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VILAF is a leader in Vietnam in cross-border mergers, acquisitions, divestment, spin‑offs and joint ventures. Our corporate/M&A practice, having a team of more than 50 lawyers and legal advisors, has consistently been ranked as a first-tier law firm for Corporate/M&A practice by numerous international prestigious editorials, including IFLR1000, Chambers and Partners, the Legal 500, asialaw and ALB.

Many of our firm’s lawyers, including myself as a Senior Partner of the firm, have been educated or trained in well-known law schools in the US, Great Britain, Australia, France and India, and have longstanding experience working with leading international law firms serving many clients in high-profile transactions, including corporate and M&A deals.

The Vietnamese law system shares characteristics with the civil law regime, which is primarily based on the written laws and rulings adopted or issued by levels of State authorities without availability and application of a sophisticated system of court case precedents like those in common-law jurisdictions. In recent years, a number of court case precedents have been selected and published by the Council of Justices of the Vietnam Supreme Court for the purposes of research and use as reference in dispute settlement; however, such precedents are in the early stages of development, and are less significant in the practice of business and corporate law.

The key corporate legislation in Vietnam is the Law on Enterprises 2020 (as amended) and its implementing decrees and circulars. Furthermore, the Law on Investment 2020 (together with its implementing decree and circulars) and relevant branch laws (e.g. insurance business law, education law, real estate business law, securities law or credit institution law) could be referred as the case may be. With respect to public and listed companies, the Securities Law 2019 (together with its implementing decree and circulars from the Government and State Securities Commission) are the most related legislation.

Vietnam is luring in FDI for both greenfield projects and M&A activities, and so we have been engaged by foreign investors (and domestic ones in some cases) in their projects in Vietnam, advising them on market access and investment structuring, drafting and negotiating joint venture agreements, shareholders’ agreements, drafting contracts and advising legal issues arising out of their operation in Vietnam – as well as assisting with the relevant licensing procedures for obtaining regulatory approvals as required by the Vietnamese law. These types of work will likely be brought more into Vietnam by our clients in the future, particularly after the COVID-19 pandemic has almost been controlled in the country.

We have recently been engaged in some large-scale M&A transactions in the power sector, real estate and packaging, international IPOs of multinational conglomerates involving their subsidiaries in Vietnam, some joint ventures in unprecedented service sectors, financing a number of renewable or “green” energy projects in Vietnam, as well as the restructuring of loans of foreign-invested companies, among other work.

COVID-19 has, to a certain extent, had an impact on the M&A market due to foreign investors’ inability to enter the country to survey the investment landscape of Vietnam, and the financial constraints caused by the pandemic. Nonetheless, it is unlikely that these issues could detrimentally jeopardise the development of the M&A market in Vietnam. Statistically, in 2021, despite the pandemic, foreign investment into Vietnam – including investment in M&A activities – still grew by 9.2% compared to 2020, reaching USD 31.15 billion. Particularly, on the M&A market, the first ten months of 2021 attracted USD 8.8 billion in investment, which was 17.9% higher than 2020 and 13.7% higher than 2019 (pre-COVID).

Presuming that the restrictive tensions from the pandemic are eased by the Government, 2022 and afterwards could prove to be a period of resilience and recovery for Vietnam.

While Vietnam remains an attractive and promising M&A market in the region – successful in controlling inflation and maintaining its good GDP growth – there are various driving factors that could potentially affect M&A transactions. One of the most challenging factors is the complicated Vietnamese law regime. For example, many existing M&A transactions in the power and renewable energy sector are still awaiting the National Power Development Plan VIII (for the period up to 2030, with a vision to 2045); particularly the new tariff calculation mechanism, which has been delayed at the Government-level for a while. Meanwhile, tax rulings may become problematic, given the differing interpretations by State authorities, and issues still remain with the purchase price currency, as well as payment account and closing procedure in M&A deals. Market accession against foreign investors in certain business sectors (e.g. pharmacy distribution, in-land transportation, logistics or telecommunication) also raise concerns from investors.

Depending on the different tastes of foreign investors and the targets of inbound investment cash flows, we would say that M&A relating to manufacturing, real estate development, retail distribution, renewable energy, technology, financial credit and payment services, logistics, etc., are on an up-trend in the market. Manufacturing has partly been moved from China and other ASEAN countries to Vietnam to take advantages of low land rental, tax incentives and the young and more reasonable cost of hiring a labour force. Elsewhere, real estate and retail distribution are attractive due to the population of almost 100 million and increased GPD per capita; and renewable energy is proving interesting, particularly after Vietnam’s commitment in the 26th UN Climate Change Conference of the Parties (COP26).

A significant percentage of our M&A client portfolio is composed of foreign investors, comprising multinational corporations, investment bankers or private equities – coming from the US, the UK, Europe, Japan, China, Korea, Thailand, Singapore and other countries in ASEAN region.

Given the complex nature of the Vietnamese laws, an investor or a company is advised to engage Vietnamese legal counsel at an early stage of their business or investment plan to avoid non-compliance or mistakes that would create added difficulty – or eventually, and potentially, prove costly in settlement.

Yes, our firm’s lawyers have been active in participating in networking events, including attending conferences and business forums, and providing legal alerts and/or legal magazine articles on a regular basis.

In recent years, there have been changes affecting various fields of laws, e.g., the Law on Investment 2020, the Law on Enterprises 2020, the Competition Law 2018, the Law on Securities 2019, the Labor Code 2019, etc., which have created a “fair” and friendlier investment environment for foreign investors, effectively making the Vietnamese M&A market more attractive. For example, instead of the old “positive list” approach, under which authorities had a wide discretion in deciding market-entry conditions, the new Law on Investment 2020 and Decree 31/2021 have adopted the new “negative list” approach. Under this new approach, except for a few business lines that are listed in Decree 31/2021, foreign investors would be subject to the same business conditions as domestic investors, effectively simplifying the investment process for foreign entities.

Another trend concerns the increasing awareness of merger-filing issues for any M&A transaction, taking into account the new merger-filing criteria and thresholds imposed by the Competition Law 2018 and its implementing Decree 35/2020. Furthermore, new data security decree No. 53/2022, as taking effect on 1 Oct 2022, would impose, among other specifications, the localised data storage obligation to a number of service providers in Vietnam – including technology companies as well as telecommunication operators and data storage providers.

The energy sector, particularly renewable energy, will develop after the National Power Development Plan VIII (for the period up 2030, with a vision to 2045) is approved by the Prime Minister; real estate, consumption goods and payment service, as well as F&B sectors, will also be developed given the population of around 100 million and given the political stability of the country. In addition, IPOs, project finance and international bond offerings will develop to attract capital into Vietnam. These would be the features of corporate and M&A activities in Vietnam in the years to come.

International Corporate / M&A - Vietnam

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Anh Dang

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