Legal due diligence is the process by which the buyer “inspects” the target company before money changes hands — and its quality decides whether the buyer pays the right price for a clean company, or a clean company’s price for one full of hidden risks. The 50-item checklist below organises the entire diligence scope into 8 groups, with a section identifying the risks most often missed at Vietnamese enterprises and how to handle issues found mid-process.
1. Groups A–B: Legal entity, capital (7) and licences (6)
Group A — Legal entity and capital structure (7 items): (1) the Enterprise Registration Certificate and its full change history; (2) the current charter and prior charters with provisions still effective; (3) the member/shareholder register reconciled with the actual ownership structure; (4) evidence of full charter capital contribution by each member/shareholder — a vital item, because “paper-contributed” capital is a classic risk; (5) resolutions/meeting minutes of material decisions over the last 3–5 years; (6) members’/shareholders’ agreements, supplementary contribution commitments, purchase/sale options; (7) the list of subsidiaries, branches, representative offices and outward investments. Group B — Licences and sector conditions (6): (8) the Investment Registration Certificate and policy approval decision (for FDI); (9) the sub-licence inventory and validity status; (10) maintenance conditions of each licence (capital, certificated personnel, facilities); (11) sector foreign ownership caps and current compliance; (12) conditions and terms of investment incentives being enjoyed; (13) investment compliance/project supervision reports of recent periods.
2. Groups C–D: Contracts (7) and labour (6)
Group C — Contracts and obligations (7): (14) key customer contracts and change of control clauses; (15) strategic supplier/partner contracts, non-assignment clauses; (16) loan, mortgage, guarantee agreements and financial covenants; (17) premises/warehouse leases and remaining terms; (18) related-party contracts and the market nature of their terms; (19) off-balance-sheet commitments: guarantees, commitment letters, repurchase obligations; (20) property/liability insurance contracts in force. Group D — Labour (6): (21) the employee list, contract types and terms; (22) social/health/unemployment insurance compliance — social insurance arrears are the most common “hidden debt”; (23) internal labour rules, the collective labour agreement and their registration; (24) key personnel contracts: change of control clauses, non-competes, retention; (25) ongoing labour disputes and the dismissal discipline track record; (26) foreign employees: work permits and compliance status.
3. Groups E–F: Land, assets (6) and tax — legal aspects (5)
Group E — Land and assets (6): (27) land use right/asset ownership certificates of the company and land origin; (28) land lease contracts with the State/third parties, outstanding land rent and terms; (29) main fixed assets: ownership, mortgage status, security transaction registration; (30) finance-leased/operating-leased assets and end-of-term clauses; (31) construction works: building permits, acceptance, completion records; (32) disputes, planning, land recovery risks affecting the operating site. Group F — Tax from the legal angle (5) (in-depth quantification belongs to separate tax diligence): (33) tax inspection/finalisation minutes of recent periods and open conclusions; (34) tax debt status and back-assessments under appeal; (35) related-party transaction files and pricing documentation across the years; (36) the validity of tax incentives being enjoyed against their conditions; (37) contractor tax and PIT withholding compliance in typical transactions.
4. Groups G–H: Disputes, compliance (6) and IP, data (7) — plus the most-missed risks
Group G — Disputes and compliance (6): (38) ongoing litigation/arbitration and latent dispute risks; (39) administrative sanctions in the last 3–5 years and remediation; (40) environmental compliance: environmental impact assessment, environmental licences, monitoring; (41) fire prevention and occupational safety compliance at production sites; (42) anti-money-laundering/special-sector compliance where applicable; (43) unfulfilled commitments to state authorities (project progress, deposits). Group H — Intellectual property and data (7): (44) trademarks: registration, actual owner (a common find: trademarks standing in an individual shareholder’s name instead of the company’s); (45) patents, software copyrights and third-party software licences; (46) domain names, digital platform accounts — who owns them; (47) trade secrets and confidentiality agreements with employees/partners; (48) personal data: compliance with the personal data protection regime (Decree 13/2023/ND-CP — expired on 01/01/2026, replaced by Decree 356/2025/ND-CP) in the company’s operations; (49) technology transfer contracts and royalty fees with related parties; (50) ongoing or threatened IP disputes. Across the 50 items, Vietnamese practice shows the five most-missed points are: incompletely contributed capital with “beautiful” paperwork (item 4), investment incentives with forgotten monitoring conditions (12), change of control clauses in major customer contracts (14), accumulated social insurance arrears (22) and trademarks registered in the wrong entity’s name (44) — a good diligence process spends disproportionate time on exactly these five.
5. Timing, cost, and handling issues when they surface
Legal diligence timing depends on company scale and data room quality: a mid-sized enterprise with tidy files usually closes within a few weeks; a multi-entity, multi-site structure can take a few months. Cost depends on scope, document volume and depth per group — there is no credible general price outside a scope-specific quote; the most effective cost control is agreeing the scope per the checklist and a materiality threshold at the outset, rather than cutting scope mid-way. When diligence surfaces an issue, the standard international M&A reaction is rarely to cancel immediately: handling tools by severity are price adjustment by the quantified risk value; additional conditions precedent compelling the seller to remedy before completion (contribute full capital, re-obtain a licence, pay social insurance arrears); representations, warranties and indemnities in the agreement with seller liability for known risks; holding back part of the price/escrow for a period for unquantified risks; and only issues of the “toxic” kind — document fraud, core capital ownership disputes, an irremediable main licence — are grounds to walk away. The 50-item checklist is therefore not a pass–fail exam for the target; it is the map for both sides to price risk correctly and allocate that risk by contract.
When buying a Vietnamese company, what legal items must be checked?
50 items in 8 groups: legal entity and capital structure (7 — including full contribution evidence and the member/shareholder register); licences and sector conditions (6 — including foreign ownership caps and incentive conditions); contracts and obligations (7 — including change of control clauses and off-balance-sheet commitments); labour (6 — including social insurance arrears); land and assets (6); tax from the legal angle (5); disputes and compliance (6 — including environment, fire safety); intellectual property and data (7 — including trademarks and personal data).
Which legal risks are most often missed when buying a company?
The five most-missed points in Vietnamese practice: (1) charter capital not fully contributed though the paperwork looks complete; (2) investment incentives being enjoyed with forgotten conditions, at risk of clawback; (3) change of control clauses in major customer contracts giving the customer a termination right when the company changes owners; (4) social insurance arrears accumulated over many periods; (5) trademarks and digital assets standing in an individual shareholder’s name instead of the company’s, so the buyer thinks it bought the brand while legally it has not.
How long does legal due diligence take, and what does it cost?
There is no general figure: timing depends on company scale and data room quality — a mid-sized enterprise with tidy files usually takes a few weeks; a multi-entity, multi-site structure can take a few months. Cost is quoted per the specific diligence scope (number of groups, depth, document volume). The effective control is agreeing the scope per the checklist and a materiality threshold at the outset, so resources concentrate on high-risk items rather than spreading evenly.
If issues are found during diligence, should the purchase continue?
It depends on severity — the standard M&A handling tools are: price adjustment by the quantified risk; conditions precedent compelling the seller to remedy before completion (contribute full capital, settle social insurance arrears, supplement licences); seller representations, warranties and indemnities for specific risks; and holding back part of the price (escrow/holdback) for unquantified risks. Only irremediable issues touching the deal’s core — document fraud, capital ownership disputes, a void main licence — are reasonable grounds to walk away.
This article has been quality-reviewed by the FLAW AI Legal Council
