M&A is a strategic procedure involving the change or transfer of company’s control. The legal framework for M&A activities currently has no consensus and is scattered in many different legal documents.
Therefore, to limit risks, companies need to require involved staff to have extensive legal knowledge in many aspects, including (but not limited to) the: Law on Enterprises, Competition Law, Investment Law, Commercial Law, Civil Codes, Tax Law, Accounting Law, Law on Intellectual Property, Labor Codes, and the implementing documents.
1. Law on Enterprises
The Law provides for M&A as a form of business reorganization, including mergers and consolidations. It also stipulates ways and procedures for buying shares, buying contributed capital, acquiring private enterprises, merging and consolidating enterprises.
2. Competition Law
The Law views M&A from the perspective of economic concentration behavior including business mergers, acquisitions, consolidations and joint ventures. Regulations restricting M&A transactions based on the combined market share of the involved parties are also stipulated.
3. Investment Law
The Law considers M&A as a form of direct investment including investment in mergers and acquisitions of enterprises, purchase of shares or contributed capital to participate in investment management. In addition, this law also provides regulations on the ratio of capital contribution and share purchased by foreign investors for some business activities and conditions for mergers and acquisitions as well as administrative procedures to be carried out.
4. Commercial Law and Civil Code
The Law mainly regulates M&A in terms of contracts between parties. These types of contracts can be: share purchase contracts, capital contribution transfer contracts, asset purchase and sale contracts and joint venture contracts.
5. Tax Law
When M&A transactions are carried out, it will usually lead to major financial changes, giving rise to tax obligations on corporate income, personal income tax and value-added tax. Therefore, the parties must fulfill all relevant tax obligations to the Vietnamese government.
6. Accounting Law
The Law provides for the consolidation of financial statements. Accordingly, it is specified in Circular No. 21/2006 / TT-BTC and Circular No. 161/2007 / TT-BTC, Accounting Standard No. 11 – Business consolidation, Accounting Standard No. 25 – Consolidated financial statements and accounting of investments in subsidiaries.
7. Law on Audit
check the financial activities of the target company to determine the value of its assets.
8. Intellectual Property Law
The Law regulates aspects of transfer of copyright, technology, trade secrets, trademarks between the parties.
9. Labor Codes
The Law requires M&A parties to properly and fully fulfil their obligations to employees, i.e., options for using labour after the deal is completed.
In addition, other regulations also participate in regulating this activity such as property valuation, customs, or the real estate.
It should be noted that especially for credit institutions, M&A activities include consolidation, merger, and acquisition activities which are adjusted in Circular 04/2010/TT-NHNN. This is a specific field and has a great influence on the national economy, so the conditions and procedures for M&A implementation are also more detailed and stricter than the other fields.