|Truong Huu Ngu||Taro Hirosawa|
Under the new Investment Law, share acquisitions by foreign buyers will only need to be registered with local licensing authorities: (i) if the target company is involved in certain types of highly-regulated business; or, (ii) the acquisition results in majority foreign ownership of the target company. After registration, the acquired company may simply go ahead with changing its membership record with the enterprise registrar (in the case of a limited liability company) or update the registrar regarding foreign ownership (in the case of a shareholding company). Theoretically, these procedures will be able to be completed within 18 days. This means that the existing, more time-consuming, procedure requiring the acquired company to obtain a so-called investment certificate will be phased out.
Additionally, the revised Investment Law may make the payment process for a share acquisition less cumbersome. Currently, based on a guideline issued by the central bank, the purchase price may be required to be routed through the target company's account before being transferred to the seller. The new Enterprise Law prescribes that any payment for the purchase of shares by a foreign investor must be made through a capital account opened by such foreign investor in Vietnam. Though we need to wait to see how the new rule will be tested in practice, the central bank will watch foreign capital flowing in or out of the country via the said capital account. This means that the purchase price funds may arrive in the seller's account directly from the buyer's onshore bank account.
One may wonder when the title to shares changes hands. Taking a closer look at the new Enterprise Law, we can see that the ownership of sold shares should shift from the seller to the buyer once the buyer has their name stated in the target company's shareholder registry.
Further clarification from the government will be necessary, and it may take some time for local officials to become acquainted with the changes, but deal makers have reason to expect a better legal framework for M&A in Vietnam.
Truong Huu Ngu and Taro Hirosawa