Public Mergers and Acquisitions in Vietnam: Overview – A Q&A guide to public mergers and acquisitions law in Vietnam.

The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; and any proposals for reform.

M&A Activity

1. What is the current status of the M&A market in your jurisdiction?

Vietnam has remained an attractive destination for foreign investors. In 2020, the total amount of foreign direct investment (FDI) was USD28.53 billion, 75% of 2019’s figure. Though a decrease compared to the previous year, this is a remarkable amount given the novel coronavirus disease (COVID-19) pandemic negatively affected global FDI during 2020. Investment in the form of capital adjustment increased by 10.6%, while capital contribution or new capital registration reduced by 12.5% and 51.7% respectively. Foreign investment concentrated in business in the following sectors:

• Processing technology and manufacturing (47.7% of the total registered capital).
• Electricity generation and distribution (18% of the total registered capital).
• Real estate trading.
• Wholesale/retail.

Most investors come from:

• Singapore (31.5%).
• Korea (13.8%).
• China (8.6%).
• Japan.
• Taiwan.

In the first half of 2020 there were only 27 large transactions (those with an announced transaction value exceeding USD5 million) with a total value of USD266 million. There was a significant increase in the number of large transactions in the second half of 2020. There were 32 large transactions in the third quarter of 2020 and 25 in the fourth quarter, bringing the total value of large deals in the second half of 2020 to USD688 million. As a result, Vietnam ranked second in the ASEAN region for domestic M&A transactions in 2020. Top of the list was Singapore with USD2.7 billion recorded across 27 deals. However, compared to the global figure of USD3.6 trillion, Vietnam’s figure remains low.

2. What have been the largest or most noteworthy sector-specific public M&A transactions in the past 12 months?

Real Estate

The most notable deals in the real estate sector were:

• A group of investors led by Kohlberg Kravis Roberts investment fund (USA), including the Temasek investment fund (Singapore) completed the acquisition of more than 200 million shares of Vinhomes JSC through a transaction with a value of up to VND15,100 billion, equivalent to USD650 million. With a post-transaction holding of 6% of shares, this group of foreign investors has become a major shareholder of Vinhomes. Vingroup still holds a controlling interest in Vinhomes with a holding of nearly 71%.
• Danh Khoi Group (Vietnam) acquired 100% ownership of the Sun Frontier project in Da Nang from the Sun Frontier Investment Company Limited (Japan). After officially acquiring this project, Danh Khoi Group renamed the project, The Royal – Boutique & Condo Da Nang.
• Deawoo Engineering & Construction Company Limited (South Korea) increased their investment capital in the West Lake West Urban Area Project in Hanoi by adding USD774 million of investment.
• CapitaLand (Singapore) increased their adjusted investment capital in the Office Building project at 29 Lieu Giai by USD246 million on 31 March 2020.

Insurance

Sumitomo Life (Japan) invested an additional USD173 million, equivalent to VND4,012 billion, to buy more than 41 million shares of Bao Viet. The share price at the time of transfer was VND96,817 per share and the Japanese insurance company raised its shareholding in Bao Viet to 22.09%. Bao Viet’s total charter capital also reached VND7,423 billion.

Oil, Gas, and Chemicals

In the oil, gas, and chemicals sector the SCG Group (Thailand) increased their investment capital in the Long Son Petrochemical Complex (previously known as the Southern Petrochemical Complex) in Ba Ria-Vung Tau province to VND1,386 billion.

Other

In April 2020, the Stark Corporation announced that it had successfully purchased 100% of the shares of Thinh Phat Electric Cable Joint Stock Company (Thipha Cables) and Vietnam Nonferrous Metals and Plastics Joint Stock Company (Dovina). The deal value was USD240 million.

3. How were the largest or most noteworthy public M&A transactions financed?

They were financed by leveraged buyouts (LBO), share issuances, and acquisition of the target company’s assets.

Obtaining Control

4. What are the main means of obtaining control of a public company?

In Vietnam, the term public company refers to a joint-stock company whose shares meet one of the following criteria:

• They have been put up for a public offer.
• They are listed on the stock exchange or a securities trading centre.
• They are owned by at least 100 investors (excluding professional securities investors) and the company’s paid-up charter capital is VND10 billion or more.

A joint-stock company is a company whose paid-up charter capital is divided into equal parts called shares. Only joint-stock companies can be listed on the stock exchange.

Shares or charter capital can be bought by purchasing shares:

• From the existing shareholders of the company.
• From the stock exchange.
• Through a public share purchase offer.

Securities of public companies must be registered and deposited at the Vietnam Securities Depository Centre before being traded.

The most common means of obtaining control over a public company are as follows.

Acquisitions of Shares/Charter Capital

Depending on the numbers of shares purchased, an investor can become a controlling shareholder. A shareholder that directly or indirectly owns 5% or more of the voting shares of an issuing organisation is a major shareholder (Law on Securities). The State Securities Commission (SSC) must approve any transaction that results in more than 10% ownership of the paid-up charter capital of a securities company.

There are restrictions on the purchase of shares/charter capital of local companies by foreign investors in certain sensitive sectors. There are no legal restrictions on business spin-off transactions.

Mergers

The 2020 Law on Enterprises sets out the procedures for company mergers by a transfer of all lawful assets, rights, obligations, and interests to the new merged company, and for the simultaneous termination of the merging companies.

To merge, the related companies prepare the merger contract and draft the new merged company’s charter. The members, company owners, and shareholders of both companies approve the merger contract and the charter. The new business must be registered in accordance with the provisions of the Enterprise Law. After registration, the merged company is a legal entity, responsible for unpaid debts, labor contracts, and any property obligations. The merger contract must be sent to all creditors for their approval and employees must be notified within 15 days from the date of their approval.

Any enterprise intending to participate in M&A activities, except credit institutions, insurance companies, or securities companies, must notify the National Committee on Competition if one of the following applies:

• It, or a group of companies of which it is an affiliate, has total assets available in the Vietnamese market of VND3,000 billion or more in the fiscal year preceding the planned year of M&A activity.
• It, or a group of companies of which it is an affiliate, has total sales or purchases in the Vietnamese market of VND3,000 billion or more in the fiscal year preceding the planned year of M&A activity.
• The value of the M&A transaction will exceed VND1,000 billion.
• The joint market share of the companies intending to participate in the M&A activity is 20% or more in the fiscal year preceding the planned year of M&A activity.

The merger of companies that results in or that may result in significant restriction of competition in the Vietnamese market is prohibited. The National Committee on Competition determines a merger’s effect on competition.

There are no legal restrictions on mergers involving foreign investors.

Asset Acquisitions

There are no legal restrictions on foreign investors acquiring assets.

Hostile Bids

5. Are hostile bids allowed? If so, are they common?

Hostile bids are neither defined nor regulated under Vietnamese law. There is also no express prohibition on this type of transaction. Recommended bids often outnumber hostile bids due to limited publicly available information about the target and a general reluctance to disclose information.

However, the number of hostile bids in Vietnam has been increasing in the last ten years, for example:

• Singapore-based Platinum Victory Ptl Ltd became Refrigeration Electrical Engineering Corp (REE)’s largest shareholder, accumulating a 10.2% interest in the company.
• Chile’s CFR International Spa acquired a 46% stake in healthcare equipment company Domesco Medical Import-Export Co (DMC), making it the first foreign deal in the pharmaceutical sector.

Regulation and Regulatory Bodies

6. How are public takeovers and mergers regulated, and by whom?

The relevant rules are contained in several laws and regulations governing general corporate and investment issues. These laws and regulations include:

• Investment Law No. 61/2020/QH14 and Enterprise Law No. 59/2020/QH14 issued by the National Assembly on 17 June 2020, and their guiding documents, Decree No. 01/20201/ND-CP and Decree No. 31/2021/ND-CP. These laws set out the general legal framework, conditional sectors, and investment procedures. The authorities responsible for enforcing these laws are the:
  • Prime Minister;
  • local People’s Committee;
  • Ministry of Planning and Investment;
  • Ministry of Industry and Trade;
  • Ministry of Health; and
  • Other ministries depending on the business activities of the target companies.
• Law on Securities No. 54/2019/QH14 issued by the National Assembly on 26 November 2019, and its implementing documents, in particular Decree No. 155/2020/ND-CP issued by the government on 31 December 2020. This law regulates the acquisition of shares in a public company in Vietnam, including public tender offers. The authorities responsible for enforcing this law include the:
  • SSC;
  • Vietnam Securities Depository Centre; and
  • Ministry of Planning and Investment.
• Competition Law No. 23/2018/QH14 issued by the National Assembly on 12 June 2018, which is enforced by the Vietnam Competition Authority (VCA). Under this law, any M&A transaction that causes or may be likely to cause substantial anti-competitive effects in the Vietnamese market is prohibited.
• Foreign exchange regulations. An investment capital account in Vietnamese dong is a condition, among others, for capital contribution/share purchase or subscription. These regulations are enforced by banks and the State Bank of Vietnam.
• Vietnam’s WTO Schedule of Specific Commitments on Services. This sets outs the ratio of shares that can be owned by foreign investors in various specific sectors.
• Other specific regulations for the acquisition of shares in Vietnamese companies operating in certain sectors, for example banking and finance or insurance. These sectors are highly regulated by the relevant authorities.

Pre-Bid

Due Diligence

7. What due diligence enquiries does a bidder generally make before making a recommended bid and a hostile bid? What information is in the public domain?

Recommended Bid

Before officially contacting the potential target, the bidder conducts a preliminary assessment based on publicly available information. The bidder then contacts the target and expresses its intention of buying shares/subscribing for its shares. The parties sign a confidentiality agreement before the due diligence process, which also sets out their confidentiality obligations during the transaction. Courts’ enforcement of confidentiality agreements remains untested. The confidentiality agreement typically contains terms regarding the:

• Permitted use of information, where the parties agree that shared confidential information is for the sole purpose of evaluating the transaction.
• Legal obligations to disclose material to the government only where necessary.
• Governing law.
• Remedies in case of default.
• Non-binding nature of the contractual relationship during the preliminary assessment phase.

A bidder’s legal due diligence usually covers the following:

• Corporate details of the target and its subsidiaries, affiliates, and other companies that form part of the target.
• Contingent liabilities (from past or pending litigation).
• Employment matters (including employment contracts, key employees, and compliance reports).
• The target’s contractual agreements.
• Statutory approvals and permits for the target’s business activities.
• Insurance, tax, intellectual property, debts, and land-related issues.
• Antitrust, corruption, and other regulatory issues.

Hostile Bid

There is no legal distinction between recommended bids and hostile bids (see Question 5).

Public Domain

Information on local companies available in the public domain includes:

• Financial statements, including information on the company’s assets, debts, owner’s capital, financial status, and business results.
• Listed companies’ prospectuses including their corporate details, their commitments, bidders’ basic rights, information on share issuance, and their business prospects.
• Business registration certificates including information on companies’ names, addresses, legal representatives, members, and charter capital.
• Other information from online sources or newspapers.

Secrecy

8. Are there any rules on maintaining secrecy until the bid is made?

There is no legal requirement that a bidder keep information about the bid secret until the bid is made. However, leaking information before the bid is finalised can lead to:

• An increase of the target’s share price.
• Difficulties in negotiating the terms of the transaction.
• Competition in the market.

In addition, leaking information can be considered a contractual violation if the parties to the transaction have committed to secrecy in writing.

Agreements with Shareholders

9. Is it common to obtain a memorandum of understanding or undertaking from key shareholders to sell their shares? If so, are there any disclosure requirements or other restrictions on the nature or terms of the agreement?

A preliminary agreement, for example a memorandum of understanding or letter of intent, is a starting document used to limit the expectations of both parties and outline the intended M&A structure. These agreements are quite common in Vietnam. Contractual negotiations can be long or short, tense or smooth, depending on the details of the agreement. There is no requirement to disclose the agreement. And there are no restrictions on the nature and terms of these agreements.

Under the Law on Enterprise 2020, founding shareholders can only transfer their shares to the company’s other founding shareholders within three years from the issuance of the Enterprise Registration Certificate. After that, the shares can be transferred freely. The approval of the general meeting of shareholders is always required if:

• The company increases its capital by issuing new shares.
• The founding shareholders propose to transfer their shares within the above three-year period.

If the sale and purchase is a direct agreement between the company and the seller in relation to an issuance of shares, the selling price must be lower than the market price at the time of selling, or in the absence of a market price, the book value of the shares at the time the plan to sell the shares is approved. In addition, the sale price for foreign and domestic buyers must be the same.

Stakebuilding

10. If the bidder decides to build a stake in the target (either through a direct shareholding or by using derivatives) before announcing the bid, what disclosure requirements, restrictions or timetables apply?

Shares can be bought before the bid announcement provided that the number of shares sold does not exceed the thresholds requiring a tender offer. A tender offer is required in the following cases:

• The purchase directly or indirectly leads to ownership of at least 25% of the voting shares of a public company.
• The purchase directly or indirectly leads to ownership of at least 35%, 45%, 55%, 65%, or 75% of the voting shares of a public company.

There is no guidance on building a stake by using derivatives. In addition, the bidder cannot purchase shares or share purchase rights outside the offer process during the tender offer period.

The bidder must publicly announce the tender offer in three consecutive editions of one electronic newspaper or one written newspaper, and (for a listed company only) on the relevant stock exchange within seven days from the receipt of the SSC’s opinion regarding the registration of the tender offer. The tender offer can only be implemented after the SSC has provided its opinion, and following the public announcement by the bidder.

Agreements in Recommended Bids

11. If the board of the target company recommends a bid, is it common to have a formal agreement between the bidder and target? If so, what are the main issues that are likely to be covered in the agreement? To what extent can a target board agree not to solicit or recommend other offers?

The shareholders’ general meeting must agree to a tender offer if the acquisition consists of an existing shareholder transferring their shares and results in 25% ownership or more of the voting shares in a public company (see Question 10). This approval is also required when a joint-stock company’s founding shareholder transfers their shares within three years from the issuance of the Enterprise Registration Certificate. The approval normally includes the:

• Number of shares offered.
• Price of the offer.
• Conditions of the offer.

If it is a recommended bid, there tends to be an agreement between the bidder and target company that covers similar content to that which requires the shareholders’ approval.

There is no statutory requirement that prohibits a target board from soliciting or recommending other offers before completion of a transaction. However, in practice, the parties can and often agree on these restrictions.

Break Fees

12. Is it common on a recommended bid for the target, or the bidder, to agree to pay a break fee if the bid is not successful?

There are no legal provisions on break fees. In practice, both parties can agree on break fees, which do not normally exceed 8% of the transaction value. When the transaction is between affiliated entities, transfer pricing issues can be triggered. If the transaction involves a foreign party, that party’s payment of fees will also raise foreign exchange issues.

The bid solicitor is responsible for returning or releasing the bid security to an unselected bidder within the time limit specified in the bidding documents but not exceeding 20 days from the date the successful party is approved (Article 11(7), Law on Bidding 2013).

Bidders’ security is non-refundable in the following cases:

• They withdraw their bid after the bid closing time while their bidding documents and proposals are still valid.
• They break the law leading to the cancellation of their bid.
• They fail to take measures to secure contract performance.
• They fail to proceed or refuse to execute the contract within 20 to 30 days from the date they receive notice of their winning bid from the bid solicitor (unless there is a force majeure event).

Committed Funding

13. Is committed funding required before announcing an offer?

If an offer that contains cash elements, the bidder must include in its offer announcement a financial statement that there are satisfactory financial resources available to carry out the cash element in full.

Announcing and Making the Offer

Making the Bid Public

14. How (and when) is a bid made public? Is the timetable altered if there is a competing bid?

The offer timetable is as follows:

• The bidder prepares registration documents for its public bid to purchase shares.
• The bidder sends the bid registration documents to the SSC for approval and, at the same time, sends the registration documents to the target.
• The SSC reviews the tender documents within seven days.
• The target’s board must send its opinions on the offer to the SSC and its shareholders within 14 days of receipt of the tender documents.
• The bid is announced in the mass media (although this is not a legal requirement).
• The length of the offer period is between 30 and 60 days.
• The bidder reports the results of the tender to the SSC within ten days of completion.

Companies operating in specific sectors (for example banking or insurance) can be subject to a different timetable.

Offer Conditions

15. What conditions are usually attached to a takeover offer? Can an offer be made subject to the satisfaction of pre-conditions (and, if so, are there any restrictions on the content of these pre-conditions)?

A takeover offer usually contains the following conditions:

• The terms and conditions of the offer apply equally to all of the target’s shareholders.
• The relevant parties are allowed full access to the tender information.
• The shareholders have full rights to sell their shares.
• Applicable laws are fully respected.

An offer can also be subject to conditions precedent. Conditions precedent are set out in the share sale and purchase agreement or the capital contribution transfer agreement. There is no specific restriction on conditions precedent other than the requirement that they cannot be contrary to law and conflict with social ethics (although the legal definition of social ethics is unclear). The most common conditions precedent are:

• Amendments to the target’s charter/relevant licence.
• Obtaining the necessary approvals to conduct the transaction.
• Changes to the target’s management body.

Payment of the contract price will only be made after the conditions precedent are met.

There is no regulatory requirement that a certain percentage of the target’s shares must be offered/bid.

Bid Documents

16. What documents do the target’s shareholders receive on a recommended and hostile bid?

The bidder must send public offer documents to the target and the SSC, which include:

• An application for registration of the public purchase offer.
• Name and address of the bidder (organisation or individual).
• Types and number of shares subject to the bid.
• The bid duration, price, and conditions.
• Latest audited financial statements if the bidder is a legal entity, or a bank statement confirming financial liability where the bidder is an individual.
• A written agreement with the target’s major shareholders whose shares are subject to the offer.

Employee Consultation

17. Are there any requirements for a target’s board to inform or consult its employees about the offer?

There is no requirement to consult employees about the offer. However, if employees are to be a laid off, the employer must:

• Prepare a labour usage plan.
• Consult with the employee representative.
• Notify the competent labour authority on the implementation of the labour usage plan.

The employees are not informed about the content of any of the above and do not receive any other type of notice.

Mandatory Offers

18. Is there a requirement to make a mandatory offer?

A tender offer is required in the following cases:

• The purchase directly or indirectly leads to ownership of at least 25% of the voting shares of a public company.
• The purchase directly or indirectly leads to ownership of at least 35%, 45%, 55%, 65%, or 75% of the voting shares of a public company.

(Decree 118/2020/TT-BTC.)

Consideration

19. What form of consideration is commonly offered on a public takeover?

Shares can be purchased by offering cash, gold, land use rights, intellectual property rights, technology, technical know-how, or other assets. In practice, acquisitions are most commonly made for cash consideration.

20. Are there any regulations that provide for a minimum level of consideration?

In full acquisitions of state-owned enterprises, the first payment for the share purchase must not be less than 70% of the value of these shares, with the remaining amount being paid within 12 months.

In transactions involving auctions of shares by state-owned enterprises, the purchaser must make a deposit of 10% of the value of the shares registered for subscription based on the reserve price at least five working days before the auction date included in the target company’s rules. Additionally, the purchaser must transfer the entire consideration for the shares into the bank account of the body conducting the auction within ten working days of the announcement of the auction results.

In a public tender offer, the payment and transfer of shares through a securities agent company appointed to act as an agent for the public tender offer must comply with Decree 155/2020/ND-CP.

21. Are there additional restrictions or requirements on the consideration that a foreign bidder can offer to shareholders?

There are no additional restrictions or requirements on the consideration that a foreign bidder can offer to shareholders.

Post-Bid

Compulsory Purchase of Minority Shareholdings

22. Can a bidder compulsorily purchase the shares of remaining minority shareholders?

If the bidder acquires 80% or more of the shares of a public company, it must buy the remaining shares of the same type of other shareholders (if they so request) at the bid price within 30 days. However, there are no squeeze-out rights that can force the remaining shareholders to sell their shares.

Restrictions on New Offers

23. If a bidder fails to obtain control of the target, are there any restrictions on it launching a new offer or buying shares in the target?

The bidder is not prohibited from making a new offer or buying shares in the target if its initial offer fails.

De-Listing

24. What action is required to de-list a company?

If a company seeks voluntarily de-listing, it must submit an application for de-listing that includes the following documents:

• A request for de-listing.
• For a joint-stock company:
  • the shareholders’ general meeting’s approval of de-listing of the stock;
  • the board of directors’ approval of de-listing of bonds; and
  • the shareholders’ general meeting’s approval of de-listing of convertible bonds.
• The members’ council’s (for a multi-member limited liability company) or the company’s owner’s (for a single-member limited liability company) approval of de-listing of bonds.
• For a securities investment fund, the investors’ congress’ approval of de-listing of the fund’s certificate.
• For a public securities investment company, the shareholders’ general meeting’s approval of stock de-listing.

A listed company can only de-list its securities if de-listing is approved by a decision of the general meeting of shareholders passed by more than 50% of the voting shareholders who are not major shareholders.

If a company voluntarily de-lists from the Hanoi Stock Exchange or Ho Chi Minh Stock Exchange, the application for de-listing must also include a plan to deal with the interests of shareholders and investors. The Hanoi Stock Exchange or Ho Chi Minh Stock Exchange must consider the request for de-listing within ten and 15 days from the receipt of a valid application, respectively.

Target’s Response

25. What actions can a target’s board take to defend a hostile bid (pre- and post-bid)?

There are no legal provisions regulating hostile bids (see Question 5).

Tax

26. Are any transfer duties payable on the sale of shares in a company that is incorporated and/or listed in the jurisdiction? Can payment of transfer duties be avoided?

Depending on whether the seller is an individual or a corporate entity, the following taxes will apply:

• Capital Gains Tax. Capital gains tax is a form of income tax that is payable on any premium on the original investor’s actual contribution to capital or its costs to purchase this capital. Foreign companies and local corporate entities are subject to a corporate income tax of 20%. However, if the assets transferred are securities, a foreign corporate seller is subject to corporate income tax of 0.1% on the gross transfer price.
• Personal Income Tax. If the seller is an individual resident, personal income tax will be imposed at the rate of 20% of the gains made, and 0.1% on the sales price if the transferred assets are securities. An individual tax resident is defined as a person who:
  • stays in Vietnam for 183 days or longer within a calendar year;
  • stays in Vietnam for a period of 12 consecutive months from their arrival in Vietnam;
  • has a registered permanent residence in Vietnam; or
  • rents a house in Vietnam under a lease contract of a term of at least 90 days in a tax year.

If the seller is an individual non-resident, they are subject to personal income tax at 0.1% on the gross transfer price, regardless of whether there is any capital gain.

Payment of the above transfer taxes is mandatory in Vietnam.

Other Regulatory Restrictions

27. Are any other regulatory approvals required, such as in relation to merger control, foreign ownership or specific industries? If so, what is the effect of obtaining these approvals on the public offer timetable?

Regulated Industries

Certain sectors, for example banking and finance or insurance are highly regulated by the relevant authorities.

Foreign Ownership

For foreign ownership restrictions in listed companies, see Question 6.

Foreign ownership restrictions in specific industries/sectors are as follows:

• Advertising: 99% or more foreign ownership is allowed provided that the foreign investor is in a joint venture with a domestic entity.
• Services incidental to agriculture, hunting, and forestry: foreign investors must have a joint venture or a business co-operation contract with a local entity. Foreign capital contributions cannot exceed 51% of the legal capital of the joint venture.
• Audio-visual services: foreign investors must have a business co-operation contract or joint venture with Vietnamese partners that are authorised to provide these services in Vietnam. Foreign capital contributions cannot exceed 51% of the legal capital of the joint venture.
• Telecommunications:
  • Facilities-based (that is, development of infrastructure plus services): the state must be the majority shareholder (51%); foreign ownership cannot exceed 49%; and
  • Non-facilities-based services: foreign ownership cannot exceed 65%.

There is no requirement to apply for approval of foreign ownership if it is within the regulatory limits. However, in exceptional cases, foreign investors that wish to go beyond ownership restrictions must seek the written approval of the Prime Minister. Except where Vietnam has made WTO commitments in certain sectors, market access is subject to the discretion of the relevant authorities.

In addition, foreign ownership of shares requires the approval of the:

• Ministry of Industry and Trade, for distribution services.
• State Bank of Vietnam, for M&A transactions involving credit institutions.
• Ministry of Finance, for any transfer of shares involving 10% or more of the charter capital of an insurance company or insurance brokerage company.

Cleared Subject to Remedies, Conditions, or Restrictions

The investor will need to register the capital contribution and purchase of shares if either:

• The target is operating in one of the conditional sectors in the Investment Law 2020.
• The capital contribution and purchase of shares results in foreign investors owning 51% or more of the target’s charter capital (in particular, from below 51% to more than 51% and from 51% to above 51%).

The local Department of Planning and Investment where the target is located must issue its final approval within 15 days from the receipt of a valid registration application. However, in practice, this procedure can take several months due to the workload of certain central authorities and the lack of clear guidance documents. Therefore, the registration requirement can cause substantial delays to the whole M&A process.

In other cases, the target company only needs to register a change of membership/shareholders at the Business Registration Division.

28. Are there any restrictions on repatriation of profits or exchange control rules for foreign companies?

If the target company in Vietnam already has an investment registration certificate, it must open a direct investment capital account at a licensed bank in Vietnam. Payment for a share purchase by a foreign investor must be conducted through this account. The account can be denominated in Vietnamese dong or a foreign currency. In addition, if the foreign investor is an offshore investor, it will also need to open a capital account at a commercial bank operating in Vietnam to carry out the payment on the seller’s account and receive profits.

If the target company in Vietnam does not have an investment registration certificate, the foreign investor will need to open an indirect investment capital account for payment to the seller and remittance of profits.

29. Following the announcement of the offer, are there any restrictions or disclosure requirements imposed on persons (whether or not parties to the bid or their associates) who deal in securities of the parties to the bid?

There are no restrictions or disclosure requirements (see Question 8).

Future Developments

30. What do you think will be the main factors affecting the public M&A market over the next 12 months, and how do you expect the market to develop?

The main drivers of Vietnam’s M&A market are:

• Privatisation of state-owned enterprises (SOE). One of the government’s key tasks in 2020 was to continue strengthening the restructuring, equitisation, and divestment of SOEs (Resolution No. 01/NQ-CP issued by the government in 2020). The government also aims to publicise equitised enterprises which are eligible but are not listed or registered for trading on the stock market.
• Trade liberalisation as a result of the Comprehensive and Progressive Agreement for Trans-Pacific Partners and EU-Vietnam Free Trade Agreement, among others.
• Resolution No. 42 on the pilot program for handling credit institutions’ bad debts is also a main driving force of M&A in the real estate sector as bad debts in real estate sector account for a high percentage of the total bad debts in Vietnam’s market.

Reform

31. Are there any proposals for the reform of takeover regulation in your jurisdiction?

The Investment Law 2020 and its guiding decree introduced clearer M&A regulations and acts as an incentive for the growth of the M&A market. This contributes to the end of years of uncertainty and frustration faced by foreign investors seeking entry into the Vietnam market, or expansion through M&A transactions.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.