M&A Transactions in Vietnam
In any business acquisition, the share purchase agreement (SPA) is the central document: where the purchase price is locked, risk is allocated between seller and buyer, and the conditions for the transaction to close are recorded. A well-drafted SPA does more than describe “A sells, B buys” — it answers a series of hard questions: will the price be adjusted after the books are closed, what does the seller warrant about the business, who bears responsibility if hidden tax liabilities surface later, and what happens if the state authority does not approve the transaction. This article analyzes the standard structure of an SPA and the specific points to note when applying it in Vietnam.
Why is the SPA the central document of an M&A transaction?
An M&A transaction typically lasts many months, going through stages: preliminary negotiation, legal and financial due diligence, signing, satisfaction of conditions precedent, and only then the closing. The SPA is the only document covering that entire journey — it is both the sale contract and the risk map of the transaction.
Experience shows most post-M&A disputes do not arise from “whether there was a sale” but from points the SPA did not regulate clearly enough: how the price adjustment is calculated, the scope of the seller’s representations and warranties, or liability when hidden obligations surface after closing. A thin SPA means the buyer ends up bearing risks that could have been shifted to the seller by contract.
How does an SPA differ from an ordinary share transfer contract?
Vietnamese enterprise law recognizes that share transfers in a joint-stock company and transfers of capital contribution portions in a limited liability company may be done by a simple transfer contract. But a simple transfer contract only suits small transactions where the parties know each other well and there are no complex elements.
An SPA in an M&A transaction differs in three respects. First, scale of provisions: an SPA governs the whole period from signing to closing, while an ordinary transfer contract usually governs only the immediate transfer. Second, buyer protection mechanisms: an SPA has a system of representations and warranties, indemnities, and price adjustments — tools that do not exist in a simple transfer contract. Third, conditionality: an SPA is typically subject to conditions precedent (state authority approvals, no material adverse change), while an ordinary transfer contract takes effect upon signing.
In other words, when the transaction value is large, there are foreign elements, or the target has a complex structure, a simple transfer contract is not enough — that is when an SPA is needed.
Standard structure of an SPA
1. Subject matter and purchase price
The SPA clearly identifies the subject of the transfer: the number of shares/capital contribution portions, the corresponding ownership ratio, and the legal status of those shares (fully paid, not subject to transfer restrictions, not mortgaged). On price, a modern SPA rarely locks an absolute fixed figure — instead it uses a price adjustment mechanism.
The two common mechanisms are closing accounts (price adjustment based on financial statements at closing: working capital, net debt, cash) and locked box (fixed price at a past accounts date, with the seller covenanting not to extract value from the business after that date). Each has pros and cons: closing accounts is more accurate but takes time to reconcile after closing; locked box is simpler but requires the buyer to trust the figures at the locked-box date.
2. Conditions Precedent
These are conditions that must be satisfied (or waived) before the parties complete the transfer. Typical conditions include: approval of the foreign investor’s registration of capital contribution or share purchase (if subject to registration under Article 21 of the Law on Investment 2025), economic concentration clearance from the National Competition Commission (if notification thresholds are exceeded), third-party consents (lending banks, counterparties to material contracts), and no material adverse change (MAC) to the target. For details on this mechanism see conditions precedent in M&A contracts.
3. Representations & Warranties
The seller warrants the condition of the business at signing and at closing: legal standing, fully contributed charter capital, truthful financial statements, no hidden disputes, compliance with tax, labor, environmental, land use right, and asset laws. This warranty system is the basis for the buyer to claim compensation if information later proves untrue.
4. Indemnity and limitations of liability
When representations and warranties are breached, the indemnity mechanism determines how the seller must compensate the buyer. SPAs typically include limitations: a cap on compensation, a basket/de minimis threshold — compensation only when losses exceed a certain level, and a survival period — the buyer may only claim within a period after closing (tax obligations usually have a longer period, tied to the statute of limitations for tax collection).
5. Governing law and dispute resolution
For transactions with foreign elements, the parties need to agree on governing law and a dispute resolution mechanism (domestic arbitration, international arbitration such as SIAC/HKIAC, or courts). This choice directly affects the enforceability of awards later.
Specific points when applying an SPA in Vietnam
Investment approval. If the buyer is a foreign investor and falls into one of the cases in Clause 3, Article 21 of the Law on Investment 2025 (increasing the foreign ownership ratio in sectors subject to conditional market access; raising the ownership ratio above 50% of charter capital; or the target having land use rights in areas sensitive for national defense and security), the transaction must complete the capital contribution/share purchase registration procedure before changing members/shareholders. The SPA should make closing conditional on this approval document — otherwise the buyer risks having paid but being unable to be recorded as owner.
Economic concentration. An M&A transaction may constitute an economic concentration under the Law on Competition 2018 (No. 23/2018/QH14). If the notification thresholds in Article 13 of Decree 35/2020/ND-CP are exceeded (total assets or revenue in Vietnam of VND 3,000 billion; transaction value of VND 1,000 billion; or combined market share of 20% on the relevant market), the parties must notify the National Competition Commission before implementation. The SPA should make clearance (or expiry of the review period without prohibition) a condition precedent.
Payment and foreign exchange control. Transfers between residents and non-residents must in principle be paid in Vietnamese dong; remitting funds abroad after the transaction is done through the investment capital account under foreign exchange regulations. The SPA should clearly state the payment currency, the receiving account, and responsibility for completing tax obligations before remitting funds abroad.
Form of contract. Transfers of shares in a joint-stock company and of capital contribution portions in a limited liability company must be made in writing; after the transfer, the enterprise carries out procedures appropriate to its type: for a limited liability company, where the transfer changes members, it must notify the change of enterprise registration contents; for a joint-stock company, an ordinary share transfer only requires updating the shareholder register, not changing the enterprise registration (except where it changes founding shareholders within the statutory period or other information stated on the Enterprise Registration Certificate). The business registration authority is now the Department of Finance under the two-tier local government model. The SPA should clearly allocate responsibility for post-closing procedures between the parties.
Common mistakes when drafting an SPA
- No price adjustment mechanism: locking a fixed price based on figures many months old, by closing the business’s finances have changed significantly.
- Vague representations and warranties: merely stating “the seller warrants the business complies with law” without listing each specific area — when a breach occurs, it is hard to prove and hard to quantify loss.
- Ignoring state approval conditions: not making capital contribution/share purchase registration approval or economic concentration notification a condition precedent, leading to deadlock when the state authority does not approve.
- No claim time limit: leaving open how long the buyer may claim for breach of warranty, creating prolonged legal risk for the seller — or conversely, the buyer losing the right to claim for lack of a clear time basis.
- Underestimating the MAC clause: not defining what counts as a “material adverse change”, making the clause nearly inapplicable when a real event occurs.
How does FLAT LAW FIRM support M&A transactions?
FLAT LAW FIRM participates in M&A transactions from structuring to closing: advising on transaction structure (share deal vs asset deal), conducting legal due diligence on the target, drafting and negotiating the SPA, advising on investment approval procedures for foreign investors under the regulations on capital contribution and share purchase, reviewing economic concentration notification obligations, and supporting post-closing procedures (enterprise registration changes, labor transfer, licenses). See also our M&A services in Vietnam for foreign investors.
Frequently asked questions
Must an SPA be notarized?
Current law does not require notarization of share/capital contribution portion transfer contracts. However, the contract must be made in writing; after the transfer, a limited liability company with a change of members must notify the change of enterprise registration, while a joint-stock company with an ordinary share transfer only updates the shareholder register. In transactions with foreign elements, parties sometimes choose notarization to strengthen signature authenticity, but this is voluntary, not a legal obligation.
Can a foreign buyer pay the purchase price in foreign currency?
In principle, transfers between residents and non-residents must be valued and paid in Vietnamese dong under foreign exchange regulations; transactions between two non-residents may be in foreign currency. The SPA should clearly state the payment currency appropriate to the parties’ residency status to avoid foreign exchange violations.
How long does SPA negotiation usually take?
It depends on the scale and complexity of the transaction. A simple domestic transaction may complete SPA negotiation in a few weeks; transactions with foreign elements requiring deep due diligence and multiple approvals (investment approval, economic concentration) often take 3 to 6 months or more. The deciding factor for timing is usually not contract negotiation but the time to complete due diligence and procedures with state authorities.
Locked box or closing accounts — which to choose?
There is no one-size-fits-all answer. Closing accounts suits buyers who want the price to accurately reflect the financial position at closing and accept post-closing reconciliation time. Locked box suits parties wanting simplicity and speed where the buyer sufficiently trusts the locked-box figures. In Vietnamese transactions, closing accounts is more commonly used as buyers usually want protection against financial fluctuations during the wait for procedures to complete.
What if hidden tax liabilities are discovered after closing?
It depends on what the SPA provides. If the SPA has tax compliance representations and an indemnity clause with a still-valid claim period, the buyer may require the seller to compensate. If the SPA lacks these provisions, the buyer largely bears the loss itself. This is precisely why tax due diligence in M&A transactions and tax indemnity provisions need careful preparation before signing the SPA.
Useful links
You should speak with a lawyer if:
- Preparing to sign an SPA for an M&A transaction and need to review the price mechanism, representations and warranties, and indemnity.
- The buyer is a foreign investor and it is unclear whether capital contribution/share purchase registration applies.
- The transaction is large-scale and economic concentration notification obligations need assessment.
- You have signed an MOU/LOI and are about to enter formal SPA negotiation.
- Warranty breaches are discovered after closing and you need to assess compensation rights.
Speak with a lawyer at FLAT LAW FIRM
Send us information about the contemplated transaction structure — we will assess the key risk points in the SPA and propose a suitable negotiation approach.
Send a legal advice requestThe content on this website is for general information purposes only and does not replace legal advice for any specific matter.
Legal regulations, the competence of state authorities, and administrative procedures may change over time, by locality, and by specific dossier. You should consult a lawyer before making decisions or carrying out transactions.
