VIETNAM Law and Practice Contributed by: Minh Duong, Phong Nguyen and Justin Gisz, Asia Counsel Vietnam Law Company Limited
Key Considerations for Foreign Investors Shares Share acquisition means inheriting all assets and liabilities. Thorough due diligence is vital. Primary shares provide capital injection, while secondary shares involve direct payments to shareholders. The payments may have to be channelled through a spe - cialised indirect investment capital account or a direct investment capital account, as required by Vietnam’s foreign exchange control regulations. Share sales offer the most straightforward exit strategy. Assets Asset acquisition is preferable when specific business segments are targeted and restructuring is impracti - cal. A Vietnamese entity must be established for the purchase. Restrictions apply to foreign ownership of certain assets and the transferral of investment pro - jects. Tax Implications Please see 9. Tax regarding the tax implications of each structure. 3.2 Regulation of Domestic M&A Transactions Foreign investors considering M&A in Vietnam should be aware of the following typical regulatory require - ments. Companies Treated as “Foreign Investors” A company must comply with investment conditions and processes applicable to “foreign investors” if: • more than 50% of its charter capital is held by foreign investors (Direct FDI); • over 50% of its charter capital is held by a Direct FDI; or • more than 50% of its charter capital is held by foreign investors and a Direct FDI. Foreign Ownership Limits The Law on Investment sets the general principles on the maximum shareholding in a Vietnamese tar - get company that can be held by foreign investors and deemed foreign investors, based on the target’s sector and business line. The specific limits may be specified in international trade agreements or specific laws and regulations.
Asset Transfer and Project Transfer Before proceeding, the transferred project and the parties involved must meet specific requirements. For example, a real estate project requires approved planning, completed land clearance and a land-use right certificate. The assignee must be a licensed real estate trading company with sufficient financial resources and a commitment to continue the project. Acquisition Approval Foreign investors need “acquisition approval” from the provincial Department of Finance before acquir - ing shares in a Vietnamese company if: • the acquisition increases the foreign ownership in the target company conducting a business activity that is subject to conditions applicable to foreign investors; • the acquisition increases the foreign ownership to over 50%; or • the target company has land-use rights in restrict - ed areas or related to national defence. The application includes an assessment of: • foreign ownership restrictions; • the conditions applicable to the target company’s business lines; and • compliance with those conditions. Merger Filing Clearance If the transaction constitutes an economic concentra - tion and exceeds certain thresholds, the parties must apply for merger filing clearance from the Vietnam Competition Commission. This can be done con - currently with the acquisition approval application. Details of the merger filing procedure are provided in Foreign investors should note specific registration requirements after completing the transaction, includ - ing: • registering foreign shareholders/equity owners with the authority; • recording changes to the Vietnamese target com - pany’s corporate information; 6. Antitrust/Competition . Registration Requirements
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