A capital transfer agreement has no “statutory payment deadline” — the law leaves it to the parties, and precisely for that reason the payment clause is where deal risk concentrates: when money is paid, in which tranches tied to which procedural milestones, how much the penalty is for late payment, and at what point the seller may cancel. This article explains the legal frame of each of those questions, including the 8% breach penalty cap many drafters do not know they are touching.
1. Payment deadlines: freely agreed, but tie them to procedural milestones
Vietnamese law sets no general payment deadline for capital transfer agreements. The common structures in M&A and capital transfer practice at FDI enterprises are three: single payment at closing, after conditions precedent are satisfied (capital acquisition approval if applicable, member/shareholder change registration, register entry); tranched payment — a deposit/escrow amount on signing, the main portion at closing, and a holdback released after a period securing the seller’s post-deal covenants; and deferred/earn-out payment tied to post-closing business performance. Whichever structure is chosen, the core drafting principle is that each tranche ties to a verifiable event (the approval date, the shareholder/member register entry date, the investment certificate amendment date) plus a number of days from that event — rather than fixed calendar dates that break when state procedures run slower than expected. The payment clause must also specify the money channel: in foreign-investor deals, payment moves through the ICA under Circular 38/2026/TT-NHNN, and the “payment date” means the date money actually lands in the designated account, not the date the buyer issues the transfer order.
2. Late payment: breach penalties, late interest and the 8% cap to know
When the buyer pays late, the seller typically has three layers of agreed entitlements. Breach penalty: the parties freely agree the late payment penalty — but there is an important statutory cap: under Article 301 of the Law on Commerce 36/2005/QH11, in a commercial relationship, the penalty for a breach may not exceed 8% of the value of the breached contract obligation portion, unless specialised law provides otherwise. Article 418 of the Civil Code 91/2015 likewise recognises agreed breach penalties with a corresponding limit in its scope. The drafting consequence: an “0.1% per day on the late amount, uncapped” clause in a capital transfer agreement between traders risks being cut down to the 8% cap of the breached obligation portion in a dispute — and the obligation portion here is the very tranche paid late, not the entire transfer price. Late payment interest: beyond the penalty, the seller usually earns interest on the late amount at an agreed rate; absent agreement, the overdue interest mechanism under the corresponding civil/commercial rules applies. Damages: penalty and damages are parallel regimes — a seller wanting both must agree them expressly, because under the Law on Commerce’s general mechanism, where a penalty is agreed the aggrieved party gets the penalty and gets damages only if the agreement also provides for damages.
3. How late is late enough for the seller to cancel?
The seller’s cancellation right does not arise automatically from a number of late days: it comes from two sources. The first source is the agreement itself: well-drafted transfer agreements always carry a termination clause listing “the buyer fails to pay tranche X within N days after a reminder notice” as a ground for the seller’s unilateral termination, with consequences: retaining the deposit/security, restoring the status quo (deleting the member change record if already entered), and claiming penalty/damages. The second source is statute: under Article 423 of the Civil Code 91/2015, a party may cancel the contract where the other party seriously breaches an obligation — a serious breach meaning failure to perform properly to the extent the other party cannot achieve the contract’s purpose. Being a few days late on a small tranche rarely meets this threshold; being long overdue on the entire purchase price after repeated reminders does. That dividing line is why the agreement should define it in advance: state which tranches are “essential obligations”, the maximum tolerated delay and the reminder notice procedure — then cancellation rests on the agreed text instead of an argument about “seriousness” before a court/arbitral tribunal. One more note: if the member/shareholder change was already registered before the money fully arrived (the “register first, pay later” structure — a seller risk), the paper cancellation right does not automatically restore the old ownership structure; the seller needs a reverse registration procedure and possibly a dispute resolution body’s decision — one more reason never to enter the register before the main tranche has landed or equivalent payment security exists.
4. A deposit before the main agreement: advisable?
A deposit is a security measure for contract formation/performance recognised by the Civil Code 91/2015 in Article 328: the depositing party hands a sum of money/assets to the deposit holder for a period to secure formation or performance; if the depositor refuses to form/perform, the deposit belongs to the holder (unless otherwise agreed); if the holder refuses, it must return the deposit plus an equivalent amount (deposit penalty), unless otherwise agreed. In capital transfers, a deposit does its work in the stage between the letter of intent (LOI) and the main agreement: it locks the buyer’s commitment during due diligence and approval-seeking, and gives the seller a first security amount if the buyer walks away. Three points must be drafted clearly when using a deposit: the conversion point — whether the deposit is credited against the first payment tranche when the main agreement is signed/closes, and when it is returned if the deal dies because an objective condition precedent fails (for example the capital acquisition approval is refused) — this objective-death case should be separated from “buyer refusal” to avoid wrongful forfeiture arguments; where the deposit is held — directly by the seller or through an escrow/blocked account for large deals; and the money channel — a deposit from a foreign investor must also reckon with the ICA channel as the deal progresses into transfer price payment. With these three points written clearly, a deposit is a cheap and effective deal-discipline tool; written vaguely, it becomes the most common dispute source in deals that die mid-way.
How long are payment deadlines in capital transfer agreements usually set?
There is no statutory deadline — the parties agree it freely. Common practice: payment at closing after conditions precedent are satisfied, or in tranches comprising a deposit/escrow on signing, the main portion at closing and a holdback after the deal. The drafting principle is to tie each tranche to a verifiable event (the capital acquisition approval date, the member change/shareholder register entry date, the IRC amendment date) plus a number of days from that event, rather than fixed calendar dates; and in foreign-investor deals, payment moves through the ICA under Circular 38/2026/TT-NHNN.
How much is the breach penalty if the buyer pays late?
As agreed in the contract, but with a statutory cap in commercial relationships: Article 301 of the Law on Commerce 36/2005/QH11 limits the breach penalty to no more than 8% of the value of the breached contract obligation portion (the portion here being the late tranche). An uncapped per-day penalty clause risks being cut to this cap in a dispute. Beyond the penalty, the seller may also agree late payment interest on the late amount, and damages if the agreement additionally provides for damages.
May the seller cancel the contract if the buyer pays late?
Yes, on two grounds: the termination clause in the agreement (well-drafted agreements always list failure to pay beyond a number of days after a reminder notice as a unilateral termination ground), or the statutory ground in Article 423 of the Civil Code 91/2015 where the buyer seriously breaches an obligation to the extent the seller cannot achieve the contracting purpose. Being a few days late on a small tranche rarely meets the statutory threshold, so the agreement should itself define essential tranches, the maximum tolerated delay and the reminder procedure.
Should a deposit be placed before signing the main transfer agreement?
Yes, for deals with a long due diligence/approval stage: a deposit under Article 328 of the Civil Code 91/2015 locks the buyer’s commitment and secures the seller if the buyer walks away (a refusing depositor forfeits the deposit; a refusing holder returns the deposit plus an equivalent amount, unless otherwise agreed). Three points must be drafted clearly: which payment tranche the deposit is credited against when the deal completes, how the deposit is treated if the deal dies on an objective condition precedent failure (distinct from buyer withdrawal), and where the deposit is held (directly or in an escrow account for large deals).
