Vietnam M&A Guide: Legal Framework, Due Diligence and Deal Structures

Introduction: The M&A Landscape in Vietnam

Vietnam's mergers and acquisitions market has matured significantly over the past decade, attracting both strategic and financial buyers from across the globe. With a growing consumer market, competitive manufacturing costs, and deepening integration into global supply chains through free trade agreements, Vietnam presents compelling acquisition targets across sectors including consumer goods, real estate, financial services, manufacturing, and technology.

In our practice advising both buyers and sellers in cross-border M&A transactions, we have seen deal values and complexity increase substantially. However, executing an M&A transaction in Vietnam requires a thorough understanding of the regulatory framework, careful due diligence adapted to local conditions, and creative deal structuring to navigate foreign ownership restrictions and other legal constraints.

This guide provides a comprehensive overview of the legal considerations involved in acquiring a business in Vietnam, with particular focus on the issues most relevant to foreign buyers.

Legal Framework Governing M&A Transactions

M&A activity in Vietnam is governed by a combination of laws, the most important of which are:

Law on Investment 2020 (Law No. 61/2020/QH14): Governs foreign investment approval requirements, including conditions that apply when a foreign investor acquires an interest in a Vietnamese company.Law on Enterprises 2020 (Law No. 59/2020/QH14): Establishes the rules for corporate restructuring, including mergers, consolidations, divisions, and share/capital transfers.Law on Competition 2018 (Law No. 23/2018/QH14): Imposes merger control requirements, including notification thresholds and substantive review standards.Law on Securities 2019: Applies to acquisitions involving publicly listed companies, including tender offer requirements and disclosure obligations.Sector-specific regulations: Banking, insurance, telecommunications, and other regulated sectors have additional approval requirements for ownership changes.

Under the Law on Investment 2020, a foreign investor acquiring shares or capital contributions in a Vietnamese company must complete an M&A registration procedure with the Department of Planning and Investment if the target company operates in a conditional business line for foreign investors, or if the acquisition would result in a foreign investor (or foreign investors collectively) holding 50% or more of the charter capital.

Deal Structures: Share Deals vs. Asset Deals

The two primary structures for acquiring a business in Vietnam are share deals and asset deals. Each has distinct legal, tax, and practical implications.

Share Deals

In a share deal, the buyer acquires the equity interests (shares or capital contributions) in the target company. The target company continues to exist as a legal entity, with all its assets, liabilities, contracts, licenses, and employees.

Advantages:

Continuity of business operations, contracts, and licensesGenerally simpler to execute than an asset dealMay preserve tax incentives enjoyed by the target companyEmployees remain with the company without requiring new employment contracts

Disadvantages:

Buyer inherits all liabilities of the target, including unknown or contingent liabilitiesRequires thorough due diligence to uncover hidden risksMay trigger M&A registration requirements under the Law on InvestmentTransfer pricing and tax audit history carry over

For share deals involving an LLC, the transfer of capital contributions must follow the procedures set out in the Law on Enterprises 2020, including obtaining consent from other members (for multi-member LLCs) and completing the registration of the ownership change with the business registration authority.

For JSCs, share transfers are generally more flexible, though founding shareholders face restrictions on transferring their shares during the first three years from the company's establishment.

Asset Deals

In an asset deal, the buyer acquires specific assets of the target company — which may include equipment, inventory, intellectual property, real estate use rights, and contracts — without acquiring the legal entity itself.

Advantages:

Buyer can select which assets and liabilities to acquireAvoids inheriting unknown liabilitiesCleaner structure from a risk perspective

Disadvantages:

Licenses and permits may not be transferable; the buyer may need to apply for new onesContracts with third parties may require counterparty consent for assignmentEmployee transfers require compliance with labor law requirementsPotentially higher transaction costs and taxes (VAT on asset transfers, registration fees for real estate)More complex and time-consuming to execute

In practice, share deals are far more common in Vietnam M&A transactions involving foreign buyers, primarily because they preserve the target company's licenses and operational continuity.

Foreign Ownership Caps and Sector Restrictions

One of the most critical issues in any Vietnam M&A transaction involving a foreign buyer is determining whether foreign ownership restrictions apply to the target's business activities.

As discussed in our guide on setting up a business in Vietnam, the Law on Investment 2020 maintains a list of conditional business lines, many of which impose caps on foreign ownership. Key examples include:

Banking: Maximum 30% aggregate foreign ownership in a Vietnamese commercial bank; individual foreign institutional investor capped at 15% (or 20% with State Bank approval)Securities: 49% foreign ownership cap for securities companies (with certain exceptions)Telecommunications: Generally 49% for infrastructure-based servicesDistribution/retail: Subject to economic needs tests for additional outlets beyond the firstReal estate: Foreign investors can own up to 100% in real estate development but face restrictions on certain types of projectsAviation: Foreign ownership capped at 34% for Vietnamese airlines

When the target company holds multiple business line registrations, the most restrictive cap applicable to any of its registered lines will generally apply to the overall foreign ownership of the entity. This is an area where careful analysis and creative structuring are essential.

Vietnam's international trade commitments — particularly under the CPTPP, EVFTA, and WTO accession commitments — may provide more favorable foreign ownership terms than domestic law. We regularly analyze these treaty obligations to identify opportunities for our clients.

Competition Review: Merger Control in Vietnam

The Law on Competition 2018 and its implementing Decree No. 35/2020/ND-CP establish a mandatory pre-merger notification regime. The National Competition Commission (NCC) is the enforcement authority.

Notification Thresholds

A concentration (merger, acquisition, consolidation, or joint venture) must be notified to the NCC if any of the following thresholds are met:

Total assets in Vietnam of at least one party: VND 3,000 billion (approximately USD 120 million)Total revenue in Vietnam of at least one party: VND 3,000 billionTransaction value: VND 1,000 billion (approximately USD 40 million)Combined market share of the parties: 20% or more in the relevant market

Review Process

The NCC conducts a preliminary review within 30 days of accepting a complete notification. If the concentration does not raise competition concerns, it is cleared. If further analysis is needed, a formal review of up to 90 days (extendable by 60 days) is conducted.

A concentration is prohibited if it has or may have a significant anti-competitive effect on the Vietnamese market and no exemptions apply. Exemptions may be granted if the parties can demonstrate that the concentration has positive effects on technological development, export promotion, or socio-economic development.

In our experience, most M&A transactions that trigger notification thresholds are cleared at the preliminary review stage. However, the notification process requires careful preparation of detailed market data and economic analysis.

Due Diligence: Adapting to Vietnamese Conditions

Due diligence in Vietnam M&A transactions requires both standard international best practices and an understanding of local conditions that create unique risks.

Legal Due Diligence Focus Areas

Corporate and ownership structure: Verify the target's legal existence, charter capital contributions, ownership chain, and any encumbrances on shares or capital contributions. In Vietnam, it is not uncommon to discover discrepancies between registered and actual ownership, or incomplete capital contribution records.

Investment and business licenses: Confirm that the target holds valid Investment Registration Certificates, Enterprise Registration Certificates, and all necessary sub-licenses for its operations. Check for any violations or pending enforcement actions.

Land use rights and real estate: Land in Vietnam is owned by the state, and users hold land use rights (LURs). Due diligence must verify the validity, duration, and permitted use of any LURs held by the target. Disputes over land are extremely common in Vietnam and can pose significant risks.

Contracts and commitments: Review material contracts, looking particularly for change-of-control provisions, unusual termination rights, related-party transactions, and off-balance-sheet commitments.

Labor and employment: Examine employment contracts, social insurance compliance, collective labor agreements, and any pending labor disputes. Non-compliance with social insurance obligations is widespread and can result in substantial back-payment liabilities.

Tax compliance: Review tax filings, audit history, transfer pricing documentation, and any outstanding tax assessments or disputes. Tax audits by Vietnamese authorities can cover up to 10 years of prior periods, and aggressive positions on transfer pricing are common targets.

Litigation and disputes: Identify all pending, threatened, or concluded litigation, arbitration, or administrative proceedings.

Intellectual property: Verify ownership and registration of trademarks, patents, copyrights, and domain names. Confirm that IP registrations are current and enforceable.

Environmental compliance: Particularly important for manufacturing targets, check for valid environmental impact assessments, discharge permits, and compliance with environmental standards.

Financial Due Diligence Considerations

Vietnamese accounting practices may differ from international standards. Many private companies maintain dual accounting records — official records for tax purposes and internal records reflecting actual operations. Quality of earnings analysis must account for this reality. We strongly recommend engaging reputable local audit firms with experience in M&A due diligence.

Deal Documentation

A typical Vietnam M&A transaction involves the following key documents:

Term sheet or letter of intent: Non-binding (or partially binding) document outlining key commercial termsShare purchase agreement (SPA) or capital transfer agreement: The principal transaction document, typically governed by Vietnamese law for domestic targetsShareholders' agreement: Governs the ongoing relationship between shareholders post-completion (particularly important in partial acquisitions)Disclosure schedules: Detailed disclosures against representations and warrantiesAncillary agreements: May include management agreements, non-compete agreements, earn-out arrangements, and escrow agreements

Key negotiation points in Vietnamese M&A transactions include:

Representations and warranties: The scope and survival period of seller representations, including specific Vietnamese risk areas such as land use rights, tax compliance, and labor obligationsIndemnification: Caps, baskets, and specific indemnities for identified risksConditions precedent: Including regulatory approvals (M&A registration, competition clearance, sector-specific approvals)Purchase price adjustments: Completion accounts, locked-box mechanisms, or earn-out structuresGoverning law and dispute resolution: While the SPA for a Vietnamese target is typically governed by Vietnamese law, arbitration (often at SIAC, HKIAC, or VIAC) is the preferred dispute resolution mechanism for cross-border deals

Tax Implications of M&A Transactions

Tax planning is a critical component of M&A deal structuring in Vietnam.

Capital gains tax on share transfers: The seller (whether an individual or entity) is subject to tax on gains from the transfer of shares or capital contributions. For corporate sellers, the gain is subject to 20% CIT. For individual sellers, a flat 0.1% tax on the gross transfer price applies (this is a deemed tax, not a tax on gains).

Foreign seller withholding: When the seller is a foreign entity without a permanent establishment in Vietnam, the buyer is typically required to withhold and remit the capital gains tax on behalf of the seller.

VAT on asset deals: The transfer of assets is generally subject to 10% VAT (with certain exemptions). This can significantly impact the economics of an asset deal.

Transfer pricing: Post-acquisition, related-party transactions between the acquired company and its new foreign parent will be subject to Vietnam's transfer pricing regulations under Decree No. 132/2020/ND-CP.

Stamp duty and registration fees: Transfers of land use rights trigger registration fees of 0.5% of the assessed value.

Post-Acquisition Integration Considerations

Successful M&A in Vietnam extends beyond deal completion. Key post-acquisition considerations include:

Regulatory filings: Updating the IRC, ERC, and other registrations to reflect the new ownershipCultural integration: Vietnamese workplace culture differs significantly from Western norms; sensitivity to local management practices is importantCompliance programs: Implementing robust compliance frameworks, particularly around anti-corruption (Vietnam ranks poorly on corruption perception indices)Labor relations: Managing employee expectations and retention, particularly of key personnelFinancial reporting alignment: Transitioning to the acquirer's reporting standards and internal controls

Conclusion: Expert Guidance for Your Vietnam M&A Transaction

M&A transactions in Vietnam offer significant opportunities but require careful legal navigation. The combination of foreign ownership restrictions, sector-specific regulations, competition review requirements, and local due diligence challenges means that experienced legal counsel is not optional — it is essential.

At Apolo Lawyers, Attorney Vo Thien Hien and our corporate team have advised on M&A transactions across sectors including manufacturing, technology, consumer goods, and real estate. We bring deep knowledge of Vietnamese law combined with an understanding of international deal practices that our foreign clients expect.

Contact us to discuss your M&A opportunity in Vietnam and receive tailored legal advice for your transaction.