How to Invest Through Acquisition – Advice from M&A Lawyers in Vietnam

    

With the international integration, more and more policies to attract foreign investment have been introduced by Vietnam government including the facilitation of M&A transaction. It has been proven efficient if the transaction get help from M&A lawyers in Vietnam but it is important the investors understand the ideas and process.

M&A or Direct Investment in Vietnam?

Besides the fact that the investor could invest through setting up a company in Vietnam, the investor could also enter Vietnam through making investment by buying shares in a company or acquire contributed capital in company operating in Vietnam which is also considered as merger and acquisition transaction.

Specifically, according to the provisions of the Law on Investment, foreign investor can invest in the form of capital contribution, share purchase, or acquisition of capital contributions from an economic organization. However, the investor must: satisfy market access conditions applied to foreign investors; ensure following national defense and security in accordance with the law; comply with regulations of the law on land and conditions for the receipt of land use rights and conditions for use of land on islands or border or coastal communes.

Unlike the case of investment in the establishment of an economic organization, the investment in the form of capital contribution, share purchase or purchase of contributed capital of an economic organization does not need to carry out investment registration procedures in Vietnam.

A foreign investor only shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization prior to change of members or shareholders in one of the following cases:

(i) The purchase of capital contribution or shares increases the ownership ratio of the foreign investors in a company operating in the restricted investment business lines;

(ii) The capital contribution or purchase of shares or stakes results in a foreign investor or business organization specified in some points of the that cover the investors with investment over 50% of the charter capital of the business organization in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.

(iii) The foreign investor that contributes capital, purchases shares or stakes of a business organization has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security.

In addition to the above cases, the investor will carry out the procedures for changing shareholders or members in accordance with relevant laws when contributing capital, buying shares or buying contributed capital of economic organizations.

How risks could be minimized with the help of M&A Lawyers in Vietnam

Investing in a company in the form of capital contribution, share purchase, or capital contribution from economic organizations will help investors gain a number of benefits such as quick access to market, gaining customers’ trust, taking advantage of physical facilities, human resources, existing operating procedures, reducing the time to create a brand as well as reduce licensing procedures. However, investing in a company according to these methods also encounter some risks which the investors need to carry out strict legal due diligence by experience M&A lawyers in Vietnam, to check on the company’s compliance and validity of their licenses to mitigate risks. Further, the investor also needs to undertake financial due diligence and operational due diligence to safe guard the potential economic benefits.

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Preferential import and export tariff according to EVFTA for the period 2020-2022

    

On September 18, 2020, the Government issued Decree No. 111/2020/ND-CP on Vietnam’s Preferential Export Tariffs and Special Preferential Import Tariffs to implement the Free Trade Agreement between The Socialist Republic of Vietnam and the European Union (EVFTA Agreement) for the period 2020-2022.

Accordingly, the Decree stipulates the Preferential Export Tariff, the Special Preferential Import Tariff of Vietnam to implement the EVFTA Agreement and the conditions for enjoying preferential export tax rates and special preferential import tax rates according to this Agreement.

The preferential export tariff specified in Appendix I to this Decree includes product code, description of goods, and preferential export tax rates for different stages when exporting to a territory under the EVFTA Agreement, including: European Union member territories; United Kingdom of Great Britain and Northern Ireland for each code.

Goods exported from Vietnam to which the preferential export tax rates are applied must satisfy the following conditions: to be imported into any territory specified in the EVFTA Agreement, including member territories of the European Union, United Kingdom of Great Britain and Northern Ireland; have transport documents (copy) showing the destination is the above territories; have the import customs declaration of the export consignment of Vietnamese origin imported into the aforesaid territories (the copy and translation in English or Vietnamese in case the language used on the declaration is not English).

Vietnam’s special preferential import tariff for the implementation of the EVFTA Agreement is specified in Appendix II to this Decree, including product code, description, and special preferential import tax rates according to stages are imported from the European Union member territory; United Kingdom of Great Britain and Northern Ireland; The Principality of Ando; The Republic of San Morocco and the Socialist Republic of Vietnam (Goods imported from non-tariff zones to the domestic market) for each product code.

Imported goods eligible for special preferential import tax rates under the EVFTA Agreement must satisfy the following conditions: in the Special Preferential Import Tariff specified in Appendix II to this Decree; be imported into Vietnam from the member territory of the European Union; United Kingdom of Great Britain and Northern Ireland; The Principality of Ando; Republic of San Mary; and the Socialist Republic of Vietnam (Goods imported from non-tariff zones to the domestic market); meeting the rules of origin of goods and having proof of origin in accordance with the provisions of the EVFTA Agreement.

The provisions of this Decree only apply to goods exported from Vietnam to the the United Kingdom of Great Britain and Northern Ireland and goods imported into Vietnam from the United Kingdom and Northern Ireland for the period from August 1, 2020, to the end of December 31, 2020.

This Decree takes effect from the date of signing.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have law firm in Hanoi, law firm in Ho Chi Minh City and law firm in Da Nang.

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How to Distinguish between Deposit and Advance Payment?

    

In commercial transactions, it is very common for one party to give the other party an amount of money before the contract being performed.

Should this amount be considered as deposit or advance payment?

Deposit is one of security measures for the performance of contract obligations. According to regulation of Civil Code 2015, deposit is an act whereby one party (hereinafter referred to as the depositor) gives to other party (hereinafter referred to as the depositary) a sum of money or precious metals, gemstones or other valuable things (hereinafter referred to as the deposited property) for a period of time as security for the entering into or performance of a contract.

Upon a contract being entered into or performed, any deposited property shall be returned to the depositor, or deducted from the amount of payment obligation. If the depositor refuses to enter into or perform the contract, the deposited property shall belong to the depositary. In case the depositary refuses to enter into or perform the contract, the depositary must return the deposited property and pay an amount equivalent to the value of the deposited property to the depositor, unless otherwise agreed.

It can be seen that the purpose of deposit is to ensure the entering into or performance of a contract. Due to the fact that its nature is a security measure for the performance of contract obligations, sanction is set in regulation of deposit in case one party refuses to perform the agreement.

In practice, the advance payment can be understood that the obligor pays the obligee a sum of money in advance and this amount is regarded as in-advance performance of a payment obligation. As the nature of the advance is not a security measure for the performance of contract obligations, there is no fine rising from the advance if one party refuses to perform the agreement. Further, when a contracting party gives to the other party a sum of money, which is not clearly identified by the parties as a deposit or an advance, such amount shall be considered an advance payment.

It is important to distinguish the difference between deposit and advance payment to avoid potential disputes in performance the contract or consult with dispute resolution lawyers at early stage of the dispute for proper actions.

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Receipt of Application for Anti-dumping Measures on Welding Materials From China, Thailand and Malaysia

    

On January 21th, 2021, Trade Remedies Authority of Vietnam (Investigating Authority) received Dossier from a company which is the representative of the domestic manufacturing (Requesting Party) requesting for the application of the anti-dumping measures on some types of welding materials originating from People’s Republic of China, Kingdom of Thailand and Malaysia.

On February 01st, 2021, Investigating Authority confirmed that Dossier was complete, valid according to regulations of law on trade remedies.

Within 45 days of the receipt of a complete, valid Dossier, the Investigating Authority shall examine the Dossier to submit to the Minister of Industry and Trade for consideration for conducting an investigation.

Contents of Dossier examination include: (i) Determine qualification of the legal representative of the domestic manufacturing of organization, individual that submitted the Dossier according to regulation of Law on Foreign Trade Management; (ii) Determine evidence on the dumping of imported goods that caused or threatened to cause significant injury to a domestic manufacturing or significantly prevent the formation of a domestic manufacturing.

Our international trade and competition lawyers at ANT Lawyers – a law firm in Vietnam will always follow the development from authorities to provide update to our clients.

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What Are Conditions for E-commerce Business in Vietnam?

     

E-commerce business in Vietnam is conditional business area

Currently, in the context of increasingly developing technology, online transactions are also taking place more often, quickly and conveniently, and the connection between buyers and sellers has become no longer a distance. But how to set up e-commerce business in Vietnam? E-commerce lawyer in Vietnam will share some ideas below on conditions to set up e-commerce business in Vietnam and other matters.

The number of enterprises doing their business in the field of e-commerce has increased significantly in recent years. Many foreign investors are also eyeing Vietnam for investment. The question is to how to set up e-commerce business in Vietnam taking advantage of the growing market and in the meantime recruiting technology talents from Vietnam for their e-commerce business which has the potential to tap on global market.

In Vietnam, e-commerce activity means conducting part or the whole of the process of commercial activity by electronic means connected to the Internet, mobile telecommunications network or other open networks.

The forms of organization of e-commerce activities includes:

Sales conducted thorough e-commerce website: It is an e-commerce website developed by traders, organizations or individuals by themselves to serve their commercial promotion, sales or service provision.

E-commerce service provision website: It is an e-commerce website developed by traders or organizations to provide an environment for other traders, organizations or individuals to conduct their commercial activities. The e-commerce service provision website includes: E-commerce trading floor; Online auction website; Online promotion website and other types of website as regulated by the Vietnam Ministry of Industry and Trade.

How to set up e-commerce business in Vietnam?

The Law on Investment in Vietnam stipulates that e-commerce business is one of the conditional business lines. Therefore, if an enterprise wishes to set up e-commerce company in Vietnam, register and conduct business activities in this field, it must meet the following conditions:

Traders, organizations and individuals wishing to set up sales e-commerce websites must be traders, organizations or individuals who have been granted personal tax identification numbers; Having websites with valid domain names and complying with regulations on management of information on the Internet and having notified the Ministry of Industry and Trade of the set-up of sales e-commerce websites.

In order to conduct business activities based on websites providing e-commerce services, traders and organizations need to be registered for business at a competent agency in accordance with law and have websites with valid domain names and complying with regulations on management of information on the Internet.

In addition, traders and organizations also need to have a service provision project which clearly states the following contents: (i) Model of organization of operations, including service provision, promotion and marketing both online and offline; (ii) Structure, utilities and main information sections on the service website; (iii) Rights and responsibilities of the trader or organization providing e-commerce services and service users.

Enterprises that wishes to do e-commerce business need to register to set up a website to provide e-commerce services and be certified by the Ministry of Industry and Trade to register in accordance with the law.

Further, the enterprises also have to apply for investment registration certificate and business registration certificate in Vietnam at the Department of Planning and Investment.

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How to Establish Company in Vietnam?

   

Foreign investors may invest in the form of 100% capital to establish company in Vietnam, being limited liability company, joint stock company, partnership company.

Foreign investors that invest in Vietnam for the first time must have investment projects and fill in investment registration or examination procedures at state agencies in charge of investment in order to be granted investment registration certificates. Investment certificates shall concurrently be business registration certificates. Company with 100% foreign capital has founded and operated from the date of issuance of the investment certificate.

A project dossier for establishing company in Vietnam shall comprise:

Registration/Request for issuance of Investment Certificate;

A report on financial capability of the investor;

Draft of the company’s charter;

List of members of company;

Copy of the people’s identity card, passport or other lawful personal certification, for individual members;

Copy of the establishment decision, business registration certificate or other equivalent document, for member organizations;

Copies of the authorization document, the people’s identity card, passport or other lawful personal certification, for authorized representatives.

Copies of the business registration certificates of the foreign member organizations must be authenticated within three months before the date of submission of the business registration dossier by agencies where such organizations are registered;

Written authorization of the investor in case investor is organization and valid copy of the lawful personal certification of the authorized representative. Documents in foreign languages must be translated into Vietnamese, notarized and legalized;

The joint-venture contract or Business Cooperation Contract (BCC);

Other documents required by Vietnam law.

The establishment of a company in Vietnam would take from 30 days. The extra time might be needed in case the investment area is conditional or the State government needs to examine the investment project. Minimum capital, special licenses or other conditions might be required in certain investment projects.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Attorneys in Hanoi, Attorneys in Ho Chi Minh and Attorneys in Danang.

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Whom is Exempted from Work Permit Since 2021?

    

On December 30, 2020, the Government issued Decree No. 152/2020/ND-CP regulating foreign workers working in Vietnam and recruiting and managing Vietnamese employees to work for the foreign employers in Vietnam.

In which, foreign workers in Vietnam are not required to be granted work permits include:

The employee is the owner or capital contributor of a limited liability company with a capital contribution of at least 3 billion VND; Chairman of the Board of Directors or a member of the Board of Directors of a joint stock company with a capital contribution of at least 3 billion VND;

Intra-corporate transferees within 11 service sectors in Vietnam’s service commitment schedule with the World Trade Organization, including: business services, communication services, construction services, distribution services, educational services, environmental services, financial services, health services, tourism services, recreational and cultural services, and transport services;

The person responsible for establishing a commercial presence;

The employee enters Vietnam to work as manager, executive, expert or technical worker for a working time of less than 30 days and not more than 3 times a year;

The employee who enters Vietnam for a period of less than 03 months to offer services;

The employee enters Vietnam for a period of less than 03 months to handle complicated incidents, technical or technological situations that affect or risk affecting production and business that Vietnamese experts and the foreign experts currently in Vietnam cannot handle it;

Foreign lawyer who has been granted a law practice license in Vietnam in accordance with the Law on Lawyers; The employee is licensed by the Ministry of Foreign Affairs to operate information and press in Vietnam in accordance with the law; The person certified by the Ministry of Education and Training to enter Vietnam for teaching and researching;

The employee enters Vietnam to provide professional and engineering consulting services or perform other tasks intended for research, formulation, appraisal, supervision, evaluation, management and execution of programs and projects using official development assistance (ODA) in accordance with regulations or agreement in international treaties on ODA signed between the competent authorities of Vietnam and foreign countries;

The employee is sent to Vietnam by competent foreign agency or organization to teach and research at international schools under the management of foreign diplomatic missions or the United Nations; establishment and organization established under the agreement which Vietnam has signed and acceded to;

The employee enters Vietnam to implement an international agreement to which a central or provincial authority is a signatory as per the law;

Person obtains an official passport to work for a regulatory agency, political organization, or socio-political organization;

Relatives of members of foreign representative missions in Vietnam;

In cases where the provisions of an international treaty to which the Socialist Republic of Vietnam is a signatory;

Head of representative office, project or is responsible for the activities of international organizations, foreign non-governmental organizations in Vietnam;

The employee is a volunteer;

The student studies at a foreign school or training institution which has a probation agreement with an agency, organization or enterprise in Vietnam; or a probationer or apprentice on a Vietnam sea-going ship;

The employee is a foreigner who marries a Vietnamese and lives in the territory of Vietnam.

This Decree takes effect from February 15, 2021.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Attorneys in Hanoi, Attorneys in Ho Chi Minh and Attorneys in Danang.

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