M&A transactions involving companies that are active in certain industries such as banking and finance, aviation or insurance may require the approval of their industry regulator. When state-owned assets or equity are sold, the approval of the relevant state bodies is required. In addition, the transaction may have to be conducted through a competitive method such as tender or bidding if the transaction assets are funded by 30 per cent or more or 500 billion Vietnam dong or more state capital.
Further, if the business combination involves offering of securities of a listed company by way of private placement of shares, the offering application must be filed with and approved by the securities authorities (ie, the State Securities Commission (SSC)), and additional listing application or filing with the relevant stock exchange may be required prior to the transaction.
A tender offer or proxy solicitation is also subject to a filing requirement with the SSC. Specifically, except for the exceptional cases listed in question 9, to file a tender offer application with the SSC the Law on Securities requires:
- an acquirer who wishes to acquire 25 per cent of the shares of the target company;
- a shareholder and related parties holding 25 per cent or more of the voting shares continuing a purchase of 10 per cent or more of the voting shares; or
- a shareholder and related parties holding 25 per cent or more of voting shares continuing the purchase of 5 per cent to less than 10 per cent of the voting shares in less than one year after the completion of a previous general tender offer
The process for conducting a tender offer includes three major steps as follows: (i) registering the tender offer application to the SSC; (ii) making a public announcement regarding the tender offer and conducting the tender offer; and (iii) reporting to the SSC. The application comprises the registration application, the shareholders’ or board’s resolutions of the purchaser regarding the tender offer and the shareholders’ resolutions of the target in the event it redeems its shares to reduce its charter capital (if any). Upon completion of the tender, the offeror must report the tender results to the SSC within five days. For the listing of companies after merger and consolidation, there are several conditions with regards to operation duration, number of profitable fiscal years, number of fiscal years of accrued loss, overdue debts and so on.
SSC approval is also required if a public target company is operating businesses that are subject to foreign ownership limit (FOL) and the potential transaction requires SSC FOL lift-up prior to closing. The publicly listed target may have to spin off or remove certain WTO unbound activities to obtain SSC approval for FOL lift-up, and this process usually involves foreign investment review approval. On the other hand, in some transactions, SSC approval for lock-up is necessary to ensure the foreign participation.
When publicly listed companies are acquired, if the transaction price is beyond the trading band at the time of the transaction, the off-band transaction shall be performed outside the stock exchange (off-market transaction) and be required to obtain prior approval from the SSC on a case-by-case basis. Upon approval from the SSC, an off-market transaction must be registered with and confirmed by the Vietnam Securities Depository before closing (ie, wiring of purchase price to selling shareholders’ bank account and the depositing of selling shares into the investor’s securities deposit account).
For cross-border business combinations, an application needs to be filed by the foreign investor or acquirer to the local foreign investment authority and subject to foreign investment review approvals. Upon the completion of a business combination or acquisition of a public company transaction, an application for registration needs to be filed with a local enterprise registration authority.
In certain circumstances, a business combination involving a Vietnamese company may be subject to the reporting requirements of the Vietnam Competition Authority (VCA). Under the Law on Competition and Law on Enterprises, if the parties to a business have a combined market share of between 30 per cent and 50 per cent in the relevant market they must notify the VCA before the proposed combination. The proposed combination can only be carried out after written confirmation has been received from the VCA that the combination is not prohibited. This will be issued within 45 days from the registration or sometimes up to 105 days for complicated cases of economic concentration. The combination shall be prohibited if the combined market share is above 50 per cent in the relevant market, subject to two following exemptions:
- where one or more of the parties participating in the economic concentration is or are at risk of being dissolved or of becoming bankrupt; or
- where the concentration has the effect of extension of export or contribution to socio-economic development or to technical and technological progress. These exemptions, however, are not automatically granted. The relevant parties must file with the VCA a request for an exemption for economic concentration.
Under the new Law on Competition 2018, the business concentration shall be prohibited if it has or likely has significant competition restricting impact on the Vietnamese market. This shall be judged by the State Competition Commission, based on the following:
- the combined market share of enterprises engaging in the economic concentration on the relevant market;
- the degree of concentration on the relevant market before and after the economic concentration;
- the relationship of the parties engaging in the economic concentration in the production, distribution or supply chain for a certain kind of good or service or the business lines of the parties engaging in the economic concentration that are inputs of or complementary to one another;
- the competitive advantage brought about by economic concentration in the relevant market;
- the ability of enterprises after the economic concentration for significantly increasing their prices or return on sales;
- the ability of enterprises after the economic concentration for removing or preventing other enterprises from market entry or expansion; and
- the particular factors in the sectors and domains where enterprises are engaging in economic concentration.
The parties to an economic concentration must report to the Competition Commission before proceeding the concentration if this is subject to a certain threshold, based on one of the following criteria:
- total assets of the enterprises engaging in the economic concentration on the Vietnamese market;
- total turnover of enterprises engaging in the economic concentration on the Vietnamese market;
- the transaction value of the economic concentration; and
- combined market share of enterprises engaging in the economic concentration on the relevant market.
In the case of a merger or consolidation, the investor must comply with the procedures under the Law on Enterprises regarding the liquidation of a company and the formation of a new company. These events must be registered with the business registration authority and the relevant authorities.
If the acquisition results in a shareholder directly or indirectly owning upwards of 5 per cent of a public company, then information about such shareholder shall be reported to the SSC, the stock exchange where the shares are listed within seven days.
A business combination may require a change to be made to the investment certificate or investment registration certificate or business registration certificate or enterprise registration certificate of the target company, or both. A government fee of about US$20 may be paid to register and compulsorily publicise such change with the National Business Registration Portal. In addition, the transaction will be subject to various Vietnamese taxes depending on the structure of the transaction, as further specified in question 18.
In addition, the fee for registering newly issued stock is about 5 million Vietnam dong, and in case the listed stock, which is required by law to exchange via the central stock exchange, is occasionally allowed to be transferred via an off-exchange transaction between parties, a fee of 0.1 per cent of the transaction value shall be charged when the buyer returns to the Vietnam Securities Deposit to register its ownership.
Back to top