Case Study: Buying 65% of a Vietnamese Company While the Founder Won’t Cooperate
Background: Fund F (Singapore) bought 65% of JSC S — a manufacturer in Binh Duong — from two founding shareholders. After the first payment tranche, Mr T. (founder, retaining 35%) refused to hand over the company seal, withheld internal financial reports and encouraged key employees to resign. Fund F held the capital majority but could not operate the company.
This is the classic Vietnamese M&A scenario for buying Vietnamese company founder uncooperative cases: you bought the shares but not actual control. This article analyses the layers of legal issues and response strategies — anonymised and synthesised from multiple real files.
Contents
- 1. What does 65% mean legally?
- 2. What can the 35% minority do?
- 3. Response strategy by layer
- 4. Preventing it in the SPA
- 5. Lessons learned
- 6. Frequently asked questions
- 7. When to work with a lawyer
- References
1. What does 65% mean legally?
Holding 65% of voting shares, the investor:
- Can pass decisions within GMS authority decided by ordinary majority (electing/removing the Board, approving financial statements, profit distribution plans…).
- Can pass even the decisions requiring elevated ratios (reorganisation, dissolution, charter amendments, management-structure changes…): under the default threshold of Article 148(1) of the 2020 Enterprise Law, these items are passed with approval by shareholders representing “at least 65% of total voting shares” — meaning exactly 65% is ENOUGH under the default law (the specific ratio is set by the company charter). The only risk is when the charter raises the threshold above 65% (e.g. 70% or 75%) — only then does the investor actually fall a few percent short on “fundamental” decisions.
First lesson: do not buy exactly 65% if the goal is absolute control. In negotiations, target 70–75% or 100%; if only 65% is available, compensate with contractual mechanics (board nomination rights, shareholders’ agreement…).
There is a second, subtler point about what “control” means beyond voting arithmetic. A 65% holder who cannot get the company’s seal, banking tokens and accounting data does not control the company in any operational sense — they control the shareholder meeting, but the founder controls the cash. This is why experienced buyers treat the handover mechanics (seal, e-banking authorisation, accounting system access, statutory document originals) as a closing deliverable with the same seriousness as the share transfer registration itself. Control is a bundle: votes, seals, systems and people. The SPA should transfer all four, not just the first.
2. What can the 35% minority do?
The law protects minority shareholders with rights that an uncooperative founder typically wields as leverage:
1. Information rights: access to financial reports and company books. Refusing information to a shareholder is a breach — but conversely, the 35% holder has this right too; a majority cannot silence them. In practice, information requests become a harassment tool: weekly demands for documents, each one technically lawful, each one consuming management time.
2. Meeting requisition rights: in statutory cases, minority groups may requisition a GMS. A founder who can force an extraordinary meeting at will can use it to relitigate settled issues and rally dissent. For the full framework of minority protections, see minority shareholders’ rights in an acquired company.
3. Litigation rights: petitioning the court to annul GMS/Board decisions believed to breach the law or charter. The most common “weapon” — a prolonged lawsuit can paralyse key decisions (see the case study of a minority shareholder suing to annul GMS resolutions). Even a weak claim works as leverage, because Vietnamese courts may take a year or more to resolve a corporate dispute, during which the challenged resolution hangs in uncertainty.
Beyond legal channels, founders usually hold soft power: relationships with customers, suppliers, key employees and local authorities. This is the hardest part to handle — and why due diligence on “people” matters as much as financial due diligence. Map it explicitly: which customers would follow the founder? Which licences depend on the founder’s personal relationships with officials? Which employees are loyal to the person rather than the company? The answers determine whether 65% is a controlling stake or an expensive minority position in disguise.
3. Response strategy by layer
In a buying Vietnamese company founder uncooperative deal, the response must be layered — cementing legality, ending personal dependence, negotiating, and litigating only as a last resort.
Layer 1: Cement the legality of control
- Hold a valid GMS (proper convening procedure, quorum), re-elect the Board, appoint a new legal representative.
- Issue resolutions demanding handover of the seal, documents and company assets — creating a written legal basis.
- Re-carve the seal through proper procedures if the old seal is not handed over.
A note on procedure: every step in Layer 1 must be procedurally impeccable, because the uncooperative founder will attack procedure first. Convening notices must go to the correct addresses within statutory time limits; the meeting minutes must record attendance accurately; resolutions must stay within the notified agenda. A single procedural flaw gives the minority a ready-made annulment claim — and in a contested control situation, courts examine procedure with unusual strictness. Have counsel review the convening pack before it goes out, not after the meeting.
- *Example:* Fund F convened an extraordinary GMS with its 65% voting rights, removed the old Board and appointed its own person as legal representative; that resolution became the basis for the bank to change the authorised signatory.
- *Action checklist:* check the charter on convening procedure (notice periods, form) → list shareholders and voting ratios → prepare draft resolutions before the meeting → keep signed minutes.
Layer 2: End dependence on the individual
- Review contracts the founder signed in a personal capacity (consulting, agency…) — terminate or novate per their terms.
- Stabilise the team: re-sign/adjust labour contracts with key personnel, with retention policies.
- Formally notify customers, suppliers and banks of the representative change.
- *Example:* Mr. T. was drawing VND 200 million/month under a “technical consultancy” contract signed with the company itself — Fund F reviewed and terminated it under the 30-day notice clause, cutting the income stream Mr. T. used to maintain influence.
- *Action checklist:* list every contract linked to the founder/family → assess termination clauses → prioritise retaining 3–5 key people with stay bonuses.
Layer 3: Negotiate the remaining 35% or an exit mechanism
Long-term, a 65/35 structure with a broken relationship is unsustainable. Two paths:
- Buy the remaining 35%: usually the cleanest solution. The top-up price can be negotiated on an independent valuation; the original SPA should have included a call option for the remainder.
- Shareholders’ agreement: if a buyout is impossible, sign an agreement setting out nomination rights, deadlock mechanics, rights of first refusal, drag-along/tag-along rights.
- *Example:* both sides agreed on an independent valuation by a Big Four firm; if Mr. T. refused to sell within 90 days, Fund F could trigger a drag-along to sell the whole company to a third party.
- *Action checklist:* independent valuation of the 35% → written buyout offer with a deadline → draft a fallback shareholders’ agreement in parallel.
Layer 4: Litigation — the last resort
Sue for handover of the seal/documents, or for damages caused by obstruction. Litigation in Vietnam takes time — use it as negotiation leverage rather than the main solution, unless damages are already severe.
- *Example:* Fund F sued Mr. T. for handover of the seal and damages from delayed handover (cancelled orders because new contracts could not be signed); shortly after the court accepted the case, Mr. T. came back to negotiate selling the remaining 35%.
- *Action checklist:* collect evidence of obstruction (emails, minutes, lawful recordings) → quantify damages with figures → send a formal demand letter before suing (building a good-faith record).
There is a strategic point about sequencing here. Litigation and negotiation are not alternatives; they run in parallel. Filing a well-founded claim for handover — while simultaneously offering a fair price for the remaining 35% — often produces settlement faster than either track alone. The lawsuit signals that obstruction has a cost; the buyout offer signals that cooperation has a reward. Experienced M&A counsel calibrates both tracks together rather than choosing one.
4. Preventing it in the SPA
This case study could have been avoided if the SPA had contained (see the 15 key clauses of a share purchase agreement in Vietnam):
1. Conditions precedent: handover of seal, documents and key-personnel lists before the final payment.
2. Price retention/escrow: 10–20% of deal value retained 6–12 months to secure post-closing obligations.
3. Non-compete and non-solicitation covenants from the founder post-sale.
4. Clear dispute resolution: arbitration or courts, governing law, language of proceedings.
5. Seller representations & warranties on the completeness of handover documents, with indemnity.
A further preventive point specific to Vietnam: verify the target’s internal governance reality during due diligence, not just its paperwork. Check who actually holds the seal, who signs banking documents, whose personal relationships drive revenue. If the business cannot function for 30 days without the founder, price that dependency into the deal — through a transition services agreement with the founder, a management earn-out, or simply a lower price.
Sample clause language for each SPA protection:
1. Conditions precedent: “The Seller shall hand over the company seal, business registration certificate, accounting books and key-personnel lists to the Buyer no later than 5 business days before the final payment date; the final payment shall only be made after the Buyer confirms receipt in full.”
2. Price retention/escrow: “10% of the purchase price shall be held in escrow for 12 months from closing; the Buyer may deduct from the retained amount any losses arising from the Seller’s breach of handover obligations or non-compete covenants.”
3. Non-compete and non-solicitation: “For 24 months from closing, the Seller and the founder covenant not to, directly or indirectly, solicit the Company’s key personnel, or establish or join a competing business in the same sector and territory.”
4. Dispute resolution: “Any dispute arising out of or in connection with this Agreement shall be resolved by arbitration at the Vietnam International Arbitration Centre (VIAC) under VIAC’s arbitration rules; the language of proceedings shall be Vietnamese; the governing law shall be the law of Vietnam.”
5. Seller representations & warranties: “The Seller warrants that all handed-over documents and books are complete and truthful; if deficiencies are discovered within 12 months, the Seller shall indemnify the Buyer for all actual resulting losses.”
5. Lessons learned
The biggest lesson from buying Vietnamese company founder uncooperative deals: paper control is never the same as actual control. Five takeaways apply to every similar transaction:
1. Legal control must precede capital control. Holding 65% without a valid GMS resolution, a new legal representative and the seal in hand means the 65% exists only on paper.
2. “People” due diligence matters as much as financial due diligence. Assess the founder’s motives, relationships and how dependent the company is on them before signing — if the company cannot operate a day without Mr. T., the price must reflect that risk.
3. Every post-closing promise needs teeth. Handover, non-compete and non-solicitation covenants only work when backed by price retention and liquidated-damages mechanics in the SPA.
4. Always have a Plan B for the ownership structure. From the negotiation stage, prepare a path to acquire the remaining 35% (call option + valuation formula) or a shareholders’ agreement with deadlock mechanics — don’t wait until the relationship breaks.
5. Speed in the first 30 days decides 80% of the outcome. The faster legal control is cemented, the team stabilised and personal dependencies cut, the less leverage the founder has to bargain with.
6. Frequently asked questions
Q: Does buying 65% give control of the company?
A: Exactly 65% is ENOUGH under the default threshold of Article 148(1) of the 2020 Enterprise Law (“at least 65% of total voting shares”) — including “fundamental” decisions such as charter amendments, reorganisation and dissolution. The risk only arises if the company charter sets a threshold above 65%; so 65% is solid control, though not absolute in every respect where the charter raises the bar.
Q: What can a 35% founding shareholder do to disrupt the company?
A: Minority shareholders keep statutory protections: information access, the right to request a GMS in certain cases, and the right to sue to annul GMS/Board decisions believed to breach the law or charter. Non-cooperation usually means withholding documents and seals and obstructing governance — handle it through legal mechanisms, not confrontation.
Q: What if the founder won’t hand over the seal and documents?
A: The seal and company documents belong to the company, not the individual founder. The controlling buyer can re-carve the seal through proper procedures, demand handover via internal mechanisms (Board/GMS resolutions), and if needed sue for handover. A valid resolution as the basis is essential.
Q: Should you buy 65% knowing the founder won’t cooperate?
A: It depends on pricing and deal structure. In a buying Vietnamese company founder uncooperative situation, if the price reflects the risk and the SPA has protections (retention, handover covenants, penalties, dispute resolution), the deal can proceed. Without protective mechanics, renegotiate the stake (to 75–80% or 100%) or walk away.
Q: Where are majority-minority shareholder disputes resolved?
A: First through internal mechanics: negotiation, mediation under the charter. Failing that, litigation in court or arbitration (if the charter/contract provides). With foreign elements, determine jurisdiction and governing law when drafting the SPA.
7. When to work with a lawyer
Work with a lawyer before signing the SPA — not after the dispute erupts: full legal due diligence (beyond financials, see the legal due diligence checklist for acquiring a manufacturing company in Vietnam), deal structuring and stake sizing, SPA drafting with protective mechanics, and shareholders’ agreement design. If a dispute has already erupted, counsel helps weigh options (negotiation, buyout, litigation) on cost-benefit. FLAT Law Firm advises on M&A and shareholder disputes for domestic and foreign investors — hotline 0988424851.
References
- Enterprise Law 59/2020/QH14, amended by Law 76/2025/QH15 (effective 01/7/2025).
- Cross-checked via thuvienphapluat.vn and luatvietnam.vn at drafting (28/9/2026).
