There has been steady growth in M&A activity in Vietnam since it joined the WTO in 2007, reaching a peak of $5.1 billion in 2012. Real estate has been the most attractive sector for deals. According to a 2014 study, the number and value of M&A deals in Vietnam increased year-over-year in 2015. Obtaining control of a public company can be done through share acquisitions, mergers, or asset purchases, but there are restrictions for foreign investors. Legal due diligence covers matters such as corporate details, liabilities, contracts, approvals, and regulatory issues.

1. Lawyer in Vietnam Oliver Massmann Public Mergers and Acquisitions
There has been a steady growth in M&A activities in Vietnam since Vietnam officially became a
member of the World Trade Organization (WTO) in 2007. The first M&A wave in Vietnam
occurred during the period between 2008 and 2013, with a reported total value of US$15 billion.
Japanese investors made about US$1.2 billion worth of deals in 2012. Japan is the leading
country for M&A deals in Vietnam in terms of both quantity and value. This helped the M&A
market in Vietnam to reach a peak of US$5.1 billion in 2012. Real estate is considered to be the
most attractive sector, with a total value of M&A transactions up to US$1.637 billion with 20
deals, accounting for 69% of the total M&A value by foreign investors in Vietnam. The retail,
consumer goods, and industrial goods and services sectors are also very active, with high value
M&A deals.
According to a research conducted by StoxPlus, Vietnam's M&A market experienced a strong
recovery in 2014, with six deals being reportedly made every week. There was a total of 341
M&A deals in 2015, with a value of US$5.2 billion, a 23.1% increase in terms of number of
deals and 9.7% increase in terms of deal value compared with the previous year.
How to obtain control of a public company
The most common means of obtaining control over a public company are as follows:
o The acquisition of shares/charter capital through:
o buying shares/charter capital from the existing shareholders of the company;
o buying shares/charter capital of a listed company on the stock exchange; and
o public share purchase offer.
o Through a merger. The 2014 Law on Enterprises sets out the procedures for company
mergers by way of a transfer of all lawful assets, rights, obligations and interests to the
merged company, and for the simultaneous termination of the merging companies.
o Through the acquisition of assets.
There are restrictions on the purchase of shares/charter capital of local companies by foreign
investors. In addition, the law does not yet allow merger or assets acquisition transactions where
a foreign investor is a party.
Securities of public companies must be registered and deposited at the Vietnam Securities
Depository Centre before being traded.
Depending on the numbers of shares purchased, an investor can become a controlling
shareholder. Under the Vietnam Law on Securities, a shareholder that directly or indirectly owns
5% or more of the voting shares of an issuing organization is a major shareholder. Any
transactions that result in more than 10% ownership of the paid-up charter capital of the
securities company must seek approval of the State Securities Commission (SSC).
What a bidder generally questions before making a bid
Before officially contacting the potential target, the bidder conducts a preliminary assessment
based on publicly available information. The bidder then contacts the target, expresses its
intention of buying shares/subscribing for its shares and the parties sign a confidentiality
agreement before the due diligence process. The confidentiality agreement basically includes

2. confidentiality obligations in performing the transaction. The enforcement of confidentiality
agreements by courts in Vietnam remains untested.
A bidder's legal due diligence usually covers the following matters:
 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.
 Contractual agreements of the target.
 Statutory approvals and permits regarding the business activities of the target.
 Insurance, tax, intellectual property, debts, and land-related issues.
 Anti-trust, corruption and other regulatory issues.
Restrictions on shares transfer of key shareholders
Founding shareholders can only transfer their shares to other founding shareholders of the
company within three years from the issuance of the Enterprise Registration Certificate. After
then, the shares can be transferred freely. An internal approval of the general meeting of
shareholders is always required if:
 The company increases its capital by issuing new shares.
 There is any share transfer of the founding shareholders 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 of the approval plan
to sell the shares. In addition, the selling price to foreign and domestic buyers must be the same.
When a tender offer is required
A tender offer is required in the following cases:
 Purchase of a company's circulating shares that results in a purchaser, with no
shareholding or less than a 25% shareholding, acquiring a 25% shareholding or more.
 Purchase of a company's circulating shares that results in a purchaser (and affiliated
persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or
more of circulating shares of the company.
 Purchase of a company's circulating shares that results in a purchaser (and affiliated
persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to
10% of currently circulating shares of the company within less than one year from the
date of completion of a previous offer.
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 State Securities Commission's (SSC's)

3. 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.
Making the bid public
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 board of the target must send its opinions regarding the offer to the SSC and the
shareholders of the target within 14 days from 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 10 days of completion.
Companies operating in specific sectors (such as banking, insurance, and so on) can be subject to
a different timetable.
Form of consideration and minimum level of consideration
Under Vietnamese law, 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.
In cases of full acquisition of state-owned enterprises, the first payment for the share purchase
must not be less than 70% of the value of such 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 rule.
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 the case of a public tender offer, the payment and transfer of shares via a securities agent
company appointed to act as an agent for the public tender offer must comply with Decree
58/2012/ND-CP.
Delisting 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:
o the shareholders' general meeting approval of de-listing of the stock;
o the board of directors' approval of de-listing of bonds; and
o the shareholders' general meeting approval of de-listing of convertible bonds.

4.  The members' council (for a multi-member limited liability company) or the company's
owner (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 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.
Transfer duties payable on the sale of shares in a company
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
such 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:
o stays in Vietnam for 183 days or longer within a calendar year;
o stays in Vietnam for a period of 12 consecutive months from his arrival in
Vietnam;
o has a registered permanent residence in Vietnam; or
o 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, he is 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.
Regulatory approvals
The investor will need to register the capital contribution and purchase of shares if either:
 The target is operating in one of the 267 conditional sectors referred to in the 2015
Investment Law.

5.  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 change of membership / shareholders at
the Business Registration Division.
Restrictions on repatriation of profits and/ or foreign exchange rules for foreign companies
If the target company in Vietnam already has an investment 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 certificate, the foreign investor
will need to open an indirect investment capital account for payment to the seller and remittance
of profits.
Please do contact the author Oliver Massmann under omassmann@duanemorris.com if you have
any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam
LLC.