Legal Framework for Mergers and Acquisitions (M&A) in Vietnam: What You Need to Know
1. What is M&A?
M&A stands for Mergers and Acquisitions, which refers to the consolidation or purchase of one business entity by another. It is a form of corporate restructuring aimed at expanding scale, increasing market competitiveness, or entering new markets.
In Vietnam, the law does not provide a specific legal definition for M&A. However, M&A activities are governed by several key legal instruments, including:
Law on Enterprises 2020
Law on Competition 2018
Law on Investment 2020
Law on Securities 2019
Law on Foreign Trade Management 2017
Law on Credit Institutions 2010 (as amended in 2017)
2. Common Forms of M&A under Vietnamese Law
Vietnamese law recognizes several types of M&A transactions:
a. Merger of enterprises
A merger involves one or more companies merging into another existing company by transferring all assets, rights, obligations, and legitimate interests to the receiving company, while the merged companies cease to exist.
b. Consolidation of enterprises
Consolidation occurs when two or more companies combine to form a new entity, and all original companies are dissolved.
c. Acquisition of enterprises
This may include:
Acquiring all or part of the capital contribution in a limited liability company (LLC)
Acquiring shares in a joint stock company (JSC)
Such acquisitions may result in a change of ownership, controlling shareholders, or the management structure of the business.
3. Conditions and Procedures for M&A under Vietnamese Law
a. General conditions:
The transaction must not fall under any prohibited or restricted categories (e.g., conditional business sectors).
Compliance with competition regulations is required in the case of economic concentration.
For foreign investors, certain conditions apply regarding ownership limits, investment forms, and operational scope.
b. Basic procedures:
Negotiate and sign the M&A agreement
Conduct legal due diligence
Carry out capital/share transfer procedures or establish a new entity
Update business registration information
Notify or reorganize the business post-M&A
Depending on the specific case, additional steps such as amending the investment registration certificate or obtaining approval from competition authorities may be required.
4. Is M&A Notification with Competition Authorities Mandatory?
Yes. According to the Law on Competition 2018, if the M&A transaction constitutes economic concentration, and meets any of the following thresholds, it must be notified to the National Competition Commission before implementation:
Total assets or revenue of the involved parties exceed the legal threshold
The M&A transaction value surpasses a specified limit
The combined market share exceeds the control threshold
Failure to comply with the notification requirement may lead to penalties and remedial measures.
5. Key Considerations for Enterprises Engaging in M&A
Conduct thorough legal and financial due diligence on the target company
Draft a comprehensive M&A agreement with clear rights and obligations
Assess potential risks relating to taxes, human resources, assets, and liabilities
Ensure strict compliance with all relevant laws, especially in cases involving foreign elements or conditional business sectors
6. Legal Advisory Services for M&A Transactions
M&A is a complex and high-stakes transaction that requires in-depth knowledge of corporate, investment, competition, and tax laws. Therefore, it is highly recommended that businesses engage reputable law firms for professional legal support, including:
Strategic advice and deal structuring
Legal due diligence
Drafting, negotiating, and resolving issues in M&A contracts
Representation before competent authorities
7. Conclusion
M&A has become a prominent trend in today’s business environment, offering a strategic pathway to growth and market expansion. However, to ensure successful and legally compliant transactions, enterprises must understand the applicable legal conditions and procedures, and seek guidance from experienced M&A legal professionals.
Contact DEDICA Law Firm today for expert legal advice!
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