PRINT THIS PAGE Guide to Mergers & Acquisitions: Vietnam02/08/2006. Source: Baker & McKenzie.
The purchase of a business in Vietnam can take a number of different forms, says Baker & McKenzie. There are two techniques to acquire a business in Vietnam, either through a transfer of legal capital (the rough equivalent of shares) or through a merger, consolidation, division or separation of a business. The concept of a merger, consolidation, division or separation of a business has been introduced to foreign investors in Decree No. 241 (as amended by Decree No. 272 ) which applies to joint ventures (JVs) and enterprises with 100 percent foreign-owned capital (often known as wholly foreign-owned enterprises or EFOCs), also collectively referred to as foreign-invested enterprises (FIEs).
The most common form of acquisition, especially in the case of foreign investors who want to hold the shares in the existing JVs and EFOCs, is the transfer of legal capital. A merger, consolidation, division or separation of a business are more frequently used for internal reorganization purposes.
TYPES OF TRANSACTIONS
Transfer of legal capital
A foreign investor who wishes to acquire an interest in a JV or EFOC in Vietnam may do so in one of three ways:
- The original investor may transfer its .legal capital. (shares) to the new investor;
- The new investor may buy some or all of the shares of the offshore company that holds the interest of the foreign investor; or
- An investor in a JV may purchase the legal capital of its local JV partner in order to convert the JV to an EFOC.
Asset acquisitions are also possible in cases where the investor wants to subsume new assets into an already licensed entity. Regardless of the mode, there are some special considerations that should be taken into account when acquiring an interest in an established company in Vietnam.
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