In the context of global economic integration, mergers and acquisitions (M&A) activities in the market are highly vibrant. In particular, foreign companies acquiring Vietnamese companies is becoming a strategic trend, unlocking massive capital sources for domestic enterprises. However, to ensure the transaction process is legal and smooth, foreign investors must master and strictly comply with current legal regulations. The article below will provide you with the most detailed and updated legal perspective.
1. What Does a Foreign Company Acquiring a Vietnamese Company Entail?
1.1. Concept of Mergers and Acquisitions (M&A)
Cross-border M&A transactions are an important strategy for market expansion. Legally, this is the process where a foreign investor invests by contributing capital, purchasing shares, or buying capital contributions in a Vietnamese company.
1.2. Benefits of Foreign Investor Participation
Acquisitions or capital contributions not only bring financial strength to domestic companies but also help foreign investors access the market quickly. Holding a certain percentage of charter capital will grant them voting and management rights within the company.
1.3. Legal Basis Under the Law on Investment 2020
All such investment activities are regulated and executed based on the provisions of the Law on Investment 2020 and the Law on Enterprises 2020. Concurrently, this process must also comply with guiding documents implementing the Law on Investment and the Law on Enterprises 2020.
1.4. Charter Capital Ownership Limits to Know
Depending on the business sector, investors may acquire the entire or a portion of the company. Determining the desired percentage of charter capital ownership beforehand is a crucial step to optimize business strategies and avoid unintended legal risks.
2. Conditions for Foreign Companies to Acquire Vietnamese Companies
2.1. Compliance with investment forms
For a smooth transaction, the prerequisite is that foreign investors contributing capital to a Vietnamese company must comply with the investment forms prescribed by law.
2.2. Scope of operations and business partners
Besides the form, they are also required to meet strict requirements regarding the scope of operations and select Vietnamese partners that align with mutual development orientations.
2.3. International Treaties applicable to investors
Furthermore, an unignorable legal barrier is that investment projects must strictly comply with International Treaties to which Vietnam is a member.
2.4. Conditional business sectors
If the target enterprise operates in sectors with restricted market access, investors must carefully review sub-licenses. Complying with all these conditions is the golden key that ensures the acquisition process is safe, transparent, and maximizes the protection of both parties’ rights.
3. Forms of Foreign Companies Acquiring Vietnamese Companies
- 3.1. Purchasing shares of a Joint Stock Company
- Investors can purchase initial shares or additionally issued shares of a joint stock company. They may also choose to buy shares of a joint stock company directly from the company or from existing shareholders.
- 3.2. Contributing capital to a Limited Liability Company
- The forms of capital contribution, share purchase, and capital contribution purchase by foreign investors are stipulated in Article 25 of the Law on Investment 2020. Accordingly, investors have the right to contribute capital to limited liability companies and partnerships.
- 3.3. Purchasing capital contributions from existing members
- The law allows the purchase of capital contributions from members of a limited liability company to become a member of that company. Similarly, investors have the right to buy the capital contributions of contributing members in a partnership to become a contributing member of that partnership.
- 3.4. Contributing capital to other economic organizations
- Beyond common types of enterprises, investors can contribute capital to other economic organizations, or purchase the capital contributions of members of other economic organizations not falling into the above cases.
4. Procedures for Foreign Companies Acquiring Vietnamese Companies
4.1. Cases requiring mandatory registration
- Foreign investors contributing capital, purchasing shares, or purchasing capital contributions in an economic organization operating in conditional business lines applicable to foreign investors.
- The procedure is also mandatory if the capital contribution or share purchase results in holding 51% or more of the charter capital of the economic organization.
- It applies if foreign investors hold 51% or more of the charter capital, or if a majority of the general partners are foreign individuals in a partnership.
- Or in cases where the economic organization has foreign investors holding 51% or more of the charter capital.
4.2. Detailed legal application file to prepare
- A registration document for capital contribution, share purchase, or capital contribution purchase, including information about the targeted economic organization and the expected charter capital ownership ratio upon completion.
- Copies of ID cards, citizen identification cards, or passports for individual investors.
- For organizations, a copy of the Certificate of Incorporation or an equivalent document confirming legal status is required.
4.3. Procedure for submitting application documents at the Department of Planning and Investment (DPI)
- Investors submit the application file to the Department of Planning and Investment (DPI) where the economic organization is headquartered.
- If the conditions are met, the DPI will issue a written notification within 15 days from the receipt of a complete application file, allowing the investor to execute procedures for changing shareholders/members.
- If conditions are not met, this agency will notify the investor in writing, clearly stating the reasons.
- After completing the capital contribution registration, the enterprise and investor proceed with the procedure to register changes to the enterprise registration contents.
4.4. Cases exempt from registration procedures
If the investor does not fall under the mandatory registration categories, they only need to perform the procedures for changing shareholders/members in accordance with the law when contributing capital or purchasing capital contributions. However, if they wish to register their capital contribution or share/capital contribution purchase in the economic organization, investors may still do so according to regulations.
The process of a foreign company acquiring a Vietnamese company is a series of legal operations that require a profound understanding of the Law on Investment and the Law on Enterprises. From determining the form of investment and assessing the charter capital ratio, to drafting the application file and completing registration procedures with state agencies, every step requires absolute precision. To minimize arising risks and shorten implementation time, partnering with a reputable and professional legal service provider is the optimal solution, helping investors confidently inject capital and develop their business in Vietnam.
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