From a legal perspective, M&A is a complex investment activity, related to many different issues such as securities law, corporate law, competition law ... Specify the applicable legal regulations for M&A activities in Vietnam and international commitments related to M&A, this article gives managers, investors and enterprises a more general view of this activity, thereby contributing to promote the development of the M&A market in Vietnam.

Legal provisions applicable to M&A activities in Vietnam

Laws in M&A activities are understood as a combination of legal regulations in many different legal fields, regulating social relations arising in the process of the parties conducting M&A activities. Accordingly, the law on enterprise M&A (DN) is specified in some of the following legal documents:

M&A in accordance with the Law on Enterprises

 The Law on Enterprises was passed by the National Assembly at the 8th session (Session XIII) on November 26, 2014 and took effect from July 1, 2015. The Law on Enterprises introduces the concept and sequence of procedures for merger, consolidation, and enterprise. The Law on Enterprises 2015 also considers M & A enterprises as a form of enterprise reorganization stemming from the needs of enterprises themselves. Although, there is no clear definition of M&A of enterprises, but the Law on Enterprises has specific provisions on M&A for each type of enterprise, specifically:

- Chapter 2, Article 18 (Right to establish, contribute capital, buy shares, buy capital contribution and manage enterprises) clearly states that organizations and individuals have the right to contribute capital, buy shares, buy contributed capital. Joint-stock companies, limited liability companies, partnerships, except for the following cases: State agencies, people’s armed forces units use state assets to contribute capital to enterprises to gain profits for agencies and units. yourself; Subjects are not allowed to contribute capital to enterprises in accordance with the law on cadres and civil servants.

- Chapter 3, for limited liability companies, Article 52 (Repurchase of stakes) and Article 53 (Transfer of stakes) specify a number of issues related to the transfer of stakes of the members. member company limited.

- Chapter 5, for joint stock companies, Article 125 (Sale of Shares) and Article 126 (Transfer of Shares) clearly indicate that the Board of Directors decides the time, method, and selling price of shares. The selling price of shares must not be lower than the market price at the time of offer, or the book value of shares at the most recent time, except in special cases. Article 126 (Transfer of Shares) also clearly states that shares of a joint stock company are free to be transferred. The transfer can be done by contract in the usual way or through trading on the stock market (stock market) ...

- Chapter 9 also specifies a number of issues such as: division of enterprises (Article 192), separation of enterprises (Article 193), consolidation (Article 194), procedures, dossiers and procedures for registration of merged enterprises. (Article 195).

M&A in accordance with the Law on Investment

 The Law on Investment was passed by the National Assembly at the 8 session (session XIII) on November 26, 2014, effective from July 1, 2015. The Law on Investment 2015 recognizes two forms of M&A, namely mergers and acquisitions of enterprises. M & A is considered to be one of the direct investment forms. The acquisition of an enterprise can be in the form of a partial or complete acquisition of an enterprise or a branch. Accordingly, investors have the right to contribute capital, buy shares and contribute capital to economic organizations (Article 24); Foreign investors may invest in the form of capital contribution, share purchase, or capital contribution to economic organizations (Articles 25 and 26).

M&A in accordance with the Competition Law

The Competition Law passed by the National Assembly at the 5th Session (Session XIV) on June 12, 2018, effective from July 1, 2019 regulates the forms of economic concentration, including: Merger of businesses; Enterprise consolidation; Acquisition of enterprises; Joint venture between enterprises; Other forms of economic concentration as provided for by law. In which, merger of enterprises means that one or several enterprises transfer all of their assets, rights, obligations and legitimate interests to another enterprise, and at the same time terminate the business operation or the existence of the enterprise. merger. Enterprise consolidation means that two or more enterprises transfer all their assets, rights, obligations and legitimate interests to form a new enterprise; at the same time, terminate business operations or the existence of consolidated enterprises.

Acquisition of a company means that a company directly or indirectly buys all or a portion of the contributed capital and assets of another enterprise to control and dominate an enterprise or a business line of an enterprise is acquired. Joint venture between enterprises is when two or more enterprises together contribute a part of their legal assets, rights, obligations and interests to form a new enterprise. Typically: Article 30 specifically mentions the forms of economic concentration that are prohibited when enterprises conduct economic concentration, causing or potentially causing anti-competitive effects on the Vietnamese market.

According to the provisions of the Competition Law, merger of enterprises, consolidation of enterprises and acquisitions of enterprises are acts of economic concentration, therefore, merger, consolidation, and acquisition of enterprises is prohibited in case of merger, consolidation and acquisitions of enterprises create the combined market share of enterprises participating in economic concentration, causing significant anti-competitive effects or effects on the Vietnamese market.

M&A in accordance with the Law on Securities

The Law on Securities passed by the National Assembly at the 8th session (session XIV) on November 26, 2019, effective from January 1, 2021, replaces the Law on Securities No. 70/2006 / QH11 and the Law on Securities. No. 62/2010 / QH12 amended to specify the division, separation, merger, and consolidation of securities companies and fund management companies must be approved by the State Securities Commission before implementation.

M & A in accordance with the Law on Credit Institutions

 The division, splitting, consolidation, and merger of credit institutions (CIs) must be approved by the State Bank and comply with Law No. 17/2017 / QH14 dated November 20, 2017 amending and supplementing. a number of articles of the Law on Credit Institutions and take effect from January 15, 2018.

Vietnam’s international commitments related to corporate M&A

Up to now, Vietnam has signed and joined many investment or investment-related agreements such as: Investment encouragement and protection agreements signed with over 50 countries; investment agreements / chapters within the framework of the FTA; Other commitments related to investment such as: Agreement on trade-related investment measures of the World Trade Organization (WTO), agreements on services in the WTO and FTAs, establishment of multilateral investment guarantee organizations, 1958 New York Convention on recognition and enforcement of foreign arbitral awards ... 

In general, Vietnam’s agreements and commitments related to M&A activities are expressed in the form of shareholding rates of foreign investors in Vietnamese enterprises, or expressed as commitments to allowing foreign investors to have commercial presence and penetrate in investment sectors and fields in Vietnam.

Commitments in GATS / WTO

Vietnam joined WTO with a commitment to open the market to foreign investors according to the roadmap. Since 2009, many service sectors have allowed foreign investors to engage in services such as architecture, market research, education, commodity distribution and advertising. This expansion is an opportunity for investment activities through the form of M&A. Some restrictions on share ownership with no term to remove such as:

Services related to forestry, hunting and agriculture: Joint venture or business cooperation contract is only allowed. Foreign capital contribution shall not exceed 51% of the legal capital of the joint venture.

- Telecommunication services without network infrastructure: Foreign capital contribution to the joint venture does not exceed 65% of the legal capital of the joint venture.

Commitment in the ASEAN region

Vietnam’s international commitments in the ASEAN region on M&A are mainly reflected in the Framework Agreement on the ASEAN Investment Area. One of the goals of the Agreement is to build an ASEAN Investment Area with a more open and clear investment environment among ASEAN member countries. Accordingly, Member States undertake to take appropriate measures to ensure transparency and consistency in the application and interpretation of laws, regulations and administrative procedures related to their investment. to create and maintain a predictable investment regime in ASEAN.

Agreement to encourage and protect investment

The investment encouragement and protection agreements that Vietnam has signed (with 54/55 countries) have relatively uniform content according to the model of the traditional investment promotion and protection agreements in the world.

International commitments on bilateral investment with a liberalizing element related to M&A

These commitments include the Agreement on the Promotion, Protection and Liberalization of Investment between Vietnam and Japan and in the Bilateral Trade Agreement between Vietnam and the United States. In addition to its commitment to investment protection, Vietnam also commits to the right of establishment for foreign investors. Both agreements use the opt-out method, that is, to make mutual commitments, and the Contracting Parties have the right to maintain or adopt measures that are inconsistent with these shared obligations and should list measures method in some appendices.

In Appendix H of the BTA Agreement, Vietnam commits to the United States to remove all restrictions on investment capital transfer. Accordingly, enterprises with 100% foreign investment capital are not required to give priority to the transfer to Vietnamese enterprises. In addition, Annex H also commits to allowing US investors to establish joint stock companies with foreign owned capital and easing restrictions on US investors’ equity ownership. According to BTA regulations, within 3 years from the date of entry into force of the Agreement, US investors are allowed to establish joint stock companies with foreign investment in Vietnam.

FTA has investment commitments

The FTAs ​​have investment commitments but Vietnam is not related to the M&A of enterprises. Foreign investors’ participation in capital contribution and share purchase in Vietnamese enterprises under this Agreement shall comply with the provisions of Vietnamese law.

M&A activities in Vietnam are mainly regulated in the Civil Code 2015, the Enterprise Law 2014, the Competition Law 2018, the Securities Law 2019, the Investment Law 2014 and are in line with international commitments. related to M&A activities to which Vietnam is a member. Due to the complex nature of M&A, the law on M&A not only regulates issues of ownership or management of target enterprises, but also refers to related issues such as: registration of change of enterprise owner, registration of M&A procedures, tax obligations, valuation of target enterprises, competition laws to control M&A activities.