Merger acquisition regulation Vietnam update

Mergers and acquisitions (M&A) play a crucial role in driving growth, improving production and business efficiency, and expanding the scale of operations for businesses. However, to successfully execute an M&A transaction in Vietnam, investors need to thoroughly understand the system of Vietnamese M&A legal regulations.

This article by S4B Vietnam will provide readers with an overview of the M&A legal regulations that investors need to know to make informed investment decisions.

1. Vietnamese M&A Legal Regulations

In the field of mergers and acquisitions (M&A) in Vietnam, M&A legal regulations encompass legal norms from various fields, aiming to regulate the relationships arising during this process. Laws regarding M&A (mergers and acquisitions) of enterprises are specifically regulated in several legal documents as follows:

1.1 M&A as regulated by the Enterprise Law

The Enterprise Law (LAW) was passed by the National Assembly at its 8th session (13th term) on November 26, 2014, and officially came into effect on July 1, 2015. This document provides detailed regulations on mergers and consolidations of enterprises, considering this a form of enterprise reorganization stemming from internal needs. Although it does not specifically define the term “enterprise M&A,” the LAW clearly guides the related processes:

  • Article 18, Chapter 2: Rights to establish, contribute capital, purchase shares, capital contributions and manage enterprises, stipulates that organizations or individuals have the right to carry out these activities, except in cases such as state agencies and armed forces units using public assets for private gain; or individuals prohibited by law.

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  • Articles 52 and 53, Chapter 3: Regarding limited liability companies, these articles clarify the acquisition or transfer of capital contributions by company members.
  • Articles 125 and 126, Chapter 5: For joint-stock companies, the Enterprise Law stipulates that the Board of Directors has the right to decide the timing, method, and price of share sales. Shares are freely transferable, through ordinary contracts or on the stock market, except in some special cases.
  • Chapter 9: Includes articles such as Article 192 (enterprise division), Article 193 (enterprise separation), Article 194 (enterprise merger), and Article 195 (procedures for registering the acquiring enterprise).

1.2 Business M&A under the Investment Law

The Investment Law, also passed by the National Assembly at its 8th session (13th term) and effective from July 1, 2015, recognizes two forms of M&A: mergers and acquisitions of businesses. According to Vietnamese M&A law, this is considered a method of direct investment, carried out through the acquisition of all or part of a business or its branch.

  • Article 24: Investors have the right to contribute capital, purchase shares or equity in economic organizations.
  • Articles 25 and 26: Foreign investors are also permitted to participate in investment in the form of capital contribution, share purchase or equity acquisition.

2. Business Mergers and Acquisitions under the Regulations of the Competition Law

The Competition Law, passed by the National Assembly at its 5th session (14th term) on June 12, 2018, and effective from July 1, 2019, specifically regulates forms of economic concentration such as: business mergers, business consolidations, business acquisitions, joint ventures between businesses, and other forms recognized by law.

Business mergers are understood as the transfer of all assets, rights, obligations, and legal interests from one or more businesses to another business, while simultaneously terminating the operations of the merged business.

Meanwhile, business consolidation is the transfer of all assets and legal rights by two or more businesses to establish a new business, resulting in the cessation of operations of the old businesses.

Business acquisitions occur when one business purchases all or part of the capital contributions and assets of another business in order to control or dominate the business or industry of the acquired business. For joint ventures, businesses contribute assets and rights to establish a new business. Specifically, Article 30 of this law emphasizes that forms of economic concentration are prohibited when they cause or risk causing restrictions on competition in the Vietnamese market.

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According to Vietnamese M&A law, mergers, consolidations, or acquisitions of businesses are all forms of economic concentration. These actions are prohibited if they create a combined market share that significantly restricts competition in the domestic market.

3. M&A of businesses under the Securities Law

The Securities Law, passed by the National Assembly at its 8th session (14th term) on November 26, 2019, and effective from January 1, 2021, replacing previous laws, has set clear regulations on the division, separation, merger, and consolidation of securities companies and fund management companies. These activities all require prior approval from the State Securities Commission before proceeding.

Corporate M&A under the Law on Credit Institutions

The division, separation, merger, or acquisition of credit institutions must be approved by the State Bank of Vietnam, according to Law No. 17/2017/QH14, issued on November 20, 2017, and effective from January 15, 2018. These regulations ensure that the restructuring process of credit institutions takes place within the legal framework and protects the rights of all stakeholders.

From the above article, we see that although the legal framework for M&A in Vietnam is becoming increasingly perfected, conducting M&A transactions still requires thorough preparation and the support of legal experts. S4B Vietnam is proud to be one of the leading firms providing legal consulting services on M&A in Vietnam.

With our extensive professional knowledge and rich practical experience, we will accompany our clients, helping them overcome legal obstacles and achieve their business goals.

S4B Vietnam

  • Address: Unit 701B – 701C, Tower A, Handi Resco Towers, 521 Kim Ma Street, Giang Vo Ward, Hanoi, Vietnam
  • Tel: +84 24 3974 4181
  • Email: service@s4b.com.vn

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