A buyer has just spent tens of millions of dollars acquiring a business. What do they fear most? That the seller — who knows the customers, the trade secrets and the team inside out — sets up a directly competing company the very next day. To prevent this scenario, M&A agreements commonly include a non-compete commitment by the seller. But how far does such a commitment hold up legally in Vietnam, and where are its limits? This article analyzes the question under the legal framework in force as of 14 October 2026.
1. Post-M&A non-compete: essentially a freely negotiated agreement
The most important starting point: Vietnamese law does not directly regulate “non-compete” undertakings in commercial M&A relationships. No provision defines non-compete for business acquisitions, and no legal document prescribes a template for such a clause.
The validity of a non-compete commitment therefore rests on the principle of freedom of agreement in civil law: parties to a transaction may freely undertake commitments that the law does not prohibit. As long as a non-compete clause does not violate a legal prohibition or contravene social ethics, it binds the parties as part of the M&A contract.
Precisely because there is no dedicated framework, the quality of a non-compete clause depends almost entirely on drafting: the clearer the scope of the restriction, and the more closely it is tied to a legitimate interest worth protecting (customers, trade secrets, the target company’s specific markets), the more likely the clause is to withstand a dispute.
2. No statutory cap on duration or geographic scope
A practical question every buyer asks: how long can a non-compete run, and how far can its geographic reach extend? The answer under current law: there is no statutory cap on the duration or geographic scope of a non-compete in a commercial M&A relationship.
In other words, the law sets no “maximum two years” or “one province only” rule for non-compete undertakings between buyer and seller in an M&A deal. The parties agree on a duration and scope suited to the transaction — unlike employment relationships, which are subject to their own separate legal limits.
However, “no statutory cap” does not mean “draft whatever you like”. A non-compete with an excessively long duration, an overbroad geographic reach, or a ban on activities unrelated to the target company faces two risks: being challenged on reasonableness in a dispute and — more importantly — running into the boundary of the Competition Law (see section 3).
3. The hard boundary: the 2018 Competition Law
This is the single most important limit every non-compete clause in a Vietnamese M&A deal must respect. Competition Law 23/2018/QH14 (effective 1 July 2019) governs agreements in restraint of competition in Articles 11, 12 and 14:
- Article 11 identifies the forms of agreements in restraint of competition;
- Article 12 lists agreements in restraint of competition that are prohibited — if a non-compete commitment constitutes one of these prohibited forms, it will be dealt with under competition law;
- Article 14 provides for time-limited exemptions for agreements in restraint of competition — i.e. in some cases, such an agreement may be exempted from the prohibition for a defined period if the statutory conditions are met.
The practical message is clear: when drafting a seller non-compete for M&A, counsel must review the clause through the lens of the 2018 Competition Law and ensure it does not fall within the prohibited agreements under Article 12. A carelessly drafted non-compete — too broad, too long, untethered to a legitimate interest — is a prime candidate for scrutiny as an agreement in restraint of competition.
Note: the specific threshold at which a non-compete clause is treated as a prohibited agreement in restraint of competition requires case-specific advice for each transaction, based on market shares, the relevant market structure and the detailed content of the clause — no one-size-fits-all formula exists.
4. Combine with trade-secret confidentiality for comprehensive protection
A non-compete alone is not enough to protect the buyer. Even if the seller honors the non-compete, risk remains if trade secrets (customer lists, formulas, processes, pricing strategies) leak out and are used by third parties.
In practice, therefore, the non-compete clause is commonly paired with a trade-secret confidentiality undertaking — grounded in Clause 2, Article 21 of the Labor Code 45/2019/QH14 on the duty to keep business secrets confidential. The two layers complement each other: the non-compete stops the seller from competing directly, while the confidentiality undertaking stops the outflow of sensitive information — forming a “double fence” protecting the value of the target company the buyer has just paid for.
Buyers should also note: the confidentiality obligation should be designed independently of the non-compete, with its own duration and scope suited to the nature of each category of trade secret — not mechanically merged into a single clause.
5. Recommendations for drafting the non-compete clause
Drawing on the analysis above, a non-compete clause that “holds up” in a Vietnamese M&A transaction should:
- Be tied to a legitimate interest: the restricted scope should correspond to the target company’s actual business — prohibiting what the seller could genuinely harm, not blanket bans;
- Carry reasonable duration and geography: although the law sets no cap, duration and geographic scope should be proportionate to the time the buyer needs to stabilize and protect the acquired value;
- Be reviewed under Competition Law 2018: verify the clause does not constitute a prohibited agreement in restraint of competition under Article 12, and consider the availability of a time-limited exemption under Article 14;
- Include enforcement mechanics: spell out the consequences of breach (contractual penalties, damages) so the clause has “teeth” — a commitment without sanctions is often difficult to enforce in practice.
Frequently asked questions
Does a non-compete differ where the seller is an individual founder versus a company?
As a matter of legal principle, both rest on freedom of agreement and face the same Competition Law 2018 boundary. The difference lies in drafting practice: with a founder, the clause usually needs more detail on the scope of prohibited personal activities.
Can the seller be barred from competing nationwide for 10 years?
The law sets no specific cap, but such an overbroad and overlong clause faces significant risk: challenges to its reasonableness and scrutiny as a prohibited agreement in restraint of competition (Article 12 of Competition Law 2018). Take specific advice before finalizing.
Does a non-compete need to be registered with any state authority?
No. It is an agreement within the M&A contract between the parties, not an administrative procedure requiring registration.
What can the buyer do if the seller breaches the non-compete?
Apply the sanctions agreed in the contract (contractual penalties, damages) and pursue litigation or arbitration under the contract’s dispute resolution mechanism. This is why drafting the sanctions up front matters so much.
Sources
- Civil Code 91/2015/QH13 — effective 1 January 2017: the principle of freedom of agreement — the validity basis of the non-compete commitment;
- Competition Law 23/2018/QH14 — effective 1 July 2019: Article 11 (agreements in restraint of competition), Article 12 (prohibited agreements in restraint of competition), Article 14 (time-limited exemptions);
- Labor Code 45/2019/QH14: Clause 2, Article 21 (duty of business-secret confidentiality) — combined with the non-compete for comprehensive protection.
This article is for reference only and does not constitute legal advice. The content was drafted 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.
Need a seller non-compete clause drafted for your M&A transaction? Contact FLAT Law Firm for advice.
Legal content reviewed by the FLAW AI Legal Council and submitted to the owner for approval; not a practicing lawyer’s opinion, not a substitute for legal advice on a specific matter.