Share purchase agreements (SPAs) are rarely paid in a single tranche: the price is usually split — part paid upfront, part deferred, part tied to business performance (earn-out), or part retained for set-off if warranties prove untrue. When the buyer pays late or refuses to pay the deferred portion, what can the seller claim: how is late-payment interest calculated, are penalties available, and can damages be recovered? This article analyzes the issue under the Commercial Law, the Civil Code and the current instruments.
1. Determine the playing field first: commercial or civil contract?
An SPA between enterprises is a commercial contract — so late-payment interest is governed primarily by Article 306 of the Commercial Law 36/2005/QH11, not Article 357 of the Civil Code. Only where the SPA is not commercial (rare) do Articles 357 and 468 of the Civil Code apply (agreed rate up to 20% per year; 10% per year if not agreed or unclear and disputed — Article 468.1, 468.2). Applying Article 357 (10% per year) to an inter-enterprise SPA is the wrong forum. A well-drafted SPA always states the late-payment interest rate to avoid disputes over calculation.
2. Late-payment interest under Article 306: an automatic right, no proof of loss needed
Under Article 306 of the Commercial Law, a party late in paying for goods, service remuneration or other reasonable costs must pay interest on the late-paid amount at the average overdue-debt interest rate on the market at the time of payment, for the duration of the delay. Strengths of this tool:
- No need to prove loss;
- No prior contractual agreement required — this is an automatic statutory right;
- The rate is determined per Article 11 of Resolution 01/2019/NQ-HDTP: the average of the overdue interest rates of at least 03 commercial banks in the province or city where the adjudicating court sits, at the time of payment (the first-instance trial date).
In practice, courts commonly use the average overdue rates of 3 major banks at the trial locality. This article gives no specific percentage figure — the correct method is the one guided by Resolution 01/2019 above.
3. The triple sanctions available to the seller: interest, penalty, damages
- Late-payment interest — an automatic right (Article 306), calculated on the late-paid principal multiplied by the delay period and the average market overdue rate;
- Penalty for breach — only if the SPA contains a penalty clause (penalties require agreement, Article 300); the penalty must not exceed 8% of the value of the breached obligation (Article 301). “Automatic 8% penalty” is wrong — 8% is a cap, not a default;
- Damages — the seller must prove the loss, its extent and the direct benefits lost (Article 304), and have performed the duty to mitigate (Article 305); damages must not overlap with what late-payment interest already compensates; and under Precedent 09/2016/AL: no late-payment interest is calculated on penalty or damages amounts — only on the late-paid principal;
- Where a penalty is agreed, the seller may claim both the penalty and damages (Article 307.2 of the Commercial Law).
4. The typical M&A dispute: buyer retains or sets off the deferred portion
A common M&A scenario: the buyer retains or sets off the deferred price, citing the seller false warranties. Right or wrong depends on the SPA terms: does the contract allow set-off, what is the notice procedure, what is the claim deadline. If the SPA does not permit set-off and the buyer withholds unilaterally, that is late payment — and the buyer bears Article 306 interest. (On false warranties, see the analysis of seller misrepresentation in M&A.)
A seller seeking to terminate the SPA for late payment may do so only for serious breach. Tools such as escrow, earn-out and holdback are not statutory institutions — all rest on contractual agreement and should be spelled out in the SPA.
5. Foreign element: payment through licensed banks
In deals with foreign investors, payment of share or capital-contribution purchase prices must go through a licensed bank, via the investment capital account under Circular 38/2026/TT-NHNN (effective 18/8/2026, replacing Circular 06/2019/TT-NHNN — the “direct investment capital account (DICA)” name no longer exists). Foreign investors may open the investment capital account right after being granted the enterprise registration certificate; all investment-related receipts and payments go through licensed banks. No cash payments or personal accounts. The Foreign Exchange Ordinance 28/2005/PL-UBTVQH11 (amended 2013) remains in force.
On the investment framework: the Law on Investment 143/2025/QH15 (effective 01/3/2026) has replaced the 2020 Law on Investment — do not cite Law 61/2020 or Decree 31/2021 for current matters.
Frequently asked questions
For an SPA between two enterprises, is late-payment interest calculated under Civil Code Article 357 at 10% per year?
No. Commercial contracts apply Commercial Law Article 306 (average market overdue rate, per Resolution 01/2019); Article 357 applies only to non-commercial relationships.
Can late-payment interest be charged on penalties and damages too?
No. Under Precedent 09/2016/AL, interest is calculated only on the late-paid principal.
Without a penalty clause in the SPA, can the seller still claim an 8% penalty?
No. Penalties require agreement (Article 300); 8% is the cap (Article 301), not a default rate.
What if the buyer unilaterally sets off the deferred portion, claiming false warranties?
If the SPA does not permit set-off, that is late payment — the buyer bears Article 306 interest. Right or wrong turns on the SPA set-off clause, notice procedure and claim deadline.
How are purchase prices paid in deals with foreign investors?
Through licensed banks, via the investment capital account under Circular 38/2026/TT-NHNN (effective 18/8/2026); no cash or personal accounts.
Sources
- Commercial Law 36/2005/QH11: Articles 300–301 (penalties, 8% cap), Articles 302–305 (damages, duty to mitigate), Article 306 (late-payment interest), Article 307.2 (penalty plus damages);
- Resolution 01/2019/NQ-HDTP, Article 11 — determining the average market overdue interest rate;
- Precedent 09/2016/AL — no late-payment interest on penalty or damages amounts;
- Civil Code 91/2015/QH13: Articles 357, 468 (late-payment interest in civil relations), Article 328 (deposit), Article 430 (asset sale), Articles 423, 428 (cancellation/termination), Article 429 (3-year limitation);
- Circular 38/2026/TT-NHNN (effective 18/8/2026, replacing Circular 06/2019/TT-NHNN) — foreign exchange management for foreign investment;
- Law on Investment 143/2025/QH15 (effective 01/3/2026) — replacing the Law on Investment 61/2020/QH14.
Conclusion
A seller facing late payment of deferred M&A consideration holds a triple sanction toolkit: automatic late-payment interest under Article 306 (no prior agreement or proof of loss needed), contractual penalties where the SPA provides (8% cap), and damages where actual loss is proven — with the hard boundary of Precedent 09/2016: no interest on penalty or damages amounts. The key remains the SPA itself: spell out the late-payment rate, set-off conditions and claim procedures at the negotiation stage.
Is your sell-side facing late payment in an M&A deal? Contact FLAT Law Firm for advice.
For reference only; not legal advice. This content was prepared by AI and will undergo quality review by the AI Legal Council of FLAT Law Firm before any publication consideration; it is not the legal opinion of a licensed human lawyer. Laws and regulations may change; verify the current legal texts before applying them.
