Legal Considerations When Acquiring a Business: What Investors Should Not Overlook

May 22

Mergers and Acquisitions (M&A) are common strategies for expanding business operations. However, without a thorough understanding of legal regulations or proper preparation, investors may face significant legal risks. In this article, Dedica Law Firm outlines key legal considerations when acquiring a business in Vietnam.

1. Conduct Thorough Due Diligence on the Target Company

Before proceeding with an acquisition, investors should conduct a comprehensive due diligence process, including:

Legal status: business registration certificate, charter, and licenses for conditional business lines.
Financials: financial statements, debts, and tax obligations.
Labor: employment contracts, social insurance obligations, and potential labor disputes.
Assets: ownership of assets, capital contributions, and mortgaged properties.
Legal disputes: ongoing lawsuits or complaints.

Due diligence helps investors assess potential risks and determine the actual value of the business prior to making a final decision.

2. Review Investment Laws and Market Access Restrictions

For foreign investors, it is crucial to verify:

Whether the target company's business sector is restricted or conditional for foreign investment;
The maximum allowable ownership ratio under Vietnam’s laws and WTO commitments;
Whether capital contribution or share purchase must be registered with the Department of Planning and Investment.

Failure to comply with these legal requirements may result in invalid transactions or administrative penalties.

3. Draft a Clear and Comprehensive Transfer Agreement

The acquisition agreement serves as the main legal document binding the parties. It should clearly specify:

Purchase price and payment method;
Seller's liabilities regarding debts and outstanding obligations;
Time of ownership transfer;
Confidentiality commitments;
Dispute resolution clauses.

It is strongly recommended to engage legal counsel to draft and review the agreement to protect your interests and minimize legal risks.

4. Complete All Legal Procedures After the Acquisition

Once the transaction is finalized, investors must update relevant corporate information, including:

Changes in shareholders or capital-contributing members;
Change of legal representative (if applicable);
Updates to the Enterprise Registration Certificate (ERC);
Fulfillment of tax declaration and capital transfer obligations (if profits are earned).

These steps are essential to legally record the transaction and avoid future disputes.

5. Engage a Legal Advisor Throughout the M&A Process

With extensive experience in both domestic and cross-border M&A transactions, Dedica Law Firm offers professional support in:

Legal due diligence of the target business;
Investment strategy and transaction structuring;
Drafting transfer agreements;
Representing clients before competent authorities;
Advising on tax and post-acquisition procedures.

Conclusion

Acquiring a business is a fast-track way to growth, but it also comes with potential legal challenges. Investors should be proactive in legal preparation, conduct thorough due diligence, and work with a reputable legal advisor to ensure a smooth and successful acquisition.

Contact DEDICA Law Firm today for expert legal advice!

Phone: (+84) 39 969 0012 (We are available on WhatsApp, WeChat and Zalo)
Head Office: 144 Vo Van Tan Street, Vo Thi Sau Ward, District 3, Ho Chi Minh City, Vietnam
Hours: Monday–Friday (8:30 am – 6:00 pm)

Call us now or leave us a message to get advice. Initial consultation is free of charge.