When conducting an M&A deal, companies should pay attention to some basic terms in the contract such as: the transfer price, payment method and time, implementation term to minimize potential risks.
In M&A deals, since the draft contract is usually prepared by the buyer, its contents are often more preferential in favor of them. To ensure the rights and interests, as well as the viability of the transaction, companies should note the following terms:
It is necessary to specify the information of the parties including:company name, head office address, name and position of the legal representative, his/her ID number (or passport number), or the company tax code, in order to be compliant with the Enterprise Registration Certificate. When entering the contract, parties should request the other party to provide a copy of their Enterprise Registration Certificate to confirm the correct information and signatory authority.
2. Transfer price
Circular 32/2013 / TT-NHNN requires specifying the total value of the contract. Companies should note that the payment currency is Vietnam Dong, except for some cases where the foreign currency is allowed to be used in the territory of Vietnam.
3. Payment method and time
The parties should specify the payment method (bank transfer or cash) and payment time with the amount of each installment. To ensure safety, parties should request a reputable competent organization to perform intermediary financial services. This third party will ensure compliance of the parties involved.
4. Conditions and terms for property transfer
For the buyer, it is necessary to specify the accompanying conditions and specific times in the M&A process for the seller to fulfill its obligations in the transfer of assets, shares, and stocks.
5. Rights and obligations of the parties
The parties need to detail their rights and obligations in the period before, during and after the performance of the contract as well as the termination of their performance.
6. Liability clause
The parties may envisage situations in which may be used to not perform the contract and regulate them on an appropriate term, such as the buyer’s liability for non-payment or the seller’s liability for not transferring the object of the contract.
7. Executive time of contract
The contract should specify the effective time and termination and cases when the contract is terminated.
8. Dispute Resolution Clause
The dispute may be settled by a court of competent jurisdiction or commercial arbitration.
9. Statements and commitments of the two parties on the target company status
The contract should contain a clause stipulating that the seller must affirm and commit to the debts of the target company, which is to limit disputes and risks for the buyer.
In addition to the above basic terms, companies also need to pay attention to the following matters:
- Principles of cooperation;
- Labor utilization plan;
- Note for some phrases such as “except for insignificant omissions that do not cause loss or liability to”; or “The contract terminates when the parties complete the works and obligations specified in the contract”.
The above are some important clauses in the M&A contract that investors should note.