By Phuong Phan.

In mid-2019, the State Bank of Vietnam issued Circular No. 06/2019/TT-NHNN dated June 26, 2019 (Circular 06) to provide guidance on foreign exchange management for foreign direct investment in Vietnam. This Circular shall take effect from September 6, 2019 and replace Circular No. 19/2014/TT-NHNN dated August 11, 2014 (Circular 19).

Direct investment and Capital Account

One of the noteworthy points under Circular 06 is that it clearly determines and construes foreign-invested enterprises, which are required to open the Direct Investment Capital Account (DICA), including (i) enterprises being established in the investment form of economic organisations, in which foreign investors are members or shareholders and must carry out the procedures to obtain Investment Registration Certificate (IRC) in accordance with the investment law, (ii) enterprises not subject to IRC and having 51 percent or more of the charter capital owned by foreign investors, for example enterprises having the foreign investors to contribute capital, purchase shares or portion of capital contribution to such enterprise which result in the foreign investors owning 51 percent or more of the charter capital of such enterprises (in this case the foreign investors obtained the notification on satisfaction of the conditions for capital contribution and share purchase (M&A Approval) and (iii) enterprises established by the foreign investors to implement PPP projects in accordance with the investment law (hereafter referred to DICA Enterprise).

The enterprises under (ii) and (iii) above are required to close DICA in the following cases: (i) after completing the transfer of shares, contribution capital or issuing the additional shares in order to increase the charter capital in such enterprises, the percentage of shares and contribution capital owned by the foreign investors at such enterprises is below 51 percent; or (ii) after such enterprises having become the listed enterprises with their shares listed or registered for trading on the Stock Exchange. In such cases, the non-resident foreign investors who own the shares, capital contribution in such enterprise must open the Indirect Investment Capital Account (IICA) in order to implement their revenue and expenditure transactions.

Screenshot 2019-09-11 at 10.44.31 AM

Capital contributions

One more notable point is that the foreign and domestic investors are allowed to contribute capital in Vietnamese dong or foreign currencies as provided in IRC, the establishment and operation licence under the specialised regulations (for the foreign-invested enterprises established and operated under the specialised regulations), M&A Approval, the PPP Contract signed with the competent state authorities and other evidence. This point will support the remittance banks to clarify the supporting documents provided by the foreign investor in order to allow the fund transfer without IRC requirement as usually did in the past. Thus, it being understood that in case the local enterprise which was incorporated by Vietnamese investors and then acquired by the foreign investors leading to such foreign investors owning 51 percent or more of the charter capital of such enterprise, the foreign investors should firstly obtain M&A Approval and then such enterprise opens DICA. Then the foreign investors implement the fund transfer through DICA and such enterprise will implement the procedures to recognise the foreign investors as the members/shareholders of such enterprise.

Circular 06 regulates more clearly the payment route regarding M&A transactions involving DICA Enterprise as follows: (i) the payment of transfer price between a resident investor and a non-resident investor must be implemented through DICA and in Vietnamese dong; (ii) the payment of transfer price between two non-resident investors is allowed to implement in foreign currency or Vietnamese dong and the payment of transfer price between two resident investors must be in Vietnamese dong, however, they both are not required to implement through DICA. Having said that, it seems to allow foreign investors to implement the offshore payment in foreign currency thanks to Circular 06. Before Circular 06, it is arguable that offshore payment for transfer price in the DICA Enterprises is allowed or it must be implemented through DICA.


In summary, Circular 06 has some significant improvements regarding capital transactions and M&A pertaining to foreign-invested enterprises in Vietnam.



On June 14th, 2019, the National Assembly enacted Law No. 42/2019/QH14 on amendment and supplement of a number of articles of Law on Insurance Business and Law on Intellectual Property (“Law No. 42”) to comply with the Intellectual Property regulations set forth in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Law No. 42 will officially take effect from November 1st, 2019 with points related to Intellectual Property noted as follows:
1. Novelty and inventive step of patent

A patent shall not lose its novelty if the patent application is submitted within 12 months in Vietnam from the date that:

i. The patent is directly or indirectly disclosed by the person who is entitled to registry or the person who has information about it.

ii. The disclosure of the patent by the State administrative agency of industrial property rights is inconsistent with the laws;

iii. The patent application is submitted by the person who is ineligible for registration.

The patent shall not be considered losing its novelty as new regulation of Law No. 42 extends the time limit for submission of patent application from 6 months to 12 months. Besides, Law No. 42 provides wider range of the applicants than the former regulations of Law on Intellectual Property.

In addition, Law No. 42 supplements the regulations that a technical solution which is a patent disclosed in the above cases shall not be used as a basis for evaluating the inventive step of such patent.

2. Validity of the Trademark Licensing Agreement (“TLA”)

The TLA between the parties is legally binding upon third parties without being registered at the National Office of Intellectual Property.

3. Obligation to use the trademarks

In the event that a dispute arises due to a request for termination of validity of Trademark Certificate of Registration of the third party as the trademark has not been used for five (05) consecutive years, the use of licensed trademark by a licensee is still considered the use of the trademark owner.

4. Self-defense right

According to Law No. 42, an organization/individual that is abused by intellectual property defense procedures (intentionally exceeding the scope or purpose of the procedure) is entitled to request the Court to compel the abusing party of compensation for damages caused by abusive procedures (including reasonable fees for hiring a lawyer).

Moreover, there are additional amendments as follows:

1. Names and indications, which are the common name of goods and widely accepted by consumers in Vietnam, are ineligible for protection as geographical indications;

2. Refusal or cancellation of geographical indications due to “potentially confusing” instead of “will cause confusion” with protected trademark in Vietnam;

3. An application for registration of industrial property rights shall be submitted in paper or electronic form according to the online filing system;

4. Supplementing provisions on International proposals and processing of International proposals for protection of geographical indications;

5. Material losses caused by intellectual property’s infringement can be determined by the intellectual property right’s holder in accordance with provisions of laws.


By Nguyen Thu Huyen.

Vietnam’s National Assembly passed the new Law on Competition (New Competition Law) on June 12, 2018 and it will be taking effect on July 1, 2019, 14 years after the implementation of the Law on Competition 2004.

The New Competition Law governs (i) the acts in restraint of competition, economic concentrations which have or may have a competition-restraining impact on Vietnam’s market; (ii) unfair competitive acts; (iii) competition legal proceedings; (iv) dealing with breaches of the law on competition; and (v) State administration of competition.

The New Competition Law extends the scope of its applicable entities that consist of “related domestic and foreign agencies, organisations and individuals”, apart from organisations and individuals conducting business and industry and professional associations operating in Vietnam. These broadened regulations aim to create the mechanism to settle anti-competitive acts and/or cases which may be implemented overseas but have or may have a competition-restraining impact on Vietnam’s market and to control acts relating to competition of state authorities. This content is to meet the requirements of economic integration and create a fair competition environment for both domestic and foreign organisation/individuals.

Pursuant to the New Competition Law, there are significant changes in regulating “acts in restraint of competition”, which are defined as actions that cause or may cause a competition-restraining impact, including “practices of agreement in restraint of competition, abuse of dominant market position, and abuse of monopoly position”. Under the 2004 version of Law, the “acts in restraint of competition” apply only to enterprises and consist of “economic concentration”, meanwhile, these matters are now no longer provided.

The approaching method under the 2004 version of the law to control “agreements in restraint of competition” is solely based on “combined market share”. At present, the New Competition Law manages these agreements by its nature or ability to have a significant competition-restraining impact in the market. The term “significant competition-restraining impact” is newly provided and shall be determined by the National Competition Committee according to market share ratio, barriers to market access or expansion, restriction of research, development and renovation of technologies, etc. The New Competition Law further provides three more types of agreements in its list of “agreements in restraint of competition”, including: agreements not to trade with parties not participating in the agreements; agreements to restrain the product sale market or sources of supply of goods and services of parties not participating in the agreements; and other agreements which have or may have a competition-restraining impact. In addition, the New Competition Law provides the new term of “significant market force”, which is a ground to verify “a dominant market position” of an enterprise, apart from the one of “holding of 30 percent or more of the market share in the relevant market”.

The management of economic concentration is another noteworthy change of the New Competition Law. Unlike the 2004 version of the law, which determines the prohibited economic concentration by relevant market share ratio, presently, economic concentration shall be prohibited if it causes the effect or is capable of causing the effect of significantly restricting competition in the market of Vietnam. The “significantly restricting competition effect” shall be also confirmed by the National Competition Committee based on specific elements provided in this New Competition Law. Regarding “the unfair competitive acts”, the New Competition Law does not re-provide and refer to other acts that are governed under other relevant laws, and “illegal multi-level sales” are excluded from unfair competitive acts.

One last remarkable point of the New Competition Law is to strengthen and ensure the independence of the state administration of competition by having new regulation on the National Competition Committee, which is an agency under the Ministry of Industry and Trade, being in charge of advising and assisting the Minister of Industry and Trade in exercising the function of state administration of competition; carrying out competition legal proceedings and to perform other duties in accordance with the laws.


By Phan Nhat Phuong.

In the middle of the year 2018, the Government of Vietnam issued Decree No. 86/2018/ND-CP (Decree 86) to regulate foreign cooperation and investments in education sector in Vietnam, taking effect as from August 1, 2018 and replacing Decree No. 73/2012/ND-CP (Decree 73) and Decree No. 124/2014/ND-CP (Decree 124).

One of the noteworthy points under Decree 86 is educational association, which is defined as twinning between Vietnamese private kindergartens, Vietnamese private general educational institutions and foreign educational institutions accredited by an education quality assessment organisations or foreign competent authorities in order to implement the integrated education programme; provided however that the educational association and the integrated education programme must be approved by the Vietnamese competent authorities. The period of educational association shall not exceed five years from the date of approval, which can be extended five years for each renewal.

The remarkable regulations to implement the integrated education programme under Decree 86 includes: (i) foreign education programme used in the integrated education programme shall be accredited in the home country or by an educational competent authority of the aforesaid country; (ii) the integrated education programme shall ensure the objectives of the Vietnamese education programme and still satisfy the requirements of the foreign education programme; learners shall not be forced to re-study the same contents, and the integrated programme shall maintain its stability throughout the study level and the interconnection between levels for the interests of the students; and ensuring volunteer participation and not overwhelming the students; (iii) the size of class and the facilities shall adequately meet the requirements of the integrated education programme and shall not affect the teaching activities of the Vietnamese educational institution during the education association process; (iv) the Vietnamese teachers assigned to teach an integrated education programme shall satisfy the training requirements according to the regulations of Vietnamese laws; the foreign teachers assigned to teach an integrated programme is required with a bachelor’s degree corresponding to his/her teaching majors and also a teacher certificate or equivalent.

One more notable point is that the administrative procedure provided under Decree 73 to obtain decision on establishment of foreign invested centres providing short-term training on foreign languages, IT, cultures and specialised skills are repealed under Decree 86. Accordingly, the establishment of such centres is subject only to the following procedures: (i) obtaining Investment Registration Certificate for foreign investors; (ii) obtaining Enterprise Registration Certificate for enterprise operating the centres and (iii) obtaining approval of educational operation and publication on the websites of the licensing competent authority. Under Decree 86, in order to issue Investment Registration Certificate, the licensing competent authority (ie, Department of Planning and Investment) is required to send the official letter to get the appraisal of the corresponding Department of Education and Training; however, in practice, the licensing authority at its discretion may ask for further appraisal from District People’s Committee and Department of Transportation.

In addition, the limitation of Vietnamese students has been raised from 10 percent of primary and 20 percent of secondary students under Decree 73 to a higher percentage of not exceeding 50 percent of the total enrolment of the international school.

Lastly, Decree 86 opens more opportunities for the foreign-invested kindergartens to enrol Vietnamese children under five years old which was previously prohibited under Decree 73.


13th June 2019

BIZCONSULT LAW FIRM is recognized as one of the most prestigious law firms in Vietnam. We are highly evaluated and ranked in the group of leading professional law firms in Vietnam in some key areas such as Business & Trade, Mergers & Acquisitions, Finance & Banking, Real Estate & Construction/EPC Contracts, Investment Projects (Inbound & Outbound), Intellectual Property & Franchise, Dispute Resolution & Litigation (Arbitration and Court) by international professional organizations such as Legal500 Asia Law Firms, Asian Legal Business (ALB), Getting The Deal Through (Mergers & Acquisitions Magazine), Global Legal Experts, Asia IP (Asian Intellectual Property Magazine), asialaw (Asian Law Magazine), etc… Our clients are multinational corporations, international organizations, investment funds and domestic and foreign enterprises. Please visit our website at: for more information.

In order to meet the demand for the Company’s development, we would like to recruit new vacant positions in Hanoi office as follows:


Job description:

  • Doing legal consulting works, acting as litigation lawyers in Court and arbitration;
  • Doing legal research and preparing legal memorandum; drafting legal advice at the request of senior lawyers;
  • Participating in writing legal analysis as assigned by the Company;
  • Supporting the senior lawyers, Company’s staffs in providing legal services for the clients.

Job requirements:

  • Having Lawyer’s License;
  • Having at least 03 years of legal consultancy experience in the fields of business and investment law, of which there is at least 01 year of litigation experience;
  • Having good teamwork skill;
  • Having good consulting and presentation skills in Vietnamese and English;
  • Having good manner, communication and problem solving skills;
  • Knowing how to use the basic functions of word processing and presentation software (MS Word, Excel, Power Point);
  • Being responsible and being able to work under pressure;
  • Graduated from law university, economic law field with good/very good grade, master’s degree in law will have advantage in evaluating employment applications.


  • Being directly involved in handling work records under the guidance of the Company’s senior lawyers;
  • Working in a professional, dynamic and friendly environment;
  • Being guided and trained by Company’s senior lawyers in counseling and practicing law skills;
  • Attending national and international forums and conferences organized in Vietnam to expand knowledge and relationship;
  • Salary according to capacity/agreement;
  • Other benefits under the provisions of laws on labor and social insurance;
  • Benefits according to the Company’s regulations;
  • Career advancement opportunities.

II. POSITION: ADVISORY LAWYER AND LEGAL ASSISTANT – Quantity: 01 Advisory Lawyer and 02 Legal Assistants.

Job description:

  • Doing legal consulting works in general;
  • Doing legal research and preparing legal memorandum; drafting legal advice at the request of senior lawyers;
  • Participating in writing legal analysis as assigned by the Company;
  • Supporting the senior lawyers, Company’s staffs in providing legal services for the clients.

Job requirements:

  • Having at least 03 years of legal consultancy experience for Advisory Lawyer position.
  • Graduated or being a final year Law student for Legal Assistant position. Having experience in internship or working at law firm’s/lawyer’s offices is an advantage;
  • Working full-time;
  • Being good at four English skills and computer science;
  • Having good communication and teamwork skills;
  • Being honest, disciplined, dedicated to work;


  • Being directly involved in handling work records under the guidance of the Company’s senior lawyers;
  • Working in a professional, dynamic and friendly environment;
  • Being guided and trained by Company’s senior lawyers in counseling and practicing law skills;
  • Attending national and international forums and conferences organized in Vietnam to expand knowledge and relationship;
  • Salary according to capacity/agreement;
  • Other benefits under the provisions of laws on labor and social insurance;
  • Benefits according to the Company’s regulations;
  • Career advancement opportunities.


Job description:

  • Making plans and organizing marketing programs under the direction of the Company’s leaders;
  • Managing customer service (except professional work);
  • Being in charge of managing content for websites and other PR tools of the Company (in collaboration with IT and lawyers);
  • Searching and scheduling conferences, marketing events for lawyers, joining with lawyers in the events to promote the Company’s name;
  • Managing posting schedules for magazines, legal updates, etc…
  • Updating company’s profile, CV of the personnel, etc…

Job requirements:

  • Being good at four English skills and computer science;
  • Being good at web management is an advantage;
  • Having good appearance, communication skills and relationships;
  • Having at least 3 years of experience in marketing or office management.


  • Working in a professional, dynamic and friendly environment;
  • Salary according to capacity/agreement;
  • Other benefits under the provisions of laws on labor and social insurance;
  • Benefits according to the Company’s regulations;
  • Career advancement opportunities;


Application dossier (in English or in Vietnamese):

  • Job application;
  • CV for the vacant position (attached with a personal photo in the last 01 year).


  • Directly at the head office of the Company:

Floor 3, 20 Tran Hung Dao Street

Hoan Kiem District

Ha Noi

Deadline: By the end of 15th July 2019.

Expected Interview schedule: From 15th to 20th July 2019.

Contact: If you have any questions, please contact:

  • Hai: 096 371 8558
  • Huyen: 091 290 8579



By Huynh Hoang Sang.

The number of solar power projects (SPP) in Vietnam has grown quickly in recent years, especially after the Prime Minister promulgated Decision No.11/2017/QD-TTg (Decision 11) on April 11, 2017 providing a mechanism for encouragement of solar power in Vietnam. This Decision took effect from June 01, 2017 and expires on June 30, 2019.

With the expiry date fast approaching, SPP investors are focused on the construction and completion of such SPPs before the benefit of Decision 11 come to an end. There are two main benefits. Firstly, Decision 11 allows SPPs to be eligible for the exemption and/or the reduction of import duties, corporate income tax, land levy, land rent and water surface rent in accordance with application laws of Vietnam (Art 10, Art 11 of Decision 11). Secondly, Decision 11 also provides a compulsory responsibility of Vietnam Electricity (EVN) as an electricity buyer to purchase all of electricity created by SPPs (Art 9.1 of Decision 11).

Following Decision 11, the Ministry of Industry and Trade (MOIT) issued Circular 16/2017/TT-BCT (Circular 16) on September 12, 2017 regarding project development and sample of power purchase agreements (PPA) mandatorily applied to SPPs including rooftop solar power project (rSPP) and grid-connected solar power project (gSPP). One of the noteworthy points of Circular 16 is that the investor shall only be permitted to form a gSPP if it is approved in the provincial or national solar power planning or provincial or national power development planning (Art 10.1 of Circular 16). However, the investor of rSPP shall only need to register the connecting terminal with the electricity company at provincial level for the rSPP having capacity under 1 megawatt (MW) or follow the regulatory procedures for inclusion of rSPP having capacity of 1 MW or over in the solar power development planning (Art 11 of Circular 16).

As of March 11, 2019, the MOIT further issued Circular 05/2019/TT-BCT (Circular 05) to amend and supplement a number of articles of Circular 16, which provides a specific electricity pricing and new template of PPA for rSPP. In particular, the electricity pricing for rSPP prior to January 01, 2018 is unchanged but after January 01, 2018, it shall be adjusted in accordance with the exchange rate between VND/USD as publicly announced by the State Bank of Vietnam (SBV) on the last working day of the previous year (Art 1.1 of Circular 05). The adhesion of exchange rate herein may be an issue for the investor as it may be treated as a violation under Ordinance on Foreign Exchange Control and its guiding regulations. If this was the case, the investor would be subject to a fine up to VND250 million (US$10,700) (Art 24.6 (c) of Circular 32/2013/TT-NHNN).

Further to Circular 05, the new sample of PPA for rSPP replaces two previous templates of PPA of rSPP as attached in Circular 16 and makes it more preferable on the scope of electricity trading, payment method, rights and obligations of the parties (Art 1.2 of Circular 05). This sample is compulsory for purchasing of electricity by and between EVN and electricity seller for a term of 20 years from the commercial operation of rSPP (Art 7.1 of PPA of rSPP attached in Circular 05). The parties are permitted to supplement some new articles without making any change of the principal contents of this agreement (Art 18.3 of Circular 16). During the term of this agreement, any requirement on amendment of the agreement must be notified to other party 15 days in advance (Art 7.2 of PPA of rSPP attached in Circular 05). The SPP investors, especially for rSPP, should place importance to this Circular and the new sample PPA of rSPP before the effective date of Circular 05 (April 25, 2019).


By Tran Cong Quoc.

In December 2018, the Government of Vietnam issued the Decree 163/2018/ND-CP (Decree 163), effective from February 2019. Decree 163 is said to be a radical reform of regulations on private issuance of corporate bonds in Vietnam, repealing the Decree 90/2011/ND-CP (Decree 90).

One of the most notable points under the Decree 163 is that the requisite conditions for issuing corporate bonds have been significantly liberalized. Specifically, the requirement to be profitable in the year immediately before issuance is now lifted. The condition for one-year test period before issuance shall be counted from the date of initial issuance of issuer’s business registration certificate, rather than the date of official operation as under Decree 90. In this regard, for issuers that have undergone restructuring such as merger, conversion or division, such time period before restructuring shall be taken into account for the purpose of that one-year test. Another noteworthy point is that a form of issuing by direct placement to  bondholders without going through issuing agent or underwriter is now allowed for any issuers. Previously, under Decree 90, it was limited for the credit institution only. With respect to international bonds, conditions requiring a credit rating for the issuer and legal opinion regarding issue have been revoked. Nonetheless, Decree 163 introduces a new condition for bond issues that requires an  issuer has to fulfill any outstanding due principal and interest accrued from those bonds issued in three consecutive years prior to the current issuance. Further, transferring of privately issued bonds upon issuance in the secondary market shall be, within first year of issuance, restricted to the extent of 100 investors, excluding professional investors.

Decree 90 previously mandates an audited financial statement (FS) of issuer for the year immediately preceding the year of issuance as a condition for bond issuance. Should the bonds be issued in first quarter of a year where yearly audited FS has not been prepared, then the unaudited one shall be alternatively allowed, but to this end, that unaudited yearly FS must firstly be approved by the board of directors (for joint stock companies) or members’ council (for liability limited companies) in accordance with the charter of the issuer. However, the charter of companies in Vietnam do not usually regulate such power of board of directors or members’ council to approve unaudited yearly FS for the purpose of bond issuance, leaving a legal uncertainty whether an issuer can use the yearly unaudited FS approved by its board of directors or member’s council for such purpose. Decree 163 now has relieved such uncertainty by stipulating that in such circumstance, an issuer may adopt the quarter or semi-annual audited FS instead, thus no longer requiring the yearly unaudited FS.

Remarkably, Decree 163 introduces a more systematical administration regime for corporate bonds as compared with Decree 90. In particular, the stock exchange shall now be the responsible state authority directly monitoring private corporate bond offerings in Vietnam, instead of Ministry of Finance under Decree 90, which shall receive any statutory pre-issuance report, post-issuance report and regular and irregular information disclosure by the issuer in respect to the bonds issued. In addition, issuer shall be required to deposit issued bonds with depository agent, ie the Vietnam Securities Depository (VSD) or a member of VSD, to manage the registrar and transferring thereof within 10 days from issue, and status of ownership of such bonds shall be updated by depository agent to the stock exchange on semi-annual basis. The stock exchange shall establish and manage a corporate bond website to collect and publicise the information on international and domestic corporate bonds issued by Vietnamese issuers, which shall include, among others, information regarding bond terms & conditions, conversion of the bonds, attached-warrant exercise and regular and irregular information disclosure of the issuers. Investors may log in such website to search for the status of bond issues in accordance with the operation rules of such website which shall be issued by stock exchange down the road. The previously-issued bonds shall also comply with such requirements on depositing and information disclosure under the Decree 163 as from the effective date thereof.

GETTING THE DEAL THROUGH – Public M&A 2018 – Vietnam

Tuan Nguyen, Phong Le, Quoc Tran and Sang Huynh

bizconsult Law Firm


1       Types of  transaction

How may publicly listed businesses combine?

Publicly listed business is typically combined via acquisitions and mergers, in which share purchases or subscriptions are the most common. Where several business are targeted by an investor, the deal would be structured in two stages, including spin-off and then share transfers, whereby those interested shall be carved out and separated into a special-purpose vehicle of which shares are then acquired by an investor. A merger is a situation where one or more companies (merging companies) may be merged into another company (merged company) by way of transfer of all lawful assets, rights, obligations and interests to the merged company and, at the same time, termination of the existence of the merging companies. The merged company shall issue new shares to swap the share of merging companies at an agreed rate.

The Law on Enterprises (effective from 1 July 2015) allows companies of different types to be merged or consolidated without a change of company type before the merger or consolidation.

2       Statutes and regulations

What are the main laws and regulations governing business combinations and acquisitions of publicly listed companies?

In addition to any sector-specific legislation, business combinations and acquisition of publicly listed company are mainly governed by:

  • the Law on Enterprises and its guiding regulations (Decree 78/2015/ND-CP and Decree No. 96/2015/ND-CP);
  • the Law on Investment and its guiding regulation (Decree 118/2015/ND-CP);
  • the Law on Securities and its guiding regulations (Decree 58/2012/ND-CP as amended by Decree No. 60/2015/ND-CP and Circular No. 123/2015/TT-BTC); and
  • the Law on Competition and its guiding regulations (Decree 116/2005/ND-CP as amended by Decree 119/2011/ND-CP).

The Law on Enterprise, Law on Investment and Decree No. 118/2015/ ND-CP regulate general conditions and formality in business combination and acquisition for all companies incorporated in Vietnam, while the Law on Securities, Decree No. 58/2012/ND-CP (as amended by Decree No. 60/2015/ND-CP) and Circular No. 123/2015/TT-BTC deal with several specific issues with respect to publicly listed companies. If the deal involves credit institutions, Circular No. 04/2010/ TT-NHNN (as amended by Circular No. 36/2015/TT-NHNN) shall apply. In the case of acquisition of an insurance business company, the Law on Insurance Business should govern. Cross-border transactions will be subject to the Law on Investment, the Ordinance on Foreign Exchange (and its guiding Circulars 05/2014/TT-NHNN and No. 19/2014/TT-NHNN), Vietnam’s World Trade Organization (WTO) commitments, ASEAN Comprehensive Investment Agreement, ASEAN Framework Agreement on Services and other international conventions to which Vietnam is a signatory that, among others, set out the market entry conditions for foreign investors. Where an M&A transaction triggers a competition concern, the Law on Competition must be observed.

3       Transaction agreements

Are transaction agreements typically concluded when publicly listed companies are acquired? What law typically governs the agreements?

Typical documents for business combinations include merger agreement, share purchase or subscription agreement or asset transfer agreement. Ancillary agreements such as shareholders or voting agreement, transition agreement, escrow agreements, executive employment agreements are also common depending on underlying facts and circumstances of the transaction.

Typically, merger agreements, share subscription agreements and shareholders or voting agreements involving a Vietnamese company are governed by Vietnamese law. The governing law for other transaction documents, on the other hand, depends on the negotiation and agreement among the parties themselves. The choice of foreign law rather than Vietnamese law is accepted provided it is not contrary to the basic principles of Vietnamese law. There are increasing cross-border M&A transactions selecting foreign law as the governing law of the transaction agreements when publicly listed companies are acquired.

4       Filings and fees

Which government or stock exchange filings are necessary in connection with a business combination or acquisition of a public company? Are there stamp taxes or other government fees in connection with completing these transactions?

M&A transactions involving companies that are active in certain industries such as banking and finance, aviation or insurance may require the approval of their industry regulator. When state-owned assets or equity are sold, the approval of the relevant state bodies is required. In addition, the transaction may have to be conducted through a competitive method such as tender or bidding if the transaction assets are funded by 30 per cent or more or 500 billion Vietnam dong or more state capital.

Further, if the business combination involves offering of securities of a listed company by way of private placement of shares, the offering application must be filed with and approved by the securities authorities (ie, the State Securities Commission (SSC)), and additional listing application or filing with the relevant stock exchange may be required prior to the transaction.

A tender offer or proxy solicitation is also subject to a filing requirement with the SSC. Specifically, except for the exceptional cases listed in question 9, the Law on Securities requires:

  • an acquirer who wishes to acquire 25 per cent of the shares of the target company;
  • a shareholder and related parties holding 25 per cent or more of the voting shares continuing a purchase of 10 per cent or more of the voting shares; or
  • a shareholder and related parties holding 25 per cent or more of vot- ing shares continuing the purchase of 5 per cent to less than 10 per cent of the voting shares in less than one year after the completion of a previous general tender offer

to file a tender offer application with the SSC. The process for conducting a tender offer includes three major steps as follows: (i) registering the tender offer application to the SSC; (ii) making a public announcement regarding the tender offer and conducting the tender offer; and (iii) reporting to the SSC. The application comprises the registration application, the shareholders’ or board’s resolutions of the purchaser regarding the tender offer and the shareholders’ resolutions of the target in the event it redeems its shares to reduce its charter capital (if any). Upon completion of the tender, the offeror must report the tender results to the SSC within five days. For the listing of companies after merger and consolidation, there are several conditions with regards to operation duration, number of profitable fiscal years, number of fiscal years of accrued loss, overdue debts and so on.

SSC approval is also required if a public target company is operating businesses that are subject to foreign ownership limit (FOL) and the potential transaction requires SSC FOL lift-up prior to closing. The publicly listed target may have to spin off or remove certain WTO unbound activities to obtain SSC approval for FOL lift-up, and this process usually involves foreign investment review approval. On the other hand, in some transactions, SSC approval for lock-up is necessary to ensure the foreign participation.

When publicly listed companies are acquired, if the transaction price is beyond the trading band at the time of the transaction, the offband transaction shall be performed outside the stock exchange (off- market transaction) and be required to obtain prior approval from the SSC on a case-by-case basis. Upon approval from the SSC, an off-market transaction must be registered with and confirmed by the Vietnam Securities Depository before closing (ie, wiring of purchase price to selling shareholders’ bank account and the depositing of selling shares into the investor’s securities deposit account).

For cross-border business combinations, an application needs to be filed by the foreign investor or acquirer to the local foreign investment authority and subject to foreign investment review approvals. Upon the completion of a business combination or acquisition of a public company transaction, an application for registration needs to be filed with a local enterprise registration authority.

In certain circumstances, a business combination involving a Vietnamese company may be subject to the reporting requirements of the Vietnam Competition Authority (VCA). Under the Law on Competition and Law on Enterprises, if the parties to a business combination have a combined market share of between 30 per cent and 50 per cent in the relevant market they must notify the VCA before the proposed combination. The proposed combination can only be carried out after written confirmation has been received from the VCA that the combination is not prohibited. This will be issued within 45 days from the registration or sometimes up to 105 days for complicated cases of economic concentration. The combination shall be prohibited if the combined market share is above 50 per cent in the relevant market, subject to two following exemptions:

  • where one or more of the parties participating in the economic concentration is or are at risk of being dissolved or of becoming bankrupt; or
  • where the concentration has the effect of extension of export or contribution to socio-economic development or to technical and technological These exemptions, however, are not automatically granted. The relevant parties must file with the VCA a request for an exemption for economic concentration.

In the case of a merger or consolidation, the investor must comply with the procedures under the Law on Enterprises regarding the liquidation of a company and the formation of a new company. Such events must be registered with the business registration authority and the relevant authorities.

If the acquisition results in a shareholder directly or indirectly owning upwards of 5 per cent of a public company, then information about such shareholder shall be reported to the SSC, the stock exchange where the shares are listed within seven days.

A business combination may require a change to be made to the investment certificate or investment registration certificate or business registration certificate or enterprise registration certificate of the target company, or both. A government fee of about US$20 may be paid to register and compulsorily publicise such change with the National Business Registration Portal. In addition, the transaction will be subject to various Vietnamese taxes depending on the structure of the transaction, as further specified in question 18.

In addition, the fee for registering newly issued stock is about 5 million Vietnam dong, and in case the listed stock, which is required by law to exchange via the central stock exchange, is occasionally allowed to be transferred via an off-exchange transaction between parties, a fee of 0.1 per cent of the transaction value shall be charged when the buyer returns to the Vietnam Securities Deposit to register its ownership.

5     Information to be disclosed

What information needs to be made public in a business combination or an acquisition of a public company? Does this depend on what type of structure is used?

The information that needs to be made public in a business combination will depend on the type of structure used. For those required for public offer, the offeror must file a registration application with the SSC that contains various information such as the name, address and historical business performance of the offeror and its market share in the relevant business; the name and address of the target; the relationship between the offeror and the target; the current shareholdings of the offeror in the target; the number of shares to be acquired; the intention of the acquirer post-acquisition with respect to the target’s operation and employees; the sources of capital to fund the acquisition, etc. Upon receiving the approval of the SSC, the offeror must make public disclosure of the offer in three consecutive issues of an electronic newspaper or printed newspaper.

Furthermore, an acquisition of listed shares related to internal shareholders requires the disclosure of the plan of acquisition three days in advance and the outcome thereof within three days upon consummation. A deal involving a 5 per cent shareholder of a public company must be reported to the SSC if there is any change of 1 per cent or more in the shareholding or if he or she is no longer regarded as a major shareholder of the public company within seven days from the date of deal closing. Generally, it is not compulsory to disclose all transaction documents, but some identity information of shareholders and basic terms of the deal like volume, timeline and form of transaction.

Besides, a listed company and a large-scale public company must publicise information relating to capital contribution valued at 10 per cent or more of total assets of the company into other organisation; capital contribution valued at 50 per cent or more of charter capital of receiving companies receiving capital contribution; as well as purchasing, selling assets valued at more than 15 per cent of the company’s total assets according to the latest audited financial statement or the latest reviewed semi-annual financial statement.

In case there is a merger of companies, the companies must notify their creditors and employees of the merger or consolidation within 15 days from of the merger or consolidation resolution.

Furthermore, if the merger or consolidation triggers competition concerns then the companies must notify the VCA or the Competition Council thereof. Information to be disclosed includes financial statements of the past two years; a report on the market share in the relevant market of the parties in the past two years, list of subsidiaries, list of goods and services supplied, etc.

6      Disclosure of substantial shareholdings

What are the disclosure requirements for owners of large shareholdings in a public company? Are the requirements affected if the company is a party to a business combination?

A shareholder owning 5 per cent or more of a public company must report to the public company, the SSC, the stock exchange where the shares are listed within seven days from the date of acquiring such large shareholdings. Where there is any material change with respect to the previously reported information or a change in the shareholdings that exceeds 1 per cent of the outstanding shares, such shareholder must also submit the amended report to the public company, SSC and the stock exchange where the shares are listed within seven days of the changes being made.

A shareholder owning from 5 per cent of the voting shares of a public company must also report to the public company, the SSC, the stock exchange where the shares are listed within seven days from the date of his or her no longer being a major shareholder of the public company.

7      Duties of directors and controlling shareholders

What duties do the directors or managers of a publicly traded company owe to the company’s shareholders, creditors and other stakeholders in connection with a business combination or sale? Do controlling shareholders have similar duties?

Under Vietnamese law, directors (or general director) who manage the day-to-day business operations of the company shall be supervised by the management board and shall be answerable to it and before the law for the exercise of their delegated powers and the performance of their delegated duties.

Besides the fiduciary duties that the directors of a company will assume under the Law on Enterprises, they also have the following duties.

Directors, senior management and major shareholders with knowledge of a takeover situation shall not abuse such information to trade shares for their personal benefit or supply such information, encourage or solicit others to trade shares before the official public disclosure of the tender offer. In addition, the board of the target must notify the SSC and its shareholders of its opinion about the offer to acquire.

Depending on the type of structure applied and the value of transaction, a business combination of a shareholding company may fall within the authority of the shareholders or the board of management. Normally, a business combination or sale with value of less than 35 per cent of total asset value of such company (or a smaller percentage stipulated in the company charter) is under the authority of the board of management. The management board is required to exercise its powers and duties honestly and diligently to the best of its abilities in furtherance of the best lawful interests of the company. A merger or consolidation or business combination or sale with substantial value is a matter under the shareholders’ authority, thus a decision to make such business combination or sale must be passed by the shareholders in a convened meeting. The chairman of the board is responsible for convening such meeting pursuant to the procedures stipulated by law in order to obtain the shareholders’ approval. Specifically, the chairman shall send notice of the meeting, the agenda and documents to the shareholders at least 10 working days in advance of the scheduled meeting.

The law provides that the contract for a business combination in the form of merger and consolidation must be sent to creditors within 15 days of its being approved. It does not specify the responsible persons but usually it is the legal representatives of the companies. In addition, the business combination shall be announced to the employees within the above-specified time limit.

Directors and managers must also declare the details of companies in which they own shares and companies in which their related parties own more than 35 per cent equity interest. Such declaration must be conducted within seven working days from the date of the relevant interest arising. A business combination involving either of the companies must be approved by the shareholders or the board, as the case may be. A party who has an interest in such transactions cannot vote.

A director (general director) of a credit institution may not concurrently hold the position of director (general director), deputy directors, chairman or member of the board of other companies. A director of a public company cannot simultaneously hold the position of chairman of the management board of the same public company.

With respect to controlling shareholders, except for the reporting obligation mentioned in question 6, basically, they do not have any duty to the company or the minority shareholders in the context of a business combination.

Generally, the Law on Securities prohibits the following conduct:

  • directly or indirectly acting fraudulently or cheating, creating false information or omitting essential information that causes a serious misunderstanding and adversely affects a public offering, listing and trading securities, conducting business and investing in securities, securities services and the securities market;
  • disclosing false information with the aim of persuading or provoking the purchase and sale of securities, or disclosing incomplete or out- of-date information about events that have a major effect on the price of securities on the market;
  • using inside information to purchase or sell securities for oneself or for a third party; disclosing or supplying inside information or advising another person to purchase or sell securities on the basis of inside information;
  • colluding in the purchase and sale of securities aimed at creating a false supply and demand; trading securities by colluding with or persuading others to continuously purchase and sell securities in order to manipulate their price;
  • combining the aforementioned methods or using other trading methods to manipulate the price of securities; and
  • implementing securities trading activities without the SSC’s approval.

8      Approval and appraisal rights

What approval rights do shareholders have over business combinations or sales of a public company? Do shareholders have appraisal or similar rights in these transactions?

Under the Law on Enterprises, any proposals for the issuance of new shares or disposing of assets of material amounts of the company, or a merger or consolidation shall require the approval of shareholders present and voting in person or by proxy representing at least 65 per cent of the voting rights of the attending shareholders.

In addition, a shareholder is entitled to demand the cancellation of shareholders’ resolutions in the following cases:

  • the order and procedures for convening the shareholders meeting did not comply with the Law on Enterprise and the charter of the company; or
  • the order and procedures for issuing a resolution and the content of the resolution breach the law or the charter of the company.

Within 90 days from the date of receipt of the minutes of the shareholders meetings, a shareholder or a group of shareholders holding 10 per cent or more of the total ordinary shares for six consecutive months or more shall have the right to request a court or an arbitrator to consider and cancel such resolution of the shareholders.

If a public tender is required, the public tender may be waived if 51 per cent of the voting rights of the attending shareholders has been obtained. The selling or buying shareholders having a related or conflict of interest are not permitted to vote.

There is no regulatory appraisal right of shareholders towards a business combination or sales of a public company.

9      Hostile transactions

What are the special considerations for unsolicited transactions for public companies?

The Securities Law establishes three situations where the investor acquiring voting shares of a public company must tender a general offer to acquire:

  • if the proposed acquisition results in the investor owning 25 per cent or more of voting shares that are issued and outstanding;
  • organisations or individuals and related persons holding 25 per cent or more of voting shares to purchase 10 per cent or more of voting shares, which are issued and outstanding; and
  • organisations or individuals and related persons holding 25 per cent or more of voting shares to continue the purchase of 5 per cent to less than 10 per cent of the voting shares less than one year after the completion of a previous general tender

In addition, the law provides for seven exempted situations that are not subject to public offering:

  • if the proposed acquisition results in the investor owning more than 25 per cent or more of the newly issued voting shares according to the issuance plan already passed by the shareholders of the public company;
  • if the proposed acquisition results in the investor owning 25 per cent or more of the voting shares that are already approved by the shareholders of the public company;
  • internal transfer of shares between the holding company and the subsidiaries;
  • gift, inheritance or share certificates;
  • when participating in a public auction of securities for sale is not required to implement the provisions on public offers to acquire if such entity intends to purchase shares with share ownership ratios at or exceeding the threshold subject to a tender offer;
  • transfer under the court’s decision; and
  • other transactions as provided by the Ministry of Finance

Generally, the investor must follow the following process in a takeover:

  • submit a tender offer to the SSC and send a copy to the target;
  • the target makes an announcement of the offer within three days;
  • the SSC gives its opinions within 15 days;
  • the board must send its opinions regarding the offer to the SSC and shareholders of the target within 10 The board’s opinions must be in writing and signed by majority of the board members;
  • the investor must make an announcement in three consecutive issues of a printed or online newspaper and the website of the stock exchange where the shares are listed, within seven days from its receipt of the SSC’s opinion;
  • the investor must report the results of the offer to the SSC within five days from completion of the offer and at the same time make a public announcement on the result of the offer;
  • the investor must appoint a securities company as an agent conducting the offer; and the offer period must be no shorter than 30 days and no longer than 60 days. It is noted foreign ownership of shares of a public company is now removed from the overall 49 per cent cap. Particularly, on 26 June 2015, the government issued Decree No. 60/2015/ND-CP and among the changes, the most welcomed point is the relaxation of the overall 49 per cent cap on foreign ownership in Vietnamese public companies. From 1 September 2016, in general, foreign ownership of public companies will not be limited. Decree 60, however, lists certain cases where foreign ownership will still be restricted, such as certain sectors under Vietnam’s international treaties (eg, Vietnam’s WTO commitments); and sectors restricted to foreign investors under the Law on Investment. If specific foreign ownership limitations for such conditional sectors have not yet been set, the foreign ownership in such cases will be capped at 49 per cent. In addition, where an investor acquires newly issued shares of a company in a private share placement the investor is restricted from selling the shares within one year.

10    Break-up fees – frustration of additional bidders

Which types of break-up and reverse break-up fees are allowed? What are the limitations on a public company’s ability to protect deals from third-party bidders?

Vietnamese law does not prohibit or otherwise regulate break-up fees and reverse break-up fees. Generally, breaches to the break-up fee agreements may lead to contractual penalties whereby the breaching party has to pay a pre-determined amount to the other parties. It is critical to note that a liquidated damages clause is not specifically provided under Vietnamese law. As a general understanding, the amount of the liquidated damages is determined by reference to an estimate of the likely loss suffered by the non-defaulting party as a result of the breach. In other words, the amount of damages is pre- agreed and does not depend on the non-defaulting party demonstrating the amount of loss actually suffered. On the other hand, Vietnamese law provides for two types of monetary remedies for breach of contract, namely penalty for breach and compensation for damages. In term of penalty for breach, the parties may agree on the penalty amount, but the amounts may not be more than 8 per cent of the value of the contractual obligation which is the subject of the breach if they are considered as a penalty. Furthermore, the aggrieved party can request for damages for loss. The value of damages for loss shall comprise the value of the actual and direct loss that the aggrieved party has suffered owing to the breach, as well as the direct profits the aggrieved party would have earned had such breach not been committed. Additionally, although not specifically regulated, the fees should be fully disclosed in the offer document that is registered with the SSC and in the offer announcement. The break-up fees would also be approved by the shareholders of the target. Where the transaction is between affiliated companies, issues such as transfer pricing and related-party transactions should be considered. If the fees are to be paid to a foreign party it will also raise a foreign exchange issue.

We are not aware of any provisions that prohibit or restrict financial assistance in business combinations.

Vietnamese law does not place limitations on a company’s ability to protect deals from third-party bidders. As mentioned above, the board of the target must send its opinions regarding a takeover offer to the SSC and shareholders within 10 days. The board’s opinions must be in writing and signed by majority of the members of the board. If the board objects to the offer, it is unclear whether the deal can proceed or be aborted. Except for some special circumstances, shareholders are not restricted from selling their shares.

11      Government influence

Other than through relevant competition (antitrust) regulations, or in specific industries in which business combinations or acquisitions are regulated, may government agencies influence or restrict the completion of such transactions, including for reasons of national security?

As mentioned in the foregoing questions, a foreign investment approval from the local foreign investment authority is required prior to the completion of a business combination involving foreign investors.

The Vietnamese government may restrict or bar certain cross- border transactions for reasons of national security or public policies of Vietnam.

Cross-border M&A transactions shall comply with the commitments of Vietnam upon accession to WTO. Transactions involving a Vietnam-incorporated company active in multiple businesses usually require appraisals of various line ministries and satisfaction of numerous industry specific conditions. Business lines that are not required to be to open to foreign investment under the WTO framework are subject to the sole discretion of the Vietnamese authorities. Owing to the workload in some big cities, a lack of inter- agency coordination and a lack of implementing regulations in several sectors, these reasons may break deals or delay business combinations in some situations.

12      Conditional offers

What conditions to a tender offer, exchange offer, mergers, plans or schemes of arrangements or other form of business combination are allowed? In a cash transaction, may the financing be conditional? Can the commencement of a tender offer or exchange offer for a public company be subject to conditions?

A tender offer may be conditional only upon the minimum number of shares being tendered (ie, 25 per cent); in other words, the offeror will not be obligated to purchase any of the shares tendered if the actual number of shares tendered falls below the minimum number set by the offeror at the outset. During the tender offer process, the offeror may withdraw its offer under certain circumstances such as an increase or decrease of charter capital or disposal of part or whole assets or business of the target company and subject to the approval of the SSC. As to other forms of business combinations, conditions may be agreed by the parties and typically include shareholder approval, regulatory approvals and third-party consents.

A tender offer must ensure that:

  • all conditions specified in a tender offer apply equally to all shareholders in the target company;
  • the relevant parties can fully access the tender offer information;
  • the self-determination right of the shareholders of the target company is fully respected;
  • the law on securities and securities market and other relevant laws are observed; and
  • the party making tender offer must appoint a securities company as an offering

A tender offer must be between 30 and 60 days. A tender offer may be supplemented or revised with terms no less favourable than those of the previous offers.

During a tender offer process, the offeror shall not:

  • directly or indirectly purchase or undertake to purchase the subject shares of the offer outside the offer tranche;
  • sell or undertake to sell the subject shares of the offer;
  • treat shareholders holding the subject shares unfairly;
  • supply separate information to a sub-group of shareholders or provide a different level of information to different groups of shareholders or at different times;
  • refuse to purchase the subject shares of target company or fund certificates of investors from the target investing fund; or
  • purchase the target company’s shares or fund certificates of the target investing fund, which is contrary to the terms disclosed in the registration of tender

After making a public announcement, the offeror may only withdraw the offer in the following circumstances:

  • the total number of shares registered to sell is less than that intended to be purchased by the offeror as announced;
  • the target company increases or reduces the number of its voting shares via a share split, share consolidation or conversion of preference shares;
  • the target company reduces its shareholding capital;
  • the target company issues additional securities to increase charter capital; or
  • the target company sells all or a part of its business or assets.

The purchaser must specify in its disclosure report to the SSC the sources of funds it uses for the acquisition. In addition, financing may be conditional upon successful completion of the tender offer, but, typically be escrowed in advance as the proof of payment is sometimes required to be present to the licensing authorities.

13    Financing

If a buyer needs to obtain financing for a transaction involving a public company, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist in the buyer’s financing?

If a buyer needs debt financing to complete a transaction, the seller may require the buyer to provide and attach the relevant financing or commitment documents as an exhibit to the transaction agreement, and require the buyer to take all actions necessary to obtain that financing.

Vietnamese law is silent on the seller’s obligations to assist the buyer’s financing in an M&A deal. While sellers in Vietnam are inclined to cooperate with the buyer for obtaining financing for the transaction, sellers typically do not have, and would be reluctant to accept, any contractual obligation to support or assist in the buyer’s financing. In practice, the seller may, upon mutually agreement by the parties, assist the buyer in its financing by recommending some sound financing entities to the buyer or signing necessary documents relating to the buyer’s financing purposes.

14    Minority squeeze-out

May minority stockholders of a public company be squeezed out? If so, what steps must be taken and what is the time frame for the process?

Vietnamese law does not specifically regulate situations where minority shareholders are squeezed out. Since the law does not require the consent of all shareholders, a business combination may still occur against the will of the minority shareholders. In the case of a merger approved by a supermajority representing 65 per cent of the voting rights of the shareholders present or by proxy, the merger plan will be binding on all the shareholders. If the merger plan calls for the transfer of all the company’s shares, then the entire share capital of the company will be transferred to the acquirer (including the shares of any dissenting shareholder). There are no regulations specifying the steps to be taken and time frame for the process in this particular minority squeeze-out.

The squeezed-out shareholders are entitled to request that the company buy back their shares at the prevailing fair price if they vote against a merger. The request shall be made to the company in writing within 10 days of the shareholders’ meeting approving the merger. After receiving the request, the company shall buy back the shares of the dissenting minority shareholders at fair price within 90 days from receipt of request. In contrast, if there is no mutual agreement reached, the parties may retain a professional price appraiser to determine that fair price.

The minority shareholders of a public company are nevertheless protected in a takeover situation where they can refuse to sell the shares to the offeror or are even entitled to withdraw the subject shares at any time during the offer process. They also have the put option to compel the acquirer to buy their shares at the announced transaction price if, as a result of the acquisition, the acquirer owns more than 80 per cent of the outstanding shares of the target.

15   Cross-border transactions

How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?

Cross-border transactions may be structured as an asset or equity deal. Asset acquisitions usually involve the establishment of a wholly owned entity specifically for the purpose of acquiring the business and undertaking of the target. Asset deals used to be the preferred choice owing to the complexity and legal loophole of the equity deal.

Cross-border transactions shall be subject to the FOL for public companies regulated by Decree No. 58/2012/ND-CP (as amended by Decree No. 60/2015/ND-CP). In particular, the FOL shall be subject to the Vietnam’s WTO Schedule of Specific Commitments in Services, or capped at 49 per cent if the target is involved in conditional business. Conditional businesses are those business lines for which the laws require one or several conditions and a list thereof is set out by the Law on Investment. Under the Law on Investment, an acquisition of 51 per cent shares or more in a local company or acquisition of shares of a local company engaging in conditional business sector shall generally be subject to a foreign investment review approvals. Therefore, in structuring cross-border transactions, attention should be paid to Vietnam’s foreign investment regulatory scheme. Under Vietnam’s foreign investment regulations, Vietnam’s industries are categorised into permissible and prohibited industries that are applicable to both foreign and domestic investors, while foreign investors are subject to several further conditions, such as market entry restriction according to international agreements to which Vietnam is a signatory, such as the WTO Commitment or other conditions specified under relevant laws.

Equity acquisitions may be onshore transactions whereby the equity of a shareholder in a Vietnamese domestic company or FIE is acquired directly. An onshore equity deal is subject to the approval by the relevant Vietnamese authorities and governed by the Law on Investment and Decree 118/2015/ND-CP.

Equity transactions may be conducted offshore at investor level, which would involve the sale of the equity of the foreign shareholder in an offshore company. They will usually need to register the change of investor with the Vietnamese authorities. Where a Vietnamese resident invests in an offshore entity that has been established to make round- trip investments back into Vietnam, the investor needs to conduct the offshore investment procedures with respect to the establishment of such offshore entity and periodically report the offshore investment activities to the competent authorities of Vietnam, including subsequent disposal of any equity in the company.

16   Waiting or notification periods

Other than as set forth in the competition laws, what are the relevant waiting or notification periods for completing business combinations or acquisitions involving public companies?

The public tender shall be subject to notification period as mentioned in question 12. Transactions involving shares of internal shareholders must be notified three days in advance.

For a normal merger, the public company shall:

  • notify the shareholders of the scheduled meeting regarding a merger at least 50 days in advance;
  • notify creditors of the merger resolution and make a public announcement; and
  • the authorities decide on whether to approve a domestic merger within five working days after receipt of all the required

For a merger with a foreign element, the prescribed approval period is between 15 and 45 working days.

For a takeover deal:

  • the target makes an announcement of the offer within three days from the receipt of the tender documents;
  • the SSC reviews the tender documents within 15 days;
  • the board must send its opinions regarding the offer to the SSC and the shareholders of the target within 10 days from receipt of the tender documents;
  • the acquirer makes an announcement on three consecutive issues of a newspaper and the website of the stock exchange where the shares are listed, within seven days from its receipt of the SSC’s opinions;
  • the length of the offer period is between 30 and 60 days from the date recorded in the offer registration sent to SSC; and
  • the acquirer reports the results of the tender to the SSC within five days of completion.

Companies in specific industries are subject to industry-specific regulations that stipulate different waiting and notification periods for completing business combinations. Specific legal advice should be sought regarding such mergers.

17    Sector-specific rules

Are companies in specific industries subject to additional regulations and statutes?

M&A transactions involving companies in specific industries are subject to additional and specific regulations and statutes. In principle, approval is usually required before a business combination may proceed. Foreign equity in certain industries is capped (for example, at 30 per cent for banking) or subject to industry-specific approvals (namely, distribution services), or both.

Business combinations involving banks, insurance companies or securities firms are governed by the Law on Credit Institutions, Law on Insurance Business, and the Law on Securities and rules promulgated thereunder. These laws and their enforcing rules prescribe, among others, approval procedures, terms and conditions that are permissible or restricted of the transactions, and qualifications for the acquirer and the target.

Business combination in certain investment sectors require approval of the relevant authorities at ministerial level. Opinions of those central ministries have considerable impact and can determine whether the business combination can be approved.

18    Tax issues

What are the basic tax issues involved in business combinations or acquisitions involving public companies?

The tax treatment will depend on the structure of the transaction and legal status of the seller. If the seller is a legal person, corporate income tax (CIT) at 20 per cent will be levied on the capital gains generated from the transfer of assets. The tax base would be the actual sales price less the cost of acquiring the assets and direct expenses of transferring such assets. In addition, an asset transaction (except for special assets such as land use right, intellectual property, etc) will be subject to VAT ranging from zero per cent up to 10 per cent, while share transfer will not. Transfer of certain property transactions such as real estate will be subject to a property registration fee at 0.5 per cent or those of vehicles will be charged at 2 per cent. The CIT rate of 20 per cent will also apply in the case of a share transfer, saving that newly issued shares subscription shall not be subject to CIT.

Where the seller is a natural person, personal income tax is usually levied on profit derived from the transfer of shares. For the capital contribution of liability limited company, the tax rate is 20 per cent of the income. For the shares of a joint stock company, including a listed or unlisted company, the tax rate of 0.1 per cent of the transaction value shall be applied.

Furthermore, special adjustment rules that govern transfer pricing may apply if the transaction involves affiliated parties. The parties may also take advantage of various double-taxation agreements that Vietnam has entered into with other countries in cross-border transactions  involving  Vietnam-incorporated companies.

19    Labour and employee benefits

What is the basic regulatory framework governing labour and employee benefits in a business combination or acquisition involving a public company?

Under the Labour Code, in a share deal the acquirer is responsible for taking over the labour contracts of the employees of the target company. Any redundancy as a result of the combination shall be subject to a rigorous procedure including an employment plan to be worked out with the participation of the trade union representatives. Job loss allowances for those employees serving for 12 months or more could be payable to the extent not covered by the unemployment insurance regime in accordance with the Law on Social Insurance, which is equivalent to an aggregate amount of one month’s wages for each year of employment, but no less than two months’ wages. In an asset deal, the labour contract shall not be automatically novated and the parties involved should arrange a handover of employees, which includes termination of employment contracts with the seller and execution of a new labour contract with the buyer. The early termination of a labour contract may trigger severance allowance to the extent not covered by unemployment insurance, which is half a monthly wage per year of service for those serving 12 months or more.

20    Restructuring, bankruptcy or receivership

What are the special considerations for business combinations or acquisitions involving a target company that is in bankruptcy or receivership or engaged in a similar restructuring?

Bankrupt companies are subject to the Bankruptcy Law, which took effect on 1 January 2015. The Bankruptcy Law applies to all entities in Vietnam that have legal person status.

Where there is a decision to start the bankruptcy procedures, the Bankruptcy Law does not allow a bankrupt company to sell or exchange its shares or transfer its property without the prior written consent of the presiding receivers.

Certain transactions entered into by a bankrupt company within six months or 18 months in case of internal transaction prior to the court accepting a bankruptcy application may be invalid, such as where the bankrupt company has donated its property, paid undue debts, mortgaged or pledged property for debts or carried out other transactions aiming to disperse its property. In addition, within five days of the court accepting a bankruptcy application, if it is deemed that a suspension of the performance of valid contracts that are being performed or have not yet been performed will be more beneficial for the bankrupt company, the performance of such contracts shall be suspended. Therefore, investors dealing with such entities should take care to ensure that their dealings are conducted in a manner that will not expose them to the risk of a transaction being suspended or terminated.

21    Anti-corruption and sanctions

What are the anti-corruption, anti-bribery and economic sanctions considerations in connection with business combinations with, or acquisitions of, a public company?

The Law on Anti-corruption of Vietnam does not refer to business combinations.

A fine up to 10 per cent of the total revenue in the financial year prior to the year in which a breach of the provisions of business combinations was committed shall be imposed on each enterprises participating in carrying out a prohibited merger, consolidation, acquisition or joint venture, as stipulated in the Law on Competition.

A fine up to 10 per cent of the total revenue in the financial year prior to the year of each enterprise in which the breach was committed shall be imposed on each enterprise participating in given economic concentration that was not notified as required by law.

Update and trends

The second half of 2017 witnessed some high-profile deals of state divestment with the successful sale of a 53.59 per cent shareholding at Sabeco for about US$5 billion value and the sale of 128 million DIC Corp shares. The balance of state-owned companies and state divest- ment is expected to keep steady in 2018, especially with the direc- tion under Resolution No. 1232/QĐ-TTg dated 17 August 2017 of the government of Vietnam. Above all, the public is now paying attention to plan of exit of 20 per cent shareholding in Vietnam Airlines and 24.9 per cent shareholding in Petrolimex by Ministry of Industry and Trade in 2018. Moreover, with a plan of state divestment for Vinatex, Viglacera, Lilama or Vinapharm, or the IPO plan of PV Oil or PV Power during, 2018 is expected to be a busy M&A year with respect to state-owned companies. In the private sector, as reported by the Foreign Investment Authority of the Ministry of Industry and Trade, 2017 saw the biggest influx since 2009 of foreign direct investment capital at US$36 billion, primarily from investors from Japan, Korea and Thailand. M&A transactions in 2018 are set to continue apace in the retail, real estate and consumer goods business sectors. Vietnam is still making effort to perfect its regulatory framework in general  and M&A in particular. Among other things, 2018 will see the issu- ance of a new Antitrust Law and proposed amendment to the Law on Securities. Further, simplifying the administrative procedure in busi- ness registration and investment will continue in 2018, as enshrined by Resolution No. 136/NQ-CP dated 27 December 2017 of the govern- ment of Vietnam. Finally, the Comprehensive Progressive Agreement for the Trans-Pacific Partnership, which was inked on 9 March 2018, is also expected to boost the expansion and success of cross-border M&A transactions in the years ahead.



The Government has issued the Decree No. 09/2018/ND-CP detailing Law on Commerce and Law on Foreign Trade Management governing the sale of goods and other activities directly related to the sale of goods of foreign investors and foreign-invested business entities in Vietnam (“Decree 09”) on January 15, 2018; replacing the Decree No. 23/2007/ND-CP dated February 12, 2007 on the sale of goods and other activities directly related to the sale of goods of foreign investors in Vietnam (“Decree 23”). The Decree 09 especially took effect from the date of its promulgation, prompting relevant enterprises and agencies to urgently study the implementation.

In principle, in comparison with the Decree 23, the Decree 09 introduces some progressive regulations and makes favorable conditions for foreign investors and foreign-invested economic organizations to express policies of the Government of Vietnam regarding implementation of its WTO Commitments on the opening of the distribution market in Vietnam. There are a number of salient points as follows:

Narrowing the scope of activities being subject to Business License

One of the most significant advances of Decree 09 is to narrow the scope of activities being subject to Business License of a foreign-invested economic organization. While previously FDI enterprises were required to apply for Business License for exercising their rights to export, import, and conduct wholesale and retail activities, FDI enterprises now do not need to apply for a Business License for export and almost do not have to apply for this license for import and wholesale distribution (only required for importing and distributing wholesale goods for oil and lubricants).

Regarding the sale of goods activities, Decree No. 23 governed all activities in connection to the sale of good setting forth in Chapter IV, V, VI of the Law on Commerce. However, local authorities failed to implement this procedure due to ambiguity of applicable laws and regulations. Decree 09 now details the activities related to sale and purchase of goods being subject to a Business License, and scope of activities subject to this license is narrower comparing to Decree 23. Activities related to the sale and purchase of goods which are subject to a Business License in accordance with Decree 09 include:

  1. Provide logistics services; except those committed on opening the market by Vietnam in international treaties to which Vietnam is a signatory;
  2. Goods leasing (financial leasing excluded), except leasing of construction equipment with operators;
  3. Trade promotion services, except advertising services;
  4. Trade intermediation services;
  5. E-commerce services;
  6. Bidding organizing services for goods/services.

Reducing the administrative procedures and time for implementation

Instead of Provincial People’s Committee (the “PC”), now the provincial Department of Industry and Trade of the province where the FDI enterprise or its retail outlets locate is in charge of Business License. This change shall reduce the administrative procedures since previously although provincial PC used to be the licensing authority, it normally assigned the Department of Industry and Trade or the Department of Planning and Investment to proceed and report to it. It also helps to shorten processing time. Under Decree 09, time for license shall be saved 17 days comparing to the total time under Decree 23 in which the time shall be reduced to 10 working days in case of no consultation with the Ministry of Industry and Trade and other specialized Ministries, and about 28 days in case consultation with Ministries required. Meanwhile, under Decree 23, the total time for this license is 45 days.

In the past, in order to grant Business License for distribution activity, the licensing authority must consult with the Ministry of Industry and Trade. Currently, this requirement has been removed under Decree 09 when granting Business License for retail distribution activity of almost goods, except for some sensitive ones (rice, sugar, recorded items, books, news and magazines). This adjustment has reduced significantly the time for implementing the administrative procedures of FDI enterprises.

Specific provisions on cases where Vietnamese enterprises having retail outlet receive foreign investment capital

Decree 09 additionally provides specific provisions on cases where Vietnamese enterprises having retail outlet receive foreign investment capital and becoming FDI enterprises under which these companies must also apply for a Business License and Retail Outlet License(s). In this particular case, Decree 09 has added a special procedure, namely, the procedure for granting a Retail Outlet License allowing the retail outlet to continue its operation, which is considered being legal basis for foreign investors to buy retail chains in Vietnam. It is noteworthy that the procedure for granting above Retail Outlet License appears to exclude the Economic Needs Test (ENT).

License for goods not being committed to market opening, including: oil, lubricants; rice; sugar; visual records; books, news and magazine

Previously, FDI enterprises were prohibited from importing and distributing these items in Vietnam. Yet, Decree 09 creates a new legal framework allowing the import and distribution of the above items in some special cases: FDI enterprises producing oil and lubricants in Vietnam shall be considered to license for the import, wholesale distribution; FDI enterprises having retail outlets in the form of supermarkets are considered to license for retail distribution of rice, sugar, visual records, books, news and magazines at their retail outlets.

Adding some definitions

Decree 09 defines Retail outlet apart from the first one, convenience store, mini supermarket, commercial center, etc. However, the interpretation of these definitions and the difference between the definitions in Decree 09 and other related documents are controversial.

Although Decree 09 has the positive changes compared to Decree 23, there are still some shortcomings and possible bottlenecks in the implementation.

Adding some contents to Business License

Though the contents of retail outlet are removed in new form of Business License provided under Decree 09, some new contents are added to the new Business License form including: the legal representative of enterprise, information on investor/contributed capital members/ founding shareholder such as: name, place of registration or nationality, value of contributed capital and ratio, etc. Any change of the mentioned contents requires amendment of Business License. Therefore, new business license form creates more administrative procedures than the old provisions.

The way of recording the goods in the dossier and on the business license

Decree 23 provided an appendix guiding the way of recording the goods for implementing import, export, and distribution rights in accordance with group of goods with HS code which previously was used for FDI companies to work with customs authority for goods import. Decree 09 has removed this guideline and silent on how to record the goods on the Business License, causing the companies and authorities may encounter problems during the regulations implementation.

Overlapping in consultation with Ministries

Decree 09 requires the Department of Industry and Trade to consult with the Ministry of Industry and Trade in most cases of granting business license, except for the case of retailing goods other than rice, sugar, visual records, books, news and magazines. However, it is noted that as to the business activities that Vietnam did not commit to open the market to foreign investors (for example: goods leasing, trade intermediation, e-commerce…), in order to carry out these business activities, FDI enterprises have to carry out both the procedure for adding the project objectives at the investment licensing authority, and procedure for Business License, and both of these procedures are required the opinions of the Ministries including the Ministry of Industry and Trade. This causes overlap in the consultation of Ministries and extension in the administrative procedures duration, unless in fact there shall be a mechanism for the reference of issued opinion of such Ministries.

The first retail outlet is obliged to obtain a separate Retail Outlet License

This regulation is newly introduced in Decree 09 while it is not required under Decree 23. This provision will overcome the fact that many FDI companies set up several new similar businesses, each of them operates a first retail outlet to avoid application for Retail Outlet License and commercial planning checking. The concern is that FDI enterprises which are operating the first retail outlet, when adjusting the contents of the retail outlet (name, code, address of head office of enterprise; name, address, type, size of the retail outlet, etc.) shall need to apply for a new Retail Outlet License for the first retail outlet being in operation including reviewing of compliance with relevant planning in the geographic market. If the first retail outlet is operating without satisfaction of planning conditions, when applying for a Retail Outlet License pursuant to Decree 09, what will be the legal consequences of that, and responsibilities of the licensing authority as well as management authority during the course of the outlet’s operation?

Tightening management for convenience stores, mini supermarkets


One of the noteworthy points of Decree 09 is the addition of new regulations to manage mini supermarket, convenience stores in the context of convenience store chains, mini supermarkets involving foreign elements have been growing rapidly for recent years. In addition to the new definition of convenience stores and mini supermarkets, the Decree 09 requires convenience stores, mini supermarkets (apart from the first one), which usually have an area of ​​less than 500m2, even located in trade centers that suitable with commercial planning, to overcome the Economic Needs Test (ENT), while not required under Decree 23. The difference in governmental management in a same trade center where convenience stores, mini supermarkets are subject to ENT, while other retail outlets less than 500m2 are not subject to ENT, shows the tightened management of this developing type of business.


New regulations on foreign investment conditions in logistics services

On 30 December 2017, the Vietnamese Government issued the Decree No. 163/2017/ND-CP (“Decree 163”) replacing the Decree No. 140/2007/ND-CP (“Decree 140”) on the logistics service. Decree 163 shall take effect from 20 February 2018.

1.Classification of logistics service

Previously, Decree 140 classified logistics services into three groups with a range of services. Under Decree 163, logistics services are divided into 17 service categories with clearer and more consistent regulations comparing to Vietnam’s commitments in the Schedule of Specific Commitments in Services of Vietnam when access to the World Trade Organization (WTO). Such classification does not limit the form of logistics service since it recognizes “Other services agreed by logistics service providers and customers which are in compliance with the basic principles of Law on Commerce”.

2.Conditions of foreign investors for investment in logistics service business

In comparison with Decree 140, Decree 163 does not provide the conditions of foreign investors for investment in logistics service businesses which are already allowed 100% market access such as: Warehouse services; Transportation agency services but regulates the conditions of foreign investors for investment in other logistics service business pursuant to the Schedule of Specific Commitments in Services of Vietnam to WTO. Accordingly, the maximum foreign ownership in some logistics services are regulated as follows:

  • For cargo transport services classified as sea transport services (except for inland transport) (excluding sea transport company), cargo transport services classified as inland waterway transport services or cargo transport services classified as rail transport services (does not exceed 49%);
  • For container handling services classified as auxiliary services for sea transport and multimodal transport, except for services provided at airports (does not exceed 50%);
  • For cargo transport services classified as road transport services (does not exceed 51%);
  • For customs clearance services classified as auxiliary services for sea transport and for other services (does not exceed 100%);
  • For technical inspection and analysis services which are  provided in order to exercise authority of the Government (does not exceed 100% after three years or 100% after five years, as from the date on which the private enterprise is permitted to conduct business in such services)

Noteworthy, Decree 163 acknowledges foreign investment by way of capital contribution and share purchase and business cooperation contract beside the establishment of enterprises as prescribed in Decree 140.

Moreover, foreign invested organizations providing the unbound logistic services must obtain the business license under regulations of Decree No. 09/2018/ND-CP.


New Decree amending certain decrees related to business investment conditions under the State management scope of the Ministry of Industry and Trade


On January 15th, 2018, the Government issued Decree No. 08/2018/ND-CP amending certain decrees related to business investment conditions under the State management scope of the Ministry of Industry and Trade (“MOIT”) (“Decree 08”). According to this Decree, the Government has eliminated a total of 675 conditions among 1216 business conditions managed by MOIT. Accordingly, the following areas are mainly focused:


Decree 08 completely repeals Article 5 on the master plans on development of the petrol and oil trading system and Article 10 on the conditions for petroleum production. The planning conditions related to production location, production scale has been reduced to facilitate the enterprises in freely selecting suitable petroleum production and business models.

Decree 08 abolishes the conditions related to the storage system, transport vehicles. Accordingly, a petrol and oil trader is no longer required to own or co-own (with a capital contribution of at least 51%) regarding the storage system and to be able to satisfy at least one-third of the trader’s reserve demand. This article also applies to the local petrol transport vehicles having capacity of 3,000m3 after being granted the Business License for import and export of petrol and oil.

In addition, Decree 08 abrogates the conditions for scale expansion by requiring petrol and oil traders to own or co-own at least four (04) retail stations each year until they reach at least one hundred (100) petrol retail stations belonging to the distribution network of the trader after being granted the Business license for import and export of petrol and oil.

However, this abrogation may lead to the situation of disorder, inappropriate distribution of petrol stations, only focus on urban areas, large roads, not satisfy the demand of people in rural and remote areas.


The only condition applied to franchisor is the business system intended for franchising has been operating for at least one (01) year. Although it is not explicitly stated yet, it may be construed that the removal conditions applicable to both the original franchisor and the sub-franchisor. In addition, the conditions for the franchisee and the goods and services allowed to be franchised have also been abolished.


Decree 08 abolishes unclear regulations related to conditions of individuals, organizations when they want to set up sales e-commerce websites, e-commerce service provision websites and credit rating of e-commerce websites.

In particular, in relation to evaluation and certification of protection of private information policy in e-commerce activity, Decree 08 annuls the conditions on having business registration or establishment decision specifying the field of operation as evaluation and certification of protection of private information policy in e-commerce; independence in organization and finance from traders, organizations and individuals who are assessed and certified for their privacy policy; having detailed activity plan approved by the MOIT; having criteria and procedures for assessing privacy policies in compliance with the regulations of the MOIT.

Moreover, Decree 08 also eliminates the conditions related to valid domain name or request for financial and technical evidence in the certification of e-contracts.


 Decree 08 abolishes the conditions of locations, workshops, machinery, equipment, technological processes, warehouses and conditions for testing and analyzing chemicals related to Table 1 chemical production conditions.

This relaxation seems to be a bold move as the production of chemicals is highly dangerous while safety conditions are minimized. However, if based on the provisions of Decree 113/2017/ND-CP detailing and guiding the implementation of certain articles of the Chemicals Law dated October 9th, 2017 (“Decree 113”), the abolition of these regulations is only formalistic when more stringent conditions are already stipulated in Decree 113.


Decree 08 amends, supplements a number of articles and clauses of Decree No. 77/2016/ND-CP dated July 1st, 2016 of the Government on amendment and supplementation of certain regulations on investment and trading conditions on international trade in goods, chemicals, industrial explosive material, fertilizer, gas business and food business under the state management of MOIT. In particular, the Decree 08 focuses on reducing regulations related to general conditions to ensure food safety for food production and trading establishments. There are remarkable points including the abolition of conditions on business registration certificates, household business registration certificates or equivalent documents. In addition, the regulations related to production facilities, business facilities and equipment for production and business activities are also reduced, such as the conditions of ventilation, lighting, water supply systems; warehouse conditions such as full nameplate, having temperature and humidity monitoring equipment, and warehouse conditions monitoring records, etc.; unclear conditions of the conformity of equipment; conditions for the prevention of animals, insects and harmful microorganisms are also more appropriately regulated.


In addition, Decree 08 also abolishes some conditions related to production facilities, equipment and tools for processed milk, beer and vegetable oil production. Particularly, all provisions related to food safety conditions specifically provided for small food production and retail facilities were abolished.

Aside from the above-mentioned areas, Decree 08 also reduces the business conditions in the areas of tobacco, electricity, industrial explosive material. This Decree takes effect from the signing date.