Legal Advice: What foreign investors need to know when buying a Vietnamese enterprise

VietNamNet Bridge – According to the Law on Investment (2005), investors may carry out direct investment activities via the method of enterprise acquisition. Aside from the benefit of cost and time efficiency, there are other matters worth considering when investors use such a method.


In regards to the legal aspect: The legal framework governing acquisition of Vietnamese enterprises carried out by foreign investors is covered in several laws, the Investment Law, Competition Law, Enterprise Law and other relevant legal normative documents. Hence, PLF suggests, in order for investors to minimise legal risks and best comply with Vietnamese laws, that foreign investors ascertain carefully the legal aspects concerning enterprise acquisition.



When determining a target enterprise (the enterprise to be acquired), investors should give heed to the following aspects:


(1) Finance: Investors should examine the target enterprise’s audited financial reports of at least three consecutive years to evaluate its financial situation before acquiring.


(2) Labor: The success of an enterprise depends not only on the leadership but also on the quality of its workforce. Investors need to determine the qualifications as well as working ability and orientation on future development of the employees, especially those of the key staff, after the target enterprise is acquired.


(3) Clients: The primary purpose of investors when buying an enterprise is to take advantage of existing conditions, thus creating a springboard to develop in a new market. Therefore, learning about the customers, partnerships and profits of the target enterprise is very essential for investors to create a platform for stabilizing, building, and developing the amount of clients of the enterprise after acquisition.


(4) Trademark: A trademark is considered a company’s intangible asset. Generally, investors tend to select enterprises with popular brand names in the market they are heading to, which helps them save time, effort and expenses spent on building a brand. However, the popularity of a trademark is also proportional to the acquisition transaction value. Therefore, investors should reasonably value a trademark consistent with their budget.


(5) Procedures: During the preparation of an enterprise acquisition dossier, investors should give careful attention to the following necessary documents:


Written proposal for acquisition of the enterprise;


Decision of the enterprise owner or the Members’ Council or the Shareholders’ General Meeting on the sale of the enterprise;


The enterprise acquisition contract;


Charter of the acquired enterprise;


Draft charter of the enterprise after the acquisition is permitted (if there are any changes);


Foreign investor’s legal status verification documents.


PLF – LAW FIRM




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