Corporate M&A 2024 Comparisons

According to data from KPMG Vietnam, the total value of M&A transactions in Vietnam for the first ten months of 2023 has dropped by 23% compared to the same period in 2022 (first ten months of 2022: USD5.697 billion; first ten months of 2023: USD4.4 billion).

While the COVID-19 pandemic and its consequences, such as travel restrictions and strict lockdown, posed major challenges for M&A activities in 2021, such challenges have been phasing out with the gradual unwinding of said restrictions since 2022.

Major M&A deals in 2023 showed promise in finance, infrastructure development, real estate, medical service, and the domestic consumer industry. Some notable deals are listed below.

• SMBC, a Japanese consumer finance company, acquired a 15% stake in Vietnam Prosperity Joint Stock Commercial Bank (VPBank) for USD1.45 billion in 2021 after acquiring FE Credit.
• ESR Group Limited paid USD450 million for strategic shares of BW Industrial Development Joint Stock Company (BW Industrial), a leading Vietnamese industrial and logistics developer.
• For USD316 million, Gamuda Land (Malaysia) acquired 100% of Tam Luc Real Estate Group shares in Vietnam, with plans to build a USD1.1 billion complex project in Thu Duc City centre.
• Thomson Medical Group (Singapore) entered the Vietnamese medical sector by acquiring controlling shares in Viet Phap Hospital for USD380 million.
• The domestic consumer industry reached a milestone when Bain Capital invested USD200 million in Masan Group’s equity.

The following industries experienced significant M&A activities in the past 12 months, with their respective percentages in Vietnam’s total M&A value as follows.

• Finance: 47%
• Real estate: 23%
• Healthcare: 10%
• Non-essential consumer goods: 8%

During the COVID-19 pandemic, the tourism sectors were particularly affected. In 2020 and 2021, travel businesses were no longer able to maintain minimum operating conditions and opted to stop applying for new licences and having their licences revoked, and many of which ultimately closed down. Post-COVID-19, as a measure to cut loss, and as small-scale hotels and resorts are vulnerable to the circumstances, the number of M&A deals considerably increased; however the value of each individual transaction decreased compared to previous years.

There are several means for acquiring a company in Vietnam as follows.

Acquiring Private Companies

The acquiring party can either buy all of the target company’s equity shares from the owner, or buy the assets of the target company. The legal regulations focus on the licensing process for changing of ownership of the target asset.

Alternatively, another method is acquiring companies through business mergers. In practice, these are uncommon in Vietnam due to the complexity of the consolidation process between two businesses with different structures. The licensing procedures for conditional business are also frustrating in M&A.

Acquiring Listed Companies

Acquiring a listed company in Vietnam can be done through:

• tender offers (if subject to a mandatory threshold);
• buying the shares through negotiations;
• buying the shares through the stock exchange; and
• acquiring assets or business restructuring (merger, acquisition, or separation) – could be used, but uncommon.

Ministry of Planning and Investment (MPI): The MPI is mainly responsible for overseeing foreign investment in Vietnam, including M&A transactions. It reviews and approves foreign investment projects, ensures compliance with investment regulations, and facilitates the investment process.

Vietnam Competition and Consumer Authority of the Ministry of Industry and Trade (VCCA): The VCCA is responsible for enforcing competition laws in Vietnam, including reviewing M&A transactions for potential anti-competitive effects. It can investigate and take action against anti-competitive practices, including imposing fines and requiring divestitures.

State Securities Commission (SSC): The SSC is the primary regulator for M&A activities involving listed companies in Vietnam. It is responsible for approving and reviewing M&A transactions, ensuring compliance with relevant laws and regulations, and protecting the interests of investors.

Other relevant ministries and agencies: Depending on the specific industry or sector involved, other ministries and agencies may also be involved in regulating M&A activities. These may include the Ministry of Transport, the Ministry of Agriculture and Rural Development, and the State Bank of Vietnam, among others.

Prohibited sectors according to Article 6 of the 2020 Law on Investment stated, the following activities in Vietnam are banned (applies to both foreign and local companies). In particular, no company in Vietnam is permitted to perform:

• trading of narcotic substances;
• trading of hazardous chemicals and minerals;
• trading of specimens of wild flora and fauna;
• prostitution;
• human trafficking, trade in human tissues, corpses, human organs and human fetuses;
• human cloning;
• trading of fireworks; and
• provision of debt collection services.

Foreign investors are also subject to investment restrictions under specialised laws, and international conventions.

For instance, in the context of the WTO Commitments of which Vietnam is a signatory to the treaties therein, licensed activities can be broken down into four different categories for foreign investors seeking to enter Vietnam:

• Committed – foreign investors can own 100% of an enterprise according to the WTO Commitments.
• Restricted – ownership limits exist for foreign investment and other specific restrictions may apply.
• Unspecified – the sector is not mentioned in the WTO Commitments detailing whether it is committed for foreign investors or uncommitted for foreign investors, therefore it will require ministerial approval and potentially additional licensing procedures and conditions.
• Uncommitted – the sector is mentioned in the WTO Commitments as uncommitted for foreign investors, requiring Ministerial Approval and potentially additional licensing procedures and conditions.

In Vietnam, business combinations are primarily governed by the 2018 Law on Competition and its guiding sub-law documents, namely Decree No. 35/2020/ND-CP. In M&A, these regulations aim to control M&A transactions that might cause significant anti-competitive effects on the Vietnam market throughout the merger control regulation, detailed briefly below.

• Mandatory filing – transactions exceeding certain thresholds (based on turnover, market share, or asset value) require mandatory filing with the Vietnam Competition and Consumer Authority of the Ministry of Industry and Trade (VCCA) for review.
• Review criteria – the VCCA assesses whether the transaction is likely to significantly restrict competition in any relevant market in Vietnam. This includes factors such as:
1. market structure, share, and concentration;
2. entry barriers and potential for competition;
3. competitive advantages; and
4. efficiency gains and potential consumer benefits.

• Outcomes – the VCCA may (in case of an official assessment was carried out):
1. approve the combinations without conditions;
2. approve with conditions to mitigate competition concerns, such as divesting assets or imposing behavioural restrictions; and
3. prohibit the combinations if it is deemed to be significantly harmful to competition.

Key labour issues:

• Employment contracts – acquirers should review the employment contracts of the target company’s employees to ensure compliance with labour laws and to identify any potential liabilities.
• Transfer of employees – in the event of a merger or acquisition, the employees of the target company will be transferred to the acquirer. Acquirers should ensure that the transfer process is conducted in accordance with labour laws and that the employees’ rights are protected.
• Social insurance and benefits – acquirers should ensure that the target company is in compliance with social insurance regulations and that employees are receiving the required benefits.
• Trade unions – acquirers should be aware of the role of trade unions in Vietnam and should engage with them in a constructive manner.
• Collective bargaining agreements – acquirers should be aware of any collective bargaining agreements that are in place at the target company and should ensure that they are respected.

Penalties for non-compliance:

• Violations of labour laws can result in fines, administrative penalties, and even criminal liability for the employer.
• Failure to comply with social insurance regulations can result in fines and additional social insurance contributions.
• In addition to the above, acquirers should also be aware of the following recent developments in labour law in Vietnam:
1. The 2019 Labour Code introduced a number of new provisions, including the right to strike and the right to collective bargaining.
2. The government has been gradually increasing the minimum wage in Vietnam.
3. The government has been promoting the development of trade unions in Vietnam.

These developments reflect the government’s commitment to protecting the rights of workers and improving labour relations in Vietnam.

Until now, apart from the specific provisions concerning conditional or restricted investment sectors explicitly listed in Appendix IV of the 2020 Law on Investment and Vietnam’s commitments under the World Trade Organization (WTO) agreement on trade and services, there has yet to be any publicly available documentation providing an overarching concept, evaluation criteria, or a review process regarding the assessment of the impact on national defence and security when scrutinising investment projects or evaluating and approving capital contributions, equity acquisitions, or project transfers.

However, the ensuring of security and national defence within the investment sphere is delineated by various regulations:

• Sectors of investment and business operations subject to conditions as stipulated in Article 7 and Appendix IV of the 2020 Law on Investment, Articles 11 and 12 of Decree No. 31/2021/ND-CP.
• Investment regulations pertaining to capital contribution, share purchase, and contribution purchase as per Article 24 and Article 26 of the 2020 Law on Investment.
• Provisions concerning the approval of investment principles for foreign investment projects conducted in areas that could potentially impact national security and defence per Articles 29, 32, and 36 of the 2020 Law on Investment.
• Regulations empowering competent state agencies to suspend investment activities if the investment project poses a risk of detriment to national security and defence according to Article 47 of the 2020 Law on Investment.

The most significant legal development in Vietnam in the past three years related to M&A is the adoption of the 2020 Law on Investment (effective since 1 January 2021) (LOI), most notably the provisions relating to “national security” for inward investments.

Under Article 26.2.c of the LOI, foreign investors have to go through registration proceedings for the contribution of capital, purchase of shares or stakes of an economic organisation prior to the change of members or shareholders – should the said economic organisation have any land title ownership in any of the following areas:

• an island;
• a commune at the international border or coastal area; and
• other places that have an affect on national defence and security.

Additionally, Article 24.2.b of the LOI also dictates that foreign investments made through contribution of capital, purchase of shares or stakes of economic organisations must not pose a threat to national defence and security.

While the requirement set out in Article 26.2.c is relatively clear on what needs to be done, the obligation provisioned in Article 24.2.b has no specific instructions or proceedings on how the foreign investors or the local authorities can ensure that the investments do not pose a threat to national defence and security, thus the only logical and practical way for the investors and the local authority to do is to rely on the individual opinions of the Ministry of Foreign Affairs, Ministry of National Defence, and the Ministry of Public Security, or perhaps their Department-level counterparts – all of which can be very time-consuming, possibly causing great damage to parties in the M&A deals, negatively affecting the attraction of foreign investments. In the worst case scenario, under Article 47.3 of the LOI, the Prime Minister has the power to suspend an investment project should the project pose or potentially pose a threat to national security and defence by proposal of the Ministry of Planning and Investment.

While there have not been any significant changes to takeover law in the past 12 months, nor is there any takeover legislation under review in a way that could result in significant changes in the coming 12 months, there are signs of the government actively working on legal mechanisms and solutions in order to improve the M&A environment, especially during this period over which many businesses may require a takeover, and M&A in general, in order to survive.

In Vietnam, it is not common to build a stake in the target prior to launching an offer. However, as shareholders with a certain percentage specified under the by-laws (charter) may have the right to summon the Board of Directors (BOD), appoint directors, or summon the shareholders of the company targeted for acquisition, the acquirers may build a minimum stake which gives them the above-mentioned rights to help them find it easier to launch an offer.

Building a stake in a private company will depend on the agreement with the existing shareholders. For a listed company, the acquirer may build a stake by reaching a negotiated agreement with the controlling shareholders or they can increase its ownership by engaging in block trading on the secondary market through the stock exchange’s trading system.

Material Shareholding Disclosure Thresholds

According to Article 118.1 (points e, g, i) of the 2019 Law on Securities (LOS), the material shareholding disclosure thresholds are as follows:

• (i) Major shareholders, and groups of related persons holding at least 5% of voting shares of a listed company.
• (ii) Investors, and groups of related persons holding at least 5% of fund certificates of a closed-end fund.
• (iii) Groups of related foreign investors holding at least 5% of voting shares of one issuer or at least 5% of fund certificates of a closed-end fund.
• (iv) Founding shareholders during the transfer restriction period of a listed company or listed securities investment company.

Filing Obligations

Groups (i), (ii) and (iii)

Under Article 127 of the LOS, the filing obligations of groups (i), (ii), and (iii) are as follows:

• (a) Organisations, individuals, groups of related persons, groups of related foreign investors shall disclose information when they become or are no longer major shareholders of a listed company or listed securities investment company.
• (b) Organisations, individuals, groups of related persons, groups of related foreign investors that are major shareholders shall disclose information every time their holdings vary by more than 1% of voting shares of the listed company or listed securities investment company.
• (c) Investors, groups of related persons, groups of related foreign investors shall disclose information when the amount of closed-end fund certificates they are holding reaches or falls below 5%.
• (d) Investors, groups of related persons, groups of related foreign investors holding at least 5% of fund certificates of a closed-end fund shall disclose information every time their holdings of closed-end fund certificates vary by 1%.

Filing obligations in points (a) and (b) do not apply in the following cases:

• changes in the holding of voting shares when the listed company repurchases its own shares or issues additional shares;
• swap transactions in exchange-traded funds (ETF); and
• other cases prescribed by law.

Group (iv)

Under Article 32 of Circular 96/2020/TT-BTC of the Ministry of Finance, group (iv) has the filing obligation when conducting securities transactions as follows:

• At least three working days before the transaction date, founding shareholders that hold shares restricted from transfer as prescribed by the Law on Enterprises shall submit reports on their transactions, made according to the form in Appendix XI enclosed within the Circular, to the State Securities Commission (SSC), the Stock Exchange (SE) (if shares are listed/registered), the Vietnam Securities Depository and Clearing Corporation (VSDCC), listed companies and securities investment fund management companies. If shares are transferred to persons other than founding shareholders, the transferor must submit the resolution of the General Meeting of Shareholder (GMS) on ratification of such transfer.
• Within five working days from the transaction completion date (if the transaction is completed before the registered deadline) or from the end of the estimated transaction time limit, founding shareholders shall submit reports on trading results, made according to the form in Appendix XII enclosed within the Circular, and explanations about failure to conduct transaction or to trade in entire trading volume as registered (if any) to the SSC, the SE (if shares are listed/registered), the VSDCC, listed companies and securities investment fund management companies.

If the reporting thresholds are regulated by specific laws, a company cannot set different reporting thresholds for filing or disclosure of such thresholds. Otherwise, the target company is free to set higher or lower reporting thresholds by its by-laws (ie, charter).

A foreign ownership limit (FOL) is a major hurdle for stakebuilding for a foreign company/individual to acquire a Vietnam company.

The FOL is provided under the WTO Commitments or Vietnamese regulations for specific businesses, which governs the list of business lines accessible to foreign investors, the percentage that a foreign company/individual can acquire a Vietnamese company.

In Vietnam, as of August 2017, derivatives were officially allowed to operate and were introduced for trading in the form of futures contracts. The two most common futures contract products currently are the VN30 index futures contract and the government bond futures contract.

The obligation to report and disclose information on derivative securities by the Securities Depository Centre is stipulated in Article 27 of Circular No 58/2021/TT-BTC guiding the implementation of Decree No 158/2020/ND-CP on derivative securities and the derivative securities market issued by the Ministry of Finance. Accordingly:

1. Periodically, the relevant entities must report to the SSC as follows:

• derivative trading organisations shall provide the SSC with physical or electronic reports on their derivative trading;
• commercial banks and foreign bank branches that are special trading members shall provide the SSC with physical or electronic reports on their derivative transactions;
• settlement banks shall provide the SSC with physical or electronic reports on their cash settlement for derivative transactions, and their fulfilment of requirements for a settlement bank; and
• clearing members that are commercial banks or foreign bank branches shall provide the SSC with physical or electronic reports on their fulfilment of requirements for provision of clearing and settlement services.

2. Derivative trading organisations, clearing and settlement service providers, trading members, special trading members, market makers, and clearing members are required to submit physical or electronic reports to the SSC within 24 hours from the occurrence of any of the following events:

• a clearing member is replaced;
• the trading system (for receiving and placing trading orders) malfunctions;
• the clearing member that is a commercial bank or foreign bank branch no longer meets one of the requirements for the provision of clearing and settlement services;
• the charter capital or the owner’s equity of the clearing member is reduced by more than 10% compared to those specified in their audited annual financial statements or reviewed half-year financial statements or financial statements of the latest quarter; and
• the clearing member’s debt-to-equity ratio is greater than 5.

3. Settlement banks are required to submit physical or electronic reports to the SSC and the Vietnam Securities Depository and Clearing Corporation (VSDCC) immediately when their cash settlement for derivative transactions is interrupted.

4. Settlement banks are required to submit physical or electronic reports to the SSC within 24 hours from the time they fail to meet one of the eligibility requirements for settlement banks.

5. The Vietnam Stock Exchange and Hanoi Stock Exchange are required to submit physical reports to the SSC within 24 hours from the occurrence of any of the following events:

• the derivative trading system malfunctions or there is any sign of abnormality in derivative transactions;
• they decide to suspend derivative trading or market-making activities or cancel membership of a trading member, a special trading member or a market maker; and
• they provide information for competent authorities according to regulations on the provision of confidential information.

6. The VSDCC shall submit reports to the SSC within 24 hours from the occurrence of any of the following events:

• a clearing member is incapable of settling derivative transactions;
• clearing and settlement activities of a clearing member are suspended or membership of a clearing member is cancelled; and
• the VSDCC provides information for competent authorities according to regulations on provision of confidential information.

See 4.2 Material Shareholding Disclosure Threshold.

In Vietnam, for listed companies, shareholders with beneficial ownership of more than 5% of the outstanding shares or who want to acquire a particular number of the target company’s voting stocks are required to disclose the purpose of their acquisition and their intention regarding control of the company.

For listed companies, the bidder is required to disclose the offer to the SSC, the target company/the target investment fund management company (Article 86 of Decree No 155/2020/ND-CP). After receiving the proposed transaction, the target company that is a listed company must disclose the transaction.

The timing of disclosure for listed companies is normally in line with the legal requirements. For private companies, the deal is often disclosed after closing or after signing definite agreements.

The scope of due diligence normally includes legal status, financial status, licenses and approvals of business activities, ownership of assets, employments, tax, operation, liabilities, and materials agreements. The due diligence process is crucial as:

• it helps the buyer minimise potential risks that may arise during the transaction process;
• legal assessment enables the buyer to gain a competitive advantage, maximising the deal’s value by positioning itself strategically in the transaction; and
• it facilitates negotiating for a lower price.

During COVID-19, there have been no significant changes to the scope and process of due diligence, other than the transition to remote access for facilities and virtual meetings instead of on-site visits or in-person interviews because of the pandemic.

Exclusivity provisions are quite common in M&A deals in Vietnam due to their capability to protect the bidders from other potential buyers and for the seller to promptly reach an agreement and expedite the due diligence process. On the other hand, standstills are not common in Vietnam. For example, among other reasons, in cases of foreign investments, standstills may not be necessary if the bidder is already restricted by the law in the amount of shares it can acquire.

In accordance with the provisions of the law, it is common practice to document the terms and conditions of a tender offer into a definitive agreement.

According to Article 82.1 of Decree 155/2020/ND-CP, the rules for tender offer dictate that:

• the tender offer shall ensure fairness among shareholders of the target company and investors of the investment fund; and
• the tender offer parties shall be provided with adequate information to decide their purchase of shares/closed-end fund certificates.

Pursuant to Article 85 of Decree 155/2020/ND-CP, a tender offer being paid in money has to fill the Tender Offer Registration Form (Form 23), and the Information Disclosure Sheet (Form 24); in case of a tender offer being paid with shares, the bidder must fill out Application for Issuance of Shares for Tender Offer by a Listed Company (Form 12) as instructed in Article 54 of said Decree.

In both cases, Forms 12, 23 and 24 all require the relevant and basic terms and conditions of the deal to be filled. As these forms are the basis for the tender offer to uphold the rules of tender offer provided, the terms and conditions of the definitive agreements must follow what was filled in these forms.

Thus, it can be said that it is mandatory by law to document the terms and conditions for a tender offer in a definitive agreement.

The timeline for acquiring or selling a business can vary substantially depending on several factors, such as the target company’s listed or private status, the size and type of assets/shares, the target company’s listed or private status, the level of due diligence needed, and the time required to secure regulatory approvals.

The process of closing the deal was significantly affected by the government’s restricted measures implemented during the COVID-19 pandemic, which delayed the process, especially the licensing procedures related to the deal.

In Vietnam, there are mandatory offer thresholds in three different circumstances.

Pursuant to Article 35.1.(a) and Article 35.1.(b) of the LOS, it is mandatory for a tender offer to be made by any investor and its related persons (except investment funds and funds management companies) in the following cases:

• intention to purchase of circulating voting shares by said entities with no or less than 25% shareholding, which results in the direct or indirect ownership of 25% or more of the total voting shares of the company targeted for acquisition;
• intention to purchase of circulating voting shares by said entities with pre-existing 25% or more shareholding, which results in the direct or indirect ownership reaching or exceeding the 35%, 45%, 55%, 65%, and 75% thresholds of the total voting shares of the target company; and
• after a tender offer, if said entities have acquired 80% or more of the total voting shares of a listed company or outstanding fund certificates of a closed-end fund then it is mandatory to purchase the shares or fund being held by the remaining shareholders, unless all voting shares or outstanding fund have been bid for.

The exceptions to said circumstances are as follows, pursuant to Article 35.2 of the LOS:

• the purchase of shares or closed-end fund certificates results in the holdings specified above is due to an issuance plan approved by the General Meeting of Shareholders of the listed company or the representative board of the closed-end fund;
• the acquisition of voting shares or outstanding closed-end fund certificates results in the holdings specified above as approved by the General Meeting of Shareholders of the listed company or the representative board of the closed-end fund;
• the transfer of shares between groups of companies, including business corporations, general companies, parent companies, and subsidiaries does not result in cross-ownership defined by the LOE;
• shares are acquired through auction of publicly offered securities or offering upon transfer of state capital or a state-owned enterprise’s stakes in another enterprise;
• shares are acquired through division, acquisition or consolidation of enterprises;
• giveaway, inheritance of shares or closed-end fund certificates; and
• transfer of shares or closed-end fund certificates under an effective court judgment, court decision or arbitral decision.

Cash is more commonly used than shares. In some cases, payment is provided partially in shares. Earn-out and price adjustment are the most commonly used tools to bridge the value gap in case of high valuation uncertainty.

Common conditions for a takeover offer are:

• the terms and conditions of the offer apply equally to all of the targeted acquisition’s shareholders;
• the shareholders have full rights to sell their shares;
• no material adverse change has occurred to the targeted acquisition’s business; and
• regulatory approvals.

Offer conditions are not restricted as long as the conditions do not violate the applicable laws.

Bidders often set the minimum acceptance conditions for tender offers at a material shareholding threshold, to ensure their rights and solid standing in the target company. The exception to this is the foreign ownership limits for certain industries (such as those prescribed in Vietnam’s Schedule of Specific Commitments in Services).

No specific regulations govern private transactions. During leveraged transactions, sellers typically request commitment letters and evaluate the buyer’s balance sheet. Prior to moving forward with a public takeover bid, the bidder must confirm that they possess the financial capability to meet their commitments to shareholders who agree to the offer. To receive a cash offer, bidders need to provide proof of sufficient funds by getting confirmation from a credit institution, typically a bank.

When acquiring a listed company, a bidder can consider various deal protections, such as:

• break-up fees against the bidder if they terminated the deal without justified reason;
• provisions that restrict the targeted company’s board from seeking other offers;
• in cases such as when a board does not want to continue the deal, a provision that requires the targeted company’s board to secure shareholders’ approval concerning the transaction could be applied; and
• acquiring a bank’s guarantee.

For private transactions, to manage the risk from the outset of the acquisition process, the bidders could make agreements directly with the shareholders to secure solid approval for the transaction.

For the changes in managing pandemic risk, see 10.3 “Broken-Deal” Disputes.

For listed companies, more often than not, it is challenging to get extra governance rights beyond those relevant to ownership of shares. For such cases, a bidder should consider negotiating with other shareholders for extra influence.

A buyer with a minority stake in a privately owned company may have more discretion to seek further governance rights, depending on the company’s ownership structure, such as veto rights over certain crucial decisions, information rights to get regular financial and operational reports, or to request further information, and drag-along rights to increase transferability and compel other shareholders to join in a sale.

The right of shareholders to exercise proxy voting in a company, unless restricted by the company’s by-laws, is unrestricted in Vietnam. To be authorised to vote by proxy, shareholders are required to present a duly registered power of attorney. The power of attorney can be revoked at any moment without prior notice.

Under Article 35.1.(c) of the Law on Securities, bidders who have just gained 80% or more of the target’s voting shares from a tender offer must buy out the remaining shares of the minority shareholders (whether the minorities conform to the successful tender offer or not).

It is common practice to ask the principal shareholders of a target company to agree to tender their shares in a possible tender offer. This aims to ensure that the buyer can successfully complete the acquisition. Getting agreement or confirmation from the principal shareholders will help to ensure their dedication before making the announcement.

In the commitment agreement, a clause shall request the principal shareholder to decline offering shares if a rival bid at a higher price is made. Subject to the negotiation and agreement between the parties, a clause shall state a request to the principal shareholders to decline or not seek out a better rival bid, preventing them from opting out of the deal.

There is no obligation to publish a bid, except for the specific cases subject to a tender offer applied for a listed company specified in Article 35.1 of the LOS (see 6.2 Mandatory Offer Threshold).

The bidder must register for the proposed public tender offer with the SSC. The SSC has 15 working days to review the dossier, and if it is full and valid, the SSC will publish it on its website upon receipt. Within three working days from the receipt of the public tender offer registration dossier, the target company must disclose the information on its website.

Many types of disclosure depend on the type of shares issuance governed by the LOS, and Decree No 155/2020/ND-CP.

Some Typical Disclosures

• issuance of new shares;
• tender offer;
• share acquisition worth 15% or more of the buyer’s total asset value;
• share acquisition leads to the target becoming the buyer’s subsidiary or affiliate;
• change of voting shares; and
• major shareholders.

It is required that the bidders provide audited financial statements from the two most recent years. Financial statements that are provided by bidders are expected to conform with the Vietnam accounting standard (VAS). The application of the IFRS is in the voluntary period from 2022 to 2025. From 2025, the IFRS is required to be applied in Vietnam.

The disclosure is only required to have the key information of the transaction; ie, full disclosure is not mandatory.

Under the Law on Enterprises (LOE), the BOD of the target company owns the fiduciary duty to the company and its shareholders rather than the other stakeholders. Therefore, the BOD of the target company is required to act in the best interests of the company and shareholders, but is only required to treat each potential acquirer fairly, and refrain from unjustly impeding a takeover. The BOD is responsible for conducting research, evaluating the offer, engaging relevant experts for transaction support, and presenting proposals to the shareholders. During the transaction, the target company’s BOD must seek shareholders’ approval for any significant decisions.

It is not a common practice for BOD to establish special committees to evaluate potential company acquisitions. An independent committee is usually established when a scenario occurs in which the majority of competing directors, management, or a controlling shareholder are involved in a transaction. It’s important to show the existence of a special or ad hoc committee made up of impartial and independent directors in certain situations, ensuring that the directors have fulfilled their fiduciary duty which involves reviewing and authorising the transaction.

The doctrine “business judgement rule” is not recognised under the court system of Vietnam. However, during the takeover situations, the BOD, as always, owns fiduciary duties to the company targeted for acquisition and shareholders which means they must act on an informed basis, in good faith and in the honest belief in the best interest of the company and shareholders.

In a business combination, it is common for the directors to refer to external experts in law, finance, assets evaluation, and taxes to ensure transparency, compliance, and smooth transactions.

Conflicts of interest of directors, managers, shareholders or their related persons are subject to scrutiny in Vietnamese jurisdictions. They are obligated to disclose their related persons and related interests.

Any related party transaction is subject to the scrutiny of either the BOM or the GSM, depending on the transaction value. The related person is not allowed to vote for the approval on such transaction to ensure that the transaction is conducted fairly and impartially for all parties involved.

Hostile tender offers to take over companies are not regulated in Vietnamese law, and rarely occur in practice. Usually, a listed company in Vietnam is controlled by a limited group of shareholders, who hold significant authority regarding M&A deals.

In Vietnam, shareholder meetings are the major focus of both the law and practice pertaining to corporate governance. When it comes to responding to public takeover efforts, the authority and flexibility of BOD are very limited. Hence, it is not particularly customary for the BOD to use defensive measures in takeover situations.

Hostile takeovers remain relatively rare in Vietnam. Accordingly, it appears that Vietnam has not yet fully implemented advanced defensive measures against takeovers.

See 9.3 Common Defensive Measures.

However, in general, directors have fiduciary duties to the company and shareholders, which necessitate acting honestly and in the best interests of the company and shareholders (see 8.1 Principal Directors’ Duties).

See 9.4 Directors’ Duties.

The practice of “just say no” is acceptable as long as it serves the best interest of the company and shareholders.

In Vietnam, litigation in connection with M&A is fairly common and has tended to increase in recent years. Some common issues that lead to dispute settlement by litigation are:

• settlement of the target company’s liabilities to third parties before, during, and after the M&A transaction;
• non-transparency or misrepresentation of the target company’s, among other things, value, financial status, ongoing liabilities and/or disputes;
• price valuation; and
• payment obligation during the implementation of the M&A transaction.

Litigation is more likely brought from the performance stage onwards (after signing relevant agreements) of the M&A transaction. This pattern could be contributed by, among other things, the following reasons:

• the parties understand or interpret certain term(s) differently, to each one’s advantage, while performing the transaction concerning such term(s);
• certain relevant aspects of the M&A transaction are subject to change in reality (eg, condition precedent, representation, etc) which leads to the situation where a party does not want to continue the transaction; and
• decisions made by the authorities, which the parties cannot control, that adversely affect the transaction.

The heavy impact of the COVID-19 pandemic has caused the parties to M&A deals to carefully consider some terms when drafting the agreements, namely:

• the definition/scope, and interpretation of “force majeure” and MAC (material adverse changes) clause;
• adding/detailing the conduct of each party when the contract performance is put into a halt;
• more leisure for the contract amendment clause, giving the parties opportunities to appropriately adjust the contract terms when needed; and
• situations and conditions for the bidders to walk away from the deal.

Shareholder activism is not common in Vietnam. There are two main reasons:

First, the Vietnamese stock market is in its early stages of growth and there is still a lack of established shareholder rights activities. Currently, the market is missing a comprehensive investor base with limited professional institutional investors, leading to a lack of guidance in this sector.

In addition, shareholders, especially small shareholders, are often unaware of their rights. Investors typically engage in small-scale and short-term investment activities, often speculating on price increases rather than implementing long-term and professional strategies. There is a lack of awareness and concern among many shareholders when their rights are infringed upon.

See 11.1 Shareholder Activism.

See 11.1 Shareholder Activism.