German investors are famously gründlich (thorough) — and due diligence when buying Vietnamese companies must be more gründlich than at home, because risks exist here that do not exist in Germany: land, licences, tax debts.
The German DD philosophy — and why Vietnam needs ‘extra’
German due diligence follows the gründlich school: check everything, document everything, trust no oral claims. In Germany, the land register (Grundbuch) and commercial register (Handelsregister) are transparent and searchable — DD is mostly reading files. In Vietnam, files are less complete — DD must investigate on the ground: visit the land, ask authorities, cross-check sources.
Rule: German standards + Vietnamese fieldwork — never transplant a German DD template without the fieldwork.
Land: the biggest difference
In Germany, companies own land (Grundstück). In Vietnam, land belongs to the people as a whole — companies hold only land-use rights (Land Law 31/2024, effective 1/8/2024). Land DD must verify:
- Land-use certificates: genuine, correct holder, correct purpose, still valid (50-year leases — how many years remain?).
- Land origin: allocated/leased/transferred — annually-paid leased land cannot be mortgaged/transferred like lump-sum land.
- Planning: is the land inside any recovery/other-project planning — check at the DONRE, never trust photocopies.
- Disputes: any claims or encroachment — ask the commune/ward authorities.
Licences and business conditions
- IRC/ERC: investment + enterprise registration certificates — do registered business lines match actual operations; any conditional business lines missing sub-licences.
- Sub-licences: fire safety, environment, food safety, construction… — one missing licence can mean suspension.
- Investment incentives: which tax incentives the target enjoys — still valid, what conditions, surviving the purchase.
- Land–investment: is the project’s in-principle approval still effective (Investment Law 2025).
Labour, tax, environment
- Labour: employment contracts (fixed/indefinite), social-insurance arrears (check with SI agencies — a common risk), pending labour disputes, collective agreements.
- Tax: tax debts, past finalisations, transfer-pricing exposure (if related-party dealings), tax incentives (as above).
- Environment: EIA, environmental permits, violation history (environmental fines), contaminated land (clean-up can cost enormously).
- Compliance: anti-corruption (gifts, “relationship costs”), sanctions (if exporting to sensitive markets).
Deal structure and SPA
German buyers of Vietnamese companies typically use share deals or asset deals (avoiding inherited debt, but complex on land, contracts, labour). The SPA may follow Vietnamese law or German/English law (Singapore/Hong Kong arbitration for big deals). Key clauses: warranty & indemnity, escrow/holdback, conditions precedent (approvals, licences), and W&I insurance (common in German deals, entering Vietnam).
Risks and notes
‘Pretty papers, ugly reality’ risk: complete files but different ground truth — German DD must go to the site. Inherited-liability risk: share deals inherit everything (tax, labour, environment) — thorough DD + escrow + warranties. Timing risk: Vietnamese DD takes longer than German (scattered files, multi-source verification) — budget time into deal timetables. Cultural risk: Vietnamese sellers may bristle at intrusive DD — explain it is German standard, not distrust.
Frequently asked questions
How does German-standard DD differ in Vietnam?
In Germany, transparent land/company registers make DD mostly file-reading; in Vietnam files are less complete — field investigation is needed (site visits, authorities, cross-checks): German standards + Vietnamese fieldwork.
What does land DD in Vietnam check?
Land-use certificates (genuine, correct holder/purpose/validity), land origin (annually-paid leases restrict transfer/mortgage), planning status (check at DONRE), and disputes (ask local authorities).
Share deal vs asset deal?
Share deals inherit all debts (tax, labour, environment) — needing thorough DD + escrow + warranties; asset deals avoid inherited debt but are complex on land, contracts and labour.
What is W&I insurance?
Warranty & Indemnity insurance — covering breach-of-warranty risk in M&A; common in German deals, now used in Vietnam for large transactions.
Contact FLAT Law Firm
FLAT Law Firm conducts German-standard M&A due diligence in Vietnam: land, licences, labour, tax, environment and SPA negotiation. Contact us when you have an acquisition target.
This article has been quality-reviewed by the FLAW AI Legal Council