M&A transactions (mergers and acquisitions) from a legal perspective are considered a complex transaction and involve many different legal fields. Therefore, it is difficult to issue a general document specifically for this transaction.

M&A is an increasingly popular term, no longer limited to business mergers and acquisitions but also being understood as transactions to control a target company to enter the market. This article will introduce the legal framework governing relationships arising from M&A transactions.

Corporate Law

Relationships arising in M&A transactions are mostly related to the business, Ergo these relationships are mostly governed by Corporate Laws. According to the Law on Enterprises (2020), M&A is expressed through the form of consolidation and merger of companies (also known as forms of business reorganization).

Law on Enterprises (2020) also regulates the voting rate to approve decisions of the key corporate bodies, including the:

  • Board of Directors,
  • General Meeting of Shareholders, or the
  • Board of Members,

Allowing the buyer to determine further steps or proportion of capital contributions and shares needed to be held to control the target company.

Competition Law

M&A transactions carried out through mergers, acquisitions and consolidation of enterprises are considered a form of economic concentration. This is an issue that the Vietnamese Law restricts to avoid abuse of a dominant market/ monopoly position to negatively skew the market. This is why parties are obliged to notify economic concentration to the National Competition Commission together with relevant documents when performing M&A transactions. These documents include (but might not be limited to) the:

  • Draft content of economic concentration agreement or draft contract, memorandum of understanding on economic concentration between buyer, seller, related companies, and units participating in economic concentration (if any);
    • List of goods and services that buyers and sellers participating in economic concentration are trading;
    • Plan to overcome the possibility of causing anti-competitive effects of economic concentration;
    • Report assessing the positive impact of economic concentration and measures to enhance the positive impact of economic concentration.

After appraisal, the National Competition Commission will make a decision, including economic concentration to be implemented, economic concentration to be officially appraised, or economic concentration to be conditional. For conditional economic concentration, the parties must meet the given conditions. For example: controlling content related to purchase price, selling price of goods, services, and other transaction conditions in enterprise contracts formed after economic concentration.

Investment Law

Vietnamese Investment Law recognizes M&A transactions in the form of direct investment through capital contribution, share purchase, and capital contribution purchase in economic organizations. This includes the purchase of initially issued shares and additional shares issuance by joint stock companies. Furthermore, since Vietnam is committed to meeting its treaty obligations, Investment Law regulates the ownership ratio of capital contributions and share purchases of foreign investors in line with international treaties to which Vietnam is a member. Additionally, the conditions for transferring investment projects are also clearly specified to have a basis for management and implementation.

Tax Law

From a tax management perspective, M&A transactions are classified into asset transfer transactions, real estate transfers, transfers of capital contributions, shares, and securities. Accordingly, depending on each type of transaction, the types of taxes and tax rates applied will be different. For example, for a transaction selling all business assets, the Seller will be subject to corporate income tax at a tax rate of 20% and value-added tax at a tax rate of 10%.

Commercial Law

The buyer and seller in an M&A transaction will sign contracts and agreements related to the parties’ intentions or the content of the transaction. These documents are partly governed by the 2005 Commercial Law and other related legal documents such as sanctions and remedies, when one party violates the contract. Therefore, the parties need to prepare carefully to ensure compliance with legal regulations.

Labor Law

According to the 2019 Labour Code, when carrying out M&A transactions through merger, purchase and sale, or transfer of ownership and property rights of enterprise, the enterprise (seller) must develop a method labour employment project. The successor enterprise (buyer) is responsible for continuing to implement this labour use plan.

In addition to the above regulations, when carrying out M&A transactions, the parties also need to learn more about the legal regulations on auditing, intellectual property, and other related regulations to ensure compliance.

Thus, due to the complex and multi-layered nature of M&A transactions, Vietnam currently does not have a separate document governing this transaction but is regulated in specialized legal documents to ensure appropriateness and logic based on the specific management and field. Therefore, buyers and sellers in M&A transactions need to pay attention to learning about and ensuring compliance with all relevant regulations to avoid legal risks that may arise during the implementation process.

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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