tháng 5 18, 2023
With the international integration, more and more policies to attract foreign investment have been introduced by Vietnam government including the facilitation of M&A transaction. It has been proven efficient if the transaction get help from M&A lawyers in Vietnam but it is important the investors understand the ideas and process.
M&A or Direct Investment in Vietnam?
Besides the fact that the investor could invest through setting up a company in Vietnam, the investor could also enter Vietnam through making investment by buying shares in a company or acquire contributed capital in company operating in Vietnam which is also considered as merger and acquisition transaction.
Specifically, according to the provisions of the Law on Investment, foreign investor can invest in the form of capital contribution, share purchase, or acquisition of capital contributions from an economic organization. However, the investor must: satisfy market access conditions applied to foreign investors; ensure following national defense and security in accordance with the law; comply with regulations of the law on land and conditions for the receipt of land use rights and conditions for use of land on islands or border or coastal communes.
Unlike the case of investment in the establishment of an economic organization, the investment in the form of capital contribution, share purchase or purchase of contributed capital of an economic organization does not need to carry out investment registration procedures in Vietnam.
A foreign investor only shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization prior to change of members or shareholders in one of the following cases:
(i) The purchase of capital contribution or shares increases the ownership ratio of the foreign investors in a company operating in the restricted investment business lines;
(ii) The capital contribution or purchase of shares or stakes results in a foreign investor or business organization specified in some points of the that cover the investors with investment over 50% of the charter capital of the business organization in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.
(iii) The foreign investor that contributes capital, purchases shares or stakes of a business organization has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security.
In addition to the above cases, the investor will carry out the procedures for changing shareholders or members in accordance with relevant laws when contributing capital, buying shares or buying contributed capital of economic organizations.
How risks could be minimized with the help of M&A Lawyers in Vietnam
Investing in a company in the form of capital contribution, share purchase, or capital contribution from economic organizations will help investors gain a number of benefits such as quick access to market, gaining customers’ trust, taking advantage of physical facilities, human resources, existing operating procedures, reducing the time to create a brand as well as reduce licensing procedures. However, investing in a company according to these methods also encounter some risks which the investors need to carry out strict legal due diligence by experience M&A lawyers in Vietnam, to check on the company’s compliance and validity of their licenses to mitigate risks. Further, the investor also needs to undertake financial due diligence and operational due diligence to safe guard the potential economic benefits.
