1. Types of transaction

How may businesses combine?

The most common forms of business combinations in Vietnam are acquisitions, joint ventures, mergers and consolidations.

Generally, an acquisition includes share deals and asset deals. In terms of legal definitions, ‘acquisition' does not have one common legal definition. It is defined across various laws of Vietnam, as follows:

• the Law on Investment provides for a partial share transfer or subscription as one form of direct investment. It is distinctive from an ‘acquisition', which is a complete share transfer;
• according to the Law on Competition, the acquisition of an enterprise means the purchase by one enterprise of all or part of the assets of another enterprise sufficient to control or govern all business lines or one business line of the acquired enterprise; and
• acquisition of a credit institution is, however, differently regulated, being the purchase of all of the assets, rights and obligations of the target credit institution. After the acquisition, the target becomes a subordinate entity of the acquiring entity.

An asset transfer, as opposite to a share transfer in the M&A context, is nevertheless not regulated. Asset transfers, including business transfers, are usually structured as share transfers whereby the target business is intentionally separated and transferred to a special-
purpose vehicle, the shares of which would then be acquired by the investor. An asset transfer could also be straightforward between the seller and the buyer, which includes one or numerous sale and purchase transactions. An asset transfer is also mentioned in the Law on Investment through the term ‘project transfer'. The project transfer may be followed by the liquidation of the transferring entity.

A merger means a situation where one or more companies of the same type (‘merging companies') may be merged into another company (‘merged company') by way of transfer of all lawful assets, rights, obligations and interests to the merged company and, at the same time, termination of the existence of the merging companies.

Consolidation means a situation where two or more companies of the same type (‘consolidating companies') may be consolidated with each other to form a new company (‘consolidated company') by way of transferring all lawful assets, rights, obligations and interests to the consolidated company and, at the same time, terminating the existence of the consolidating companies.

2. Statutes and regulations

What are the main laws and regulations governing business combinations?

The Law on Enterprises and the Law on Investment are the two main laws generally governing business combinations and applicable to all companies incorporated in Vietnam. Specific regulations addressing private equity transactions are Decree 102/2010/ND-CP, Decree 01/2010/ND-CP and Decision 88/2009/QD-TTg and Circular 131/2010/TT-BTC. If the acquisition involves shares of a public company, the Law on Securities, Decision 55/2009/QD-TTg, and related rules and regulations will apply. Cross-border transactions will be subject to the Law on Foreign Investment, the Ordinance on Foreign Exchange and the WTO Commitments. Where an M&A transaction triggers a competition concern, the Law on Competition must be observed.

3. Governing law

What law typically governs the transaction agreements?

Generally, the law of the jurisdiction in which the target company is established or where the assets for sale are located is selected as the governing law of the agreements. The specific law will vary depending on the particulars of the transaction. The choice of foreign law rather than Vietnamese law is accepted to the extent that it is not contrary to the basic principles of Vietnamese law.

4. Filings and fees

Which government or stock exchange filings are necessary in connection with a business combination? Are there stamp taxes or other government fees in connection with completing a business combination?

M&A transactions involving companies that are active in certain industries such as banking & finance, aviation or insurance may require approval of their industry regulator. When state-owned assets or equity are involved, 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 it involves 30 per cent state capital.

For acquisitions of public companies, the Law on Securities requires an acquirer to file a tender offer application with the State Securities Commission (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 to SSC about the tender results within 10 days.

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, if the parties to a business combination have a combined market share of between 30 per cent and 50 per cent of the relevant market they must notify VCA 30 days before the proposed combination. The proposed combination can only be carried out after written confirmation has been received from VCA that the combination is not prohibited. The combination shall be prohibited if the combined market share is above 50 per cent in the relevant market. There are two exceptions with this rule, such as 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.

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. Such events must be registered with the business registration authority and the relevant authorities.

If the acquisition results in a shareholder owning more than 5 per cent of a public company, then information about such shareholder shall be reported to SSC, the stock exchange where the shares are listed, and the business registration authority within seven days as well as being reported to the business registration authority.

A business combination may require a change to be made to the investment certificate and/or business registration certificate of the target company, or both. A fee of between US$2 and US$10 may be paid to register such change. In addition, the transaction will be subject to various Vietnamese taxes depending on the structure of the transaction as further specified in question 18.

5. Information to be disclosed

What information needs to be made public in a business combination? Does this depend on what type of structure is used?

The information that needs to be made public in a business combination will depend on the type of structure used. As mentioned above, the offeror must file a registration application with the SSC that contains various information such as the name, address and historical business performance of the offeror and its market share in the relevant business; the name and address of the target; the relationship between the offeror and the target; the current shareholdings of the offeror in the target; the number of shares to be acquired; the intention of the acquirer post-acquisition with respect to the target's operation and employees; the sources of capital to fund the acquisition, etc. Upon receiving the approval of the SSC, the offeror must make public disclosure of the offer in three consecutive issues of an electronic newspaper or printed newspaper.

Public companies must report a change of 5 per cent or more in the shareholding of any shareholder holding at least 5 per cent of the shares to the SSC and make a public announcement. Information to be disclosed includes:

• name, address and business lines of corporate shareholders;
• full name, age, nationality, place of residence and occupation of individual shareholders; and
• the number and percentage of shares owned by such shareholders.

When there is a merger or consolidation of companies, the companies must notify their creditors of the merger or consolidation within 15 days from of the merger or consolidation resolution.

Furthermore, if the merger or consolidation triggers competition concerns then the companies must notify the Vietnam Competition Authority or the Competition Council thereof. Information to be disclosed includes financial statements of the past two years; a report on the market share in the relevant market of the parties in the past two years, list of subsidiaries, list of goods and services supplied, etc.

6. Disclosure of substantial shareholdings

What are the disclosure requirements for owners of large shareholdings in a company? Are the requirements affected if the company is a party to a business combination?

A shareholder owning more than 5 per cent of a public company must report to the SSC, the stock exchange where the shares are listed seven days from the date of acquiring such large shareholdings as well as being reported to the business registration authority. Where there is any material change with respect to the previously reported information or a change in the shareholdings that exceeds 1 per cent of the outstanding shares, such shareholder must also report to the SSC and the stock exchange where the shares are listed.

7. Duties of directors and controlling shareholders

What duties do the directors or managers of a company owe to the company's shareholders, creditors and other stakeholders in connection with a business combination? Do controlling shareholders have similar duties?

Besides the fiduciary duties that the directors and managers of a company will assume under the Law on Enterprises, they have the following duties.

Directors, senior management and large shareholders with knowledge of information about a takeover situation shall not abuse such information to trade shares for their personal benefit or supply such information, encourage or solicit others to trade shares before the official public disclosure of the tender offer. In addition, the board of the target must notify the SSC and its shareholders of its opinion about the offer to acquire.
A business combination is a matter under the shareholders' authority, thus a business combination must be passed by the shareholders in a convened meeting. The chairman of the board is responsible for convening such meeting pursuant to the procedures stipulated by law in order to obtain the shareholders' approval.

Specifically, the chairman shall send notice of the meeting, the agenda and documents to the shareholders well in advance of the scheduled meeting (at least 7 working days).

The law provides that the contract for a business combination must be sent to creditors within 15 days from its being approved. It does not specify persons who are responsible for this but usually it is the legal representative of the companies. Furthermore, the business combination shall be announced to the employees within the above-specified time limit.

Directors and managers must also declare the details of companies in which they own shares and companies in which their related parties own more than 35 per cent of the equity interest. A business combination involving either of these companies must be approved by the shareholders or the board, as the case may be. A party who has an interest in such transactions cannot vote.

Generally the Law on Securities prohibits the following conduct:

• directly or indirectly acting fraudulently or cheating, creating false information or omitting essential information that causes a serious misunderstanding and adversely affects a public offering, listing and trading securities, conducting business and investing in securities, securities services and the securities market;
• disclosing false information with the aim of persuading or provoking the purchase and sale of securities, or disclosing incomplete or out-of-date information about events that have a major effect on the price of securities on the market;
• using inside information to purchase or sell securities for oneself or for a third party; disclosing or supplying inside information or advising another person to purchase or sell securities on the basis of inside information; or
• colluding in the purchase and sale of securities aimed at creating a false supply and demand; trading securities in the form of colluding with or persuading others to continuously purchase and sell in order to manipulate the price of securities; combining the aforementioned methods or using other trading methods in order to manipulate the price of securities.
• Implementing the securities trading activities without the SSC's approval.

8. Approval and appraisal rights

What approval rights do shareholders have over business combinations? Do shareholders have appraisal or similar rights in business combinations?

Under the Law on Enterprises, any proposals for the issuance of new shares or disposing of assets of material amounts of the company, or a merger or consolidation shall require the approval of shareholders present and voting in person or by proxy representing at least 75 per cent of the voting rights.

An offer price for shares of a public company must not be lower than the average price of the shares published by the stock exchange during the 60 days preceding the submission of the offer to the SSC or the average prices of the shares listed by at least two securities companies in the 60 days preceding the submission of the offer to the SSC.

Where a transaction involves state-owned companies, the transaction price for a strategic investor must not be lower than the average successful auction prices. Assets of state-owned companies will need to be appraised in accordance with strict procedures and determined through a competitive method, such as auction or bidding.

9. Hostile transactions

What are the special considerations for unsolicited transactions?

The recently amended Securities Law establishes three situations where the investor acquiring voting shares, fund certificates of the public company or closed-end fund must tender a general offer to acquire, as follows:

• if the proposed acquisition results in the investor owning 25 per cent or more of voting shares, fund certificates that are issued and outstanding;
• organizations or individuals and related persons holding 25 per cent or more of voting shares, fund certificates to purchase 10 per cent or more of voting shares or fund certificates which are issued and outstanding; and
• organizations or individuals and related persons holding 25 per cent or more of voting shares, certificates of closed-end fund to continue the purchase of 5 per cent to less than 10 per cent of the voting shares, fund certificates in less than one year after the completion of a previous general tender offer.

In addtion, the amended law provides for six exempted situations which are not subject to public offering:

• if the proposed acquisition results in the investor owning more than 25 per cent or more of the newly issued voting shares, fund certificates according to the issuance plan already passed by GSM of the public company or fund representative board of the closed-end fund;
• if the proposed acquisition results in the investor owning 25 per cent or more of the voting shares, fund certificates which are already approved by GSM of the public company or fund representative board of the closed-end fund;
• internal transfer of shares between holding company and subsidiaries;
• gift, inheritance or share certificates
• transfer under the court's decision; and
• other transactions as provided by the Ministry of Finance.

Generally, the investor must follow the following process in a takeover:

• submit a tender offer to the SSC and send a copy to the target;
• the target makes an announcement of the offer within three days;
• the SSC gives its opinions within seven days;
• the board must send its opinions regarding the offer to the SSC and shareholders of the target within 14 days. The board's opinions must be in writing and signed by two-thirds of the board members;
• the investor must make an announcement in three consecutive issues of a newspaper and the website of the stock exchange where the shares are listed, within seven days from its receipt of the SSC's opinions;
• the investor must report the results of the offer to the SSC within 10 days from completion of the offer;
• the investor must appoint a securities company as an agent conducting the offer; and
• the offer period must be no shorter than 30 days and no longer than 60 days.

It is noted foreign ownership of shares of a public company is capped at 49 per cent. In addition, where an investor acquires newly issued shares of a company in a private share placement the investor is restricted from selling the shares within one year.

10. Break-up fees - frustration of additional bidders

Which types of break-up and reverse break-up fees are allowed? What are the limitations on a company's ability to protect deals from third-party bidders?

Vietnamese law does not prohibit or otherwise regulate break-up fees and reverse break-up fees. Generally, the parties may agree on the fees, but the amounts may not be more than 8 per cent of the transaction value if they are considered as a penalty. Additionally, though not specifically regulated, the fees should be fully disclosed in the offer document that is registered with the SSC and the offer announcement. The break-up fees would also be approved by the shareholders of the target. Where the transaction is between affiliated companies, issues such as transfer pricing and related-party transactions should be considered. If the fees are to be paid to a foreign party it will raise foreign exchange issue as well.

We are not aware of any provisions that prohibit or restrict financial assistance in business combinations.
Vietnamese law does not place limitations on a company's ability to protect deals from third-party bidders. As mentioned above, the board of the target must send its opinions regarding a takeover offer to the SSC and shareholders within 14 days. The board's opinions must be in writing and signed by two-thirds of the members of the board. If the board objects to the offer, it is unclear whether the deal can proceed or be aborted. We note that except for some special circumstances, shareholders are not restricted from selling their shares.

11. Government influence

Other than through relevant competition regulations, or in specific industries in which business combinations are regulated, may government agencies influence or restrict the completion of business combinations, including for reasons of national security?

The Vietnamese government may restrict or bar certain cross-border transactions for reasons of national security or public policies of Vietnam.

Cross-border M&A transactions shall comply with the commitments of Vietnam upon accession to WTO. Transactions involving a Vietnam-incorporated company active in multiple businesses usually require appraisals of various line ministries and satisfaction of numerous industry specific conditions. Business lines that are not required to be to open to foreign investment under the WTO framework are subject to the sole discretion of the Vietnamese authorities. Due to the workload in some big cities, a lack of inter-agency coordination and a lack of implementing regulations in several sectors, these reasons may break deals or delay business combinations in some situations.

12.  Conditional offers

What conditions to a tender offer, exchange offer or other form of business combination are allowed? In a cash acquisition, may the financing be conditional?

A tender offer must assure that:

• all conditions specified in a tender offer must apply equally to all shareholders in the target company;
• the relevant parties can fully access the tender offer information;
• the right of the shareholders to sell the shares of the target company is fully respected; and
• the Securities Law is observed.

A tender offer must be between 30 and 60 days. A tender offer may be supplemented or revised with terms no less favourable than those of the previous offers.

During a tender offer process, the offeror shall not:

• directly or indirectly purchase or undertake to purchase the subject shares of the offer outside the offer tranche;
• sell or undertake to sell the subject shares of the offer;
• treat shareholders holding the subject shares unfairly; or
• supply separate information to a sub-group of shareholders or provide a different level of information to different groups of shareholders or at different times.

After making a public announcement, the offeror may only withdraw the offer in the following circumstances:

• the total number of shares registered to sell is less than that intended to be purchased by the offeror as announced;
• the target company increases or reduces the number of its voting shares via a share split, share consolidation, or conversion of preference shares;
• the target company reduces its shareholding capital;
• the target company issues additional securities to increase charter capital; or
• the target company sells all or a part of its business or assets

In a cash acquisition, the purchaser must specify in its disclosure report to the SSC the sources of funds it uses for the acquisition.

13. Financing

If a buyer needs to obtain financing for a transaction, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist In the buyer's financing?

First, the buyer should provide in the transaction documents the requisite approval of the financing entity, this being a condition precedent upon closing of the transaction. Second, the payment schedule must be commensurate with that of the financing arrangement between the buyer and the financing entity. Third, with respect to onshore transactions, the payment should be directed to an indirect investment capital Vietnamese dong account opened by the buyer with a licensed bank in Vietnam, from which the purchase price will be paid to the seller's designated account.

The Vietnamese authorities require evidence of payment before an approval is granted. The approval, however, is usually one of the conditions required by the financing entity before the disbursement. This conflict maybe solved in practice in a number of ways, such as escrow arrangements, payment guarantees or the buyer granting security over the equity in the target to the seller from the date of issuance of the approval until the payment of the purchase price.

It appears that a Vietnamese-incorporated company is not prohibited from giving financial assistance (directly or indirectly) to the purchaser in a M&A transaction, such as giving security to the bank loan obtained by the purchaser to finance the acquisition of shares in itself or its holding company.

Vietnamese law is silent on the seller's obligations to assist the buyer's financing in an M&A deal. In practice, the seller, may, upon mutual agreement by the parties, assit the buyer in its financicing by recommending some sound financing entities to the buyer or signing necessary documents relating to the buyer;s financing purposes. The seller may also give security to the bank loan obtained by the buyer in case the buyer wishes to use the acquired shares or assets as secured assets for the bank loan.

14.  Minority squeeze-out

May minority stockholders be squeezed out? If so, what steps must be taken and what is the time frame for the process?

Vietnamese law does not specifically regulate situations where minority shareholders are squeezed out. Since the law does not require the consent of all shareholders, a business combination may still occur against the will of the minority shareholders. In the case of a merger where it is approved by a supermajority in number representing three-quarters of the voting rights of the shareholders present or by proxy, the merger plan will be binding on all the shareholders. If the merger plan calls for the transfer of all of the company's shares, then the entire share capital of the company will be transferred to the acquirer (including the shares of any dissenting shareholder). There are no regulations specifying the steps to be taken and time frame for the process in this particular minority squeeze-out.

The minority shareholders of a public company are nevertheless protected in a takeover situation where they can refuse to sell the shares to the offeror or are even entitled to withdraw the subject shares at any time during the offer process. They also have the put option to compel the acquirer to buy their shares at the announced transaction price if, as a result of the acquisition, the acquirer owns more than 80 per cent of the outstanding shares of the target.

15. Cross-border transactions

How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?

Cross-border transactions may be structured as an asset or equity deal.

Asset acquisitions usually involve the establishment of a wholly owned entity specifically for the purpose of acquiring the business and undertaking of the target. Asset deals used to be the preferred choice due to the complexity and legal loophole of the equity deal.

Acquisitions of more than 49 per cent in a Vietnamese domestic company usually require the conversion of the domestic company into a foreign-invested enterprise (FIE). However, if the target company is undertaking distribution services (wholesale, retail, commissioned agency and franchise), the conversion is still mandatory pursuant to a recent guideline from the Ministry of Industry and Trade. In these circumstances, the parties must follow the procedures for establishing an FIE.

Equity acquisitions may be onshore transactions whereby the equity of a shareholder in a Vietnamese domestic company or FIE is acquired directly. An onshore equity deal is subject to the approval of the relevant Vietnamese authorities and governed by the Law on Investments and Decision No. 88/2009 of the prime minister.

Equity transactions may be conducted offshore at the investor level, which would involve the sale of the equity of the foreign shareholder in an offshore company. They will usually need to register the change in the investor with the Vietnamese authorities. Where a Vietnamese resident invests in an offshore entity that has been established to make round-trip investments back into Vietnam, the investor needs to conduct the offshore investment procedures with respect to the establishment of such offshore entity and periodically report the offshore investment activities to the competent authorities of Vietnam, including subsequent disposal of any equity in it.

16. Waiting or notification periods

Other than as set forth in the competition laws, what are the relevant waiting or notification periods for completing business combinations?

For a normal merger:

• notify the shareholders of the scheduled meeting regarding a merger at least seven days in advance;
• notify creditors of the merger resolution and make a public announcement; and
• the authorities decide on whether to approve a domestic merger within five working days after receipt of all the required documents. For a merger with a foreign element, the prescribed approval period is between 15 and 45 working days.

For a takeover deal:

• the target makes an announcement of the offer within three days from the receipt of the tender documents;
• the SSC reviews the tender documents within seven days;
• the board must send its opinions regarding the offer to the SSC and the shareholders of the target within 14 days from receipt of the tender documents;
• the acquirer makes an announcement on three consecutive issues of a newspaper and the website of the stock exchange where the shares are listed, within seven days from its receipt of the SSC's opinions;
• the length of the offer period is between 30 and 60 days; and
• the acquirer reports the results of the tender to the SSC within 10 days of completion.

Companies in specific industries are subject to industry-specific regulations that stipulate different waiting and notification periods for completing business combinations. Specific legal advice should be sought regarding such mergers.

17. Sector-specific rules

Are companies in specific industries subject to additional regulations and statutes?

M&A transactions involving companies in specific industries are subject to additional and specific regulations and statutes. In principle, approval is usually required before a business combination may proceed. Foreign equity in certain industries is capped (eg, at 30 per cent for banking) or subject to industry-specific approvals (ie, distribution services), or both.

Transactions between credit institutions established and operating in Vietnam are currently governed by Circular 04/2010/TT-NHNN, which allows various forms of credit institutions to be merged or consolidated with one bank. There is one form of acquisition that is defined as the purchase of the entire legal assets, rights, obligations and interests of the target credit institution. After the acquisition, the target credit institution becomes a subsidiary company of the acquiring institution. The acquisition requires consent of the State Bank.

18 Tax issues

What are the basic tax issues involved in business combinations?

The tax treatment will depend on the structure of the transaction and legal status of the seller. If the seller is a legal person, corporate income tax at 25 per cent will be levied on the capital gains generated from the transfer of assets. The tax base would be the actual sales price less the cost of acquiring the assets and direct expenses of transferring such assets. In addition, an asset transaction will be subject to VAT ranging from 0 per cent up to 10 per cent. In the case of transfer of certain property such as real estate or vehicles, the transaction will be also subject to a property registration tax from 0.5 per cent to 15 per cent. The rate of 25 per cent will also apply in the case of a share transfer.

Where the seller is a natural person, the personal income tax is usually levied on profit derived from the transfer of shares. For unlisted shares, the tax rate is 20 per cent of the income. For listed shares, there will be two options: 0.1 per cent of the transaction value or 20 per cent of the net annual income from investment in the listed shares.

Furthermore, special adjustment rules that govern transfer pricing may apply if the transaction involves affiliated parties. The parties may also take advantage of various double taxation agreements which Vietnam has entered into with other countries in cross-border transactions involving Vietnam-incorporated companies.

19. Labour and employee benefits

What is the basic regulatory framework governing labour and employee benefits in a business combination?

Under the Labour Code, where an enterprise undergoes restructuring the succeeding employer is responsible for continuing the performance of the labour contracts with the employees. For those employees who have been working for the company for a period of one or more years and become unemployed, the new employer must re-train and assign the employees to other jobs within the enterprise. Where they cannot employ all of the existing employees, the employment plan must be worked out with the participation of the trade union representatives and its implementation must be notified to the local labour authority. If termination of employees is necessary, the employer needs to publish a list of the employees to be retrenched, to consult the trade union and to notify the local labour authority. The retrenchment shall be conducted gradually. In the event they cannot reach agreement with the trade union on this matter, they would be permitted to terminate the employees only after 30 days of giving such notice to the local labour authority.

An employee who has been serving for 12 months or more must be paid compensation for loss of work based on their seniority, which is equivalent to an aggregate amount of one month's wages for each year of employment, but no less than two month's wages.

20. Restructuring, bankruptcy or receivership

What are the special considerations for business combinations involving a target company that is in bankruptcy or receivership or engaged in a similar restructuring?

Bankrupt companies are subject to the Bankruptcy Law, which took effect on 15 October 2004. The Bankruptcy Law applies to all entities in Vietnam that have legal person status. There are special provisions applicable to companies in the financial sector such as banking, securities or insurance. In these circumstances, the State Bank, the Ministry of Finance or the State Securities Commission, as the case
maybe, shall have the right to apply available methods to restore the payment ability of the bankrupt companies upon receiving a notice from the court on initiation of the bankruptcy proceedings.

Where there is a decision to start the bankruptcy procedures, the Bankruptcy Law does not allow a bankrupt company to sell or exchange its shares or transfer its property without the prior written consent of the presiding judges.

Certain transactions entered into by a bankrupt company within three months prior to the court accepting a bankruptcy application may be invalid, such as where the bankrupt company has donated its property, paid undue debts, mortgaged or pledged property for debts or carried out other transactions aiming to disperse its property. In addition, during the bankruptcy proceedings, if it is deemed that a suspension of the performance of valid contracts which are being performed or have not yet been performed will be more beneficial for the bankrupt company, the performance of such contracts shall be suspended. Therefore, investors dealing with such entities should take care to ensure that their dealings are conducted in a manner that will not expose them to the risk of a transaction being suspended or terminated.

Update and trends

2010 was the year of the blooming of inbound and outbound M&A deals in Vietnam. The significant increase in M&A values and volumes reflected clearly the recovery of the global economy. The development in the local economy and increasing focus on market entry through M&A by foreign investors indicate that Vietnam is still integral to the international expansion plans of other countries, especially Asian ones. Higher levels of offshore investment by some giant state-owned corporations aimed at expanding their overseas markets have also boosted M&A values significantly.

In the regulatory sphere, M&A are regulated by various laws in different domains and there is no single legal framework governing M&A activities. In addition, the actual licensing practices hinder quite a bit the M&A process owing to some aspects of the laws not being very clear to the authorities and to investors as well. Notwithstanding, the legal and investment environments have become increasingly clear and transparent over the past four years since Vietnam joined the World Trade Organization (WTO), and the government has put much effort into luring foreign investment. A draft government decree on M&A involving foreign-invested companies was recently released to invite public comments and is expected to clear the path for M&A activities to further develop. The amended Law on Securities now extends to private placements of public companies, whereby newly issued shares and convertible bonds under placements shall be subject to a one-year transfer restriction; shares under public offers must be listed within one year; and a tender offer is required if a shareholder holding 25 per cent acquires a further 10 per cent or more.

The impact of the credit crisis on global and local economies and the government's policies to control inflation are affecting M&A activity. It is foreseen that restructuring across the economy is almost unavoidable and Vietnamese enterprises, both local and foreign-invested, expect that via M&A deals they will be able to achieve sharp growth as well as create new development strategies in the current difficult financial and economic climate.

21. Anti-corruption and sanctions

What are the anti-corruption and economic sanctions considerations in connection with business combinations?

The Law on Anti-corruption of Vietnam does not refer to business combinations.

A fine of from 5 to 10 per cent of the total revenue in the financial year prior to the year in which a breach of the provisions of business combinations was committed shall be imposed on an enterprise carrying out a prohibited merger, consolidation, acquisition or joint venture, as stipulated in the Law on Competition.

A fine of from 1 to 3 per cent of the total revenue in the financial year prior to the year in which the breach was committed shall apply to an economic concentration which was not notified as required by law.

[This guide is published on Getting The Deal Through - Merges & Acquisitions 2011]