Depending on the type of investment, investors often have to follow many different regulations and procedures when receiving investment capital from abroad. To guarantee that the capital or share transfer process runs smoothly and lawfully, the necessary agreements and documentation must be signed.

The following are some of the most common documents that investors must sign when investing in Vietnam:

1. Memorandum of Understanding

A Memorandum of Understanding (MOU) is a document used to record and identify the basic terms and commitments associated with the purchase of shares or capital contributions in a company or organization. An MOU may be used during negotiations before signing a specific sales contract or shareholder agreement.

This MOU is usually a temporary document that does not have the same legal force as a sales contract. Instead, it represents the parties’ initial commitment in a common spirit, as well as basic information about the expected transaction, such as transaction value, number of shares or capital contribution, implementation time, and other important conditions.

2. Non-disclosure Agreement

A non-disclosure agreement (“NDA”) outlines the obligation of the receiving party (particularly the buyer) to keep confidential information related to the transaction and information about: the target company that the information disclosing party (particularly the seller) provides when researching, negotiating, and implementing of the transaction.

2.1 What is the purpose of a non-disclosure agreement?

A non-disclosure agreement’s primary objective is to keep an organization’s or individual’s sensitive information from unauthorized use or disclosure. The main purposes of this agreement are to:

  • protect sensitive information,
  • allocate responsibilities,
  • limit the use of information, and
  • establish control.

2.2 Things that need to be addressed

This agreement should be signed as soon as possible to ensure confidentiality before any disclosure by the seller to the buyer. If a preliminary agreement fails to be reached, the NDA should be separated into a separate contract to protect the information of both parties.

It is important to define confidential information in an NDA, such as deal negotiations and agreements, as well as commercial, financial, technical, legal, and other information. This information can be exchanged in many different forms.

Finally, the agreement specifies how information will be disposed of once the agreement expires, including the return of documents and confidential information to the disclosing party or the destruction of such information.

NDAs play an essential role in protecting companies’ and individuals’ information and intellectual property. Following the terms of this agreement ensures the security and protects sensitive information from unwanted access. To maintain data integrity and security, it is vital that all parties who access the information understand and strictly adhere to an NDA.

3. Share purchase agreement (SPA) 

A Share Purchase Agreement (SPA) or “Capital contribution transfer agreement for limited liability companies” is an important legal agreement that is frequently used in the process of trading a company’s shares. The SPA has terms and conditions that assure the protection and preservation of both purchasers’ and sellers’ rights while engaging in share transactions. It is commonly used in stock purchase and sale transactions and business restructuring decisions.

Investors must understand that when parties get into a SPA, the parties want to be in a safe position, minimizing risks as much as possible.

The buyer and seller have the following goals:

  • The buyer wants to ensure that they may safely own the shares they purchase, have complete information about the business, and are protected from risk factors.
  • Meanwhile, the seller wishes to receive the profits of the share sale, reduce financial obligation, and avoid non-contractual liability.

One may argue that SPA is the most crucial document to have when receiving funds from overseas investors. The result of the comprehensive procedure that involved thorough discussion, legal analysis, and negotiation will be represented in the SPA. For all share trading activities and obtaining foreign investment capital, SPA is a comprehensive framework. It plays a decisive role in determining the rights and obligations of the parties and helps ensure the transparency, security, and safety of the transaction.

4. Shareholder agreement

A shareholder agreement is an agreement entered into by some or all the shareholders in a company, or between one and other shareholders. This is a legal agreement between the shareholders or key shareholders of a company, setting the rules and conditions of how they will participate in the management and decision-making within the company. It also defines issues related to shares, shareholder rights, and how to resolve any disagreements between the parties involved.

Shareholder agreements often go beyond the company’s charter and the legal provisions regarding the rights that shareholders have in the agreement. Accordingly, shareholders can also voluntarily waive their rights under the law or the company’s charter.

4.1 Purpose of a shareholder agreement

A shareholder agreement’s primary goal is to establish a legal foundation for the company’s effective management and operations. This is an important tool for ensuring stability and harmony in shareholder relationships, avoiding unnecessary conflicts, and laying a foundation for long-term development. The main objects of the shareholder agreement include rights and obligations, profit division, dispute resolution, and share transactions.

4.2 Shareholder agreement provision

Depending on the will of the shareholder participating in the transaction, the provision in the Shareholder Agreement may vary but usually includes the following main elements: Share division, rights related to voting, division profits, resolving disagreements, and trading shares.

The shareholder agreement is an important tool to create stability and harmony in company management and operations. This harmony is essential when foreign investors invest in a company. Setting and following the provision helps protect each shareholder’s rights and interests while promoting the company’s long-term development. All shareholders must participate in the development and implementation of the shareholder agreement responsibly to ensure the success and growth of the company.

The following are among some of the documents that investors frequently come across and must sign to make investments in Vietnam. The parties will sign different agreements and documents based on the company’s structure. Check out our other articles to find out more about topics relating to company mergers and acquisitions, as well as investment activity in Vietnam.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.

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