareholders receive on a recommended and hostile bid?
The bidder must send public offer documents to the target and the SSC, which include:
• An application for registration of the public purchase offer.
• Name and address of the bidder (organisation or individual).
• Types and number of shares subject to the bid.
• The bid duration, price, and conditions.
• Latest audited financial statements if the bidder is a legal entity, or a bank statement confirming financial liability where the bidder is an individual.
• A written agreement with the target’s major shareholders whose shares are subject to the offer.
Employee Consultation
17. Are there any requirements for a target’s board to inform or consult its employees about the offer?
There is no requirement to consult employees about the offer. However, if employees are to be a laid off, the employer must:
• Prepare a labour usage plan.
• Consult with the employee representative.
• Notify the competent labour authority on the implementation of the labour usage plan.
The employees are not informed about the content of any of the above and do not receive any other type of notice.
Mandatory Offers
18. Is there a requirement to make a mandatory offer?
A tender offer is required in the following cases:
• Purchase of a company’s circulating shares that result in a purchaser, with no shareholding or less than a 25% shareholding, acquiring a 25% shareholding or more.
• Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or more of circulating shares of the company.
• Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to 10% of currently circulating shares of the company within less than one year from the date of completion of a previous offer.
19. What form of consideration is commonly offered on a public takeover?
Shares can be purchased by offering cash, gold, land use rights, intellectual property rights, technology, technical know-how, or other assets. In practice, acquisitions are most commonly made for cash consideration.
Compulsory Purchase of Minority Shareholdings
20. Can a bidder compulsorily purchase the shares of remaining minority shareholders?
If the bidder acquires 80% or more of the shares of a public company, it must buy the remaining shares of the same type of other shareholders (if they so request) at the bid price within 30 days. However, there are no squeeze-out rights that can force the remaining shareholders to sell their shares.
Restrictions on New Offers
21. If a bidder fails to obtain control of the target, are there any restrictions on it launching a new offer or buying shares in the target?
The bidder is not prohibited from making a new offer or buying shares in the target if its initial offer fails.
22. What action is required to de-list a company?
If a company seeks voluntarily de-listing, it must submit an application for de-listing that includes the following documents:
• A request for de-listing.
• For a joint-stock company:
• the shareholders’ general meeting’s approval of de-listing of the stock;
• the board of directors’ approval of de-listing of bonds; and
• the shareholders’ general meeting’s approval of de-listing of convertible bonds.
• The members’ council’s (for a multi-member limited liability company) or the company’s owner’s (for a single-member limited liability company) approval of de-listing of bonds.
• For a securities investment fund, the investors’ congress’ approval of de-listing of the fund’s certificate.
• For a public securities investment company, the shareholders’ general meeting’s approval of stock de-listing.
A listed company can only de-list its securities if de-listing is approved by a decision of the general meeting of shareholders passed by more than 50% of the voting shareholders who are not major shareholders.
If a company voluntarily de-lists from the Hanoi Stock Exchange or Ho Chi Minh Stock Exchange, the application for de-listing must also include a plan to deal with the interests of shareholders and investors. The relevant Stock Exchange must consider the request for de-listing within 7 days from the receipt of a valid application.
Target’s Response
23. What actions can a target’s board take to defend a hostile bid (pre- and post-bid)?
There are no legal provisions regulating hostile bids (see Question 5).
24. Are any transfer duties payable on the sale of shares in a company that is incorporated and/or listed in the jurisdiction? Can payment of transfer duties be avoided?
Depending on whether the seller is an individual or a corporate entity, the following taxes will apply:
• Capital Gains Tax. Capital gains tax is a form of income tax that is payable on any premium on the original investor’s actual contribution to capital or its costs to purchase this capital. Foreign companies and local corporate entities are subject to a corporate income tax of 20%. However, if the assets transferred are securities, a foreign corporate seller is subject to corporate income tax of 0.1% on the gross transfer price.
• Personal Income Tax. If the seller is an individual resident, personal income tax will be imposed at the rate of 20% of the gains made, and 0.1% on the sales price if the transferred assets are securities. An individual tax resident is defined as a person who:
• stays in Vietnam for 183 days or longer within a calendar year;
• stays in Vietnam for a period of 12 consecutive months from their arrival in Vietnam;
• has a registered permanent residence in Vietnam; or
• rents a house in Vietnam under a lease contract of a term of at least 90 days in a tax year.
If the seller is an individual non-resident, they are subject to personal income tax at 0.1% on the gross transfer price, regardless of whether there is any capital gain.
Payment of the above transfer taxes is mandatory in Vietnam.
Other Regulatory Restrictions
25. Are any other regulatory approvals required, such as in relation to merger control, foreign ownership or specific industries? If so, what is the effect of obtaining these approvals on the public offer timetable?
Regulated Industries
Certain sectors, for example banking and finance or insurance are highly regulated by the relevant authorities.
Foreign Ownership
For foreign ownership restrictions in listed companies, see Question 6.
Foreign ownership restrictions in specific industries/sectors under Vietnam’s Schedule of Specific Commitments in the WTO are as follows:
• Advertising: 99% or more foreign ownership is allowed provided that the foreign investor is in a joint venture with a domestic entity.
• Services incidental to agriculture, hunting, and forestry: foreign investors must have a joint venture or a business co-operation contract with a local entity. Foreign capital contributions cannot exceed 51% of the legal capital of the joint venture.
• Audio-visual services: foreign investors must have a business co-operation contract or joint venture with Vietnamese partners that are authorised to provide these services in Vietnam. Foreign capital contributions cannot exceed 51% of the legal capital of the joint venture.
• Telecommunications:
• Facilities-based (that is, development of infrastructure plus services): the state must be the majority shareholder (51%); foreign ownership cannot exceed 49%; and
• Non-facilities-based services: foreign ownership cannot exceed 65%.
There is no requirement to apply for approval of foreign ownership if it is within the regulatory limits. However, in exceptional cases, foreign investors that wish to go beyond ownership restrictions must seek the written approval of the Prime Minister. Except where Vietnam has made WTO commitments in certain sectors, market access is subject to the discretion of the relevant authorities.
In addition, foreign ownership of shares requires the approval of the:
• Ministry of Industry and Trade, for distribution services.
• State Bank of Vietnam, for M&A transactions involving credit institutions.
• Ministry of Finance, for any transfer of shares involving 10% or more of the charter capital of an insurance company or insurance brokerage company.
Vietnam’s commitments in other international treaties may offer better market access conditions for foreign investors. Please feel free to contact us for further advice.
Cleared Subject to Remedies, Conditions, or Restrictions
The investor will need to register the capital contribution and purchase of shares if either:
• The target is operating in one of the conditional sectors in the Investment Law 2020.
• The capital contribution and purchase of shares results in foreign investors owning 51% or more of the target’s charter capital (in particular, from below 51% to more than 51% and from 51% to above 51%).
The local Department of Planning and Investment where the target is located must issue its final approval within 15 days from the receipt of a valid registration application. However, in practice, this procedure can take several months due to the workload of certain central authorities and the lack of clear guidance documents. Therefore, the registration requirement can cause substantial delays to the whole M&A process.
In other cases, the target company only needs to register a change of membership/shareholders at the Business Registration Division.
26. Are there any restrictions on repatriation of profits or exchange control rules for foreign companies?
If the target company in Vietnam already has an investment registration certificate, it must open a direct investment capital account at a licensed bank in Vietnam. Payment for a share purchase by a foreign investor must be conducted through this account. The account can be denominated in Vietnamese dong or a foreign currency. In addition, if the foreign investor is an offshore investor, it will also need to open a capital account at a commercial bank operating in Vietnam to carry out the payment on the seller’s account and receive profits.
If the target company in Vietnam does not have an investment registration certificate, the foreign investor will need to open an indirect investment capital account for payment to the seller and remittance of profits.
Future Developments
27. What do you think will be the main factors affecting the public M&A market over the next 12 months, and how do you expect the market to develop?
The main drivers of Vietnam’s M&A market are:
• The country’s deeper and wider integration into the world’s economy is offering new opportunities for M&A activities.
• Another factor includes the high pressure faced by the government to privatise state-owned enterprises to meet requirements under signed trade pacts, especially the EU – Vietnam Free Trade Agreement, which came into force on 1 August 2020.
Encouraging signs for foreign investment include:
• Reformed policies to allow wider access to foreign investors.
• ASEAN Economic Community single market and production base.
• The conclusion of free trade agreements (FTAs), including the EU – Vietnam FTA and The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
• Vietnam’s super rich population is growing faster than anywhere else and is on track to continue leading the growth in the next decade.
• Equitization of state-owned enterprises will speed up.
• Investment Law, Enterprise Law, Resolution No. 42 on handling bad debts and other laws and policies have created a transparent legal environment for investment and trade in general, and the M&A market in particular. However, the following factors also affect M&A transactions:
 Divergent interpretations and implementations by local licensing authorities of international treaties such as Vietnam’s WTO Commitments.
 Different licensing procedures applied to different types of transactions (for example, for foreign invested companies and domestic companies, public companies and private companies, and for buying state-owned shares or private shares).
Although legal and governance barriers, along with macro instability and the lack of market transparency are still the greatest concerns for investors, M&A deals in Vietnam are still expected to be one of the key, effective channels for market entry.
28. Are there any proposals for the reform of takeover regulation in your jurisdiction?
The Investment Law 2020 and its guiding decree introduced clearer M&A regulations and acts as an incentive for the growth of the M&A market. This contributes to the end of years of uncertainty and frustration faced by foreign investors seeking entry into the Vietnam market, or expansion through M&A transactions.

Source: Dr. Oliver Massmann (duanemorris)

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