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Tech Startup M&A in Vietnam: IP Due Diligence and Key Personnel Retention

20 min readFLAT LAW FIRM
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When buying a manufacturing company, the buyer can see the factory, the machinery, and the inventory. When acquiring a tech company or a startup in Vietnam, what the buyer is really paying for is invisible: source code, algorithms, brands, user data — and the engineers and founders who created them. Many tech startup M&A deals in Vietnam run into trouble not because the valuation was wrong, but because only after signing does the buyer discover that the core source code was written by a freelancer with no IP assignment agreement, or that the CTO — who holds the entire system architecture in his head — walks out right after closing because no retention mechanism was in place.

This article is for investors, buyers, and startup leadership preparing for a tech company M&A deal in Vietnam. It rests on two pillars: intellectual property due diligence under the Intellectual Property Law, and the people side — from legal obligations in mergers and acquisitions under the Labor Code 2019 to mechanisms for retaining key personnel after the deal. The final section provides a 12-step checklist to apply directly to each deal.

Table of contents

1. Why IP and key personnel determine the deal's value

In tech company M&A, the target's value structure differs sharply from a traditional business. Tangible assets usually account for only a small share; most of the value lies in intellectual assets (source code, patents, trademarks, trade secrets, data) and in the team's capabilities — particularly the founders, the CTO, system architects, and core engineers. The two pillars are tightly linked: IP is created by people, and if the people who created it leave carrying unprotected know-how, the deal's value can evaporate within months.

From a Vietnamese legal perspective, the buyer must answer three questions decisively before locking in the price:

First, does the target company actually own the IP it claims to own? Source code written by employees during working hours, code written by a freelancer under a piecework contract, a patent registered in the CTO's personal name — each scenario carries a different ownership regime under the Intellectual Property Law. If the chain of title breaks at any link, the buyer may be paying for an asset it has no legal right to exploit exclusively.

Second, has the IP been transferred and registered through the proper procedures? Contracts transferring industrial property rights must be in writing and must be registered with the Intellectual Property Office of Vietnam to take effect against third parties. Many startups sign trademark or patent transfer contracts with founders but never register them — only discovering in a dispute that the law does not recognize them as the owner vis-à-vis a bona fide third party.

Third, will the key team stay after the deal, and what does the law require when the workforce structure changes? The Labor Code 2019 imposes an obligation to develop a labor usage plan when a merger or acquisition affects the employment of many employees. In parallel, the buyer needs commercial tools — retention bonuses, earn-outs tied to tenure, non-compete agreements — to protect the human value of the deal.

These three questions are also the three risk clusters the share purchase agreement (SPA) must address through representations and warranties, conditions precedent, and indemnity mechanisms. This article assumes basic familiarity with M&A deal structures and goes deep into the two areas distinctive to tech deals: IP and key personnel.

Computer software — including source code, machine code, and design documentation — is protected as a copyrighted work. In a tech startup, it is often the most valuable asset. The first question of any IP due diligence is always: who owns the copyright in the source code?

The Intellectual Property Law answers with a "whoever commissions the work owns it, unless agreed otherwise" principle. Specifically, Article 39 provides that an organization assigning a creative task to an author who is its member, or an organization or individual entering into a contract with an author to create a work, owns the economic rights (Article 20) and the right to publish the work (Article 19(3)) — unless the parties agree otherwise. In other words, if an engineer is the company's employee and writes code as an assigned task, the company owns the copyright in that source code.

But this principle has three exceptions the buyer must examine carefully in every deal:

First exception: a different agreement. Article 39 allows the parties to agree otherwise. Many early-stage startups sign cursory employment contracts, or use template contracts with no IP clause. Worse, some contracts with founders expressly state that IP belongs to the individual founder. In that case, even code written during employment with the company legally belongs to the individual — the buyer must negotiate a separate transfer, and the founder holds strong bargaining power right before closing.

Second exception: collaborators, freelancers, outsourcing vendors. If a critical module was written by a freelancer under a piecework contract with no copyright transfer clause, then under Article 39 the contracting party (the company) is the owner — unless agreed otherwise. That sounds favorable to the company, but in practice many software outsourcing contracts merely say "Party B delivers the product" without mentioning copyright; in a dispute, the freelancer may argue they only transferred a right of use. Due diligence must read each outsourcing contract — nothing can be assumed.

Third exception: moral rights cannot be transferred. Article 19 of the IP Law provides that moral rights attached to the author (naming the work, using their real name or pen name on the work, protecting the work's integrity) are non-transferable. Article 45 permits only the transfer of economic rights. The practical consequence: even where the company owns all economic rights in the source code, the author (the engineer) retains moral rights. In an M&A deal this rarely creates direct risk, but the buyer should know better than to draft an SPA clause demanding "transfer of all copyright including moral rights" — a clause void from the moment it is drafted.

Checklist for this section: inventory all source code and technical documentation; cross-reference each part against the corresponding employment, collaboration, and outsourcing contracts; determine whether IP clauses exist; for parts lacking agreements, require the seller to sign supplementary transfer documents before closing.

3. Patents and technical solutions: who has the right to register?

Not every tech startup holds granted patents, but for deep-tech, AI, and hardware companies, patents and utility solutions can be the core asset. Due diligence must answer two questions: who has the right to register, and has that right been properly exercised?

Article 86 of the IP Law (as amended by the 2022 IP Law) provides: an organization or individual that invests funds and material facilities in an author in the form of assigning or hiring work has the right to register patents, industrial designs, and layout designs — unless the parties agree otherwise. So if the CTO researched and created a technical solution while performing tasks assigned by the company, using the company's funds and equipment, then the company — not the individual CTO — holds the right to file.

Two points commonly generate disputes. First, where multiple people co-created or co-invested: Article 86 requires the right to register to be exercised only with the consent of all parties. In a startup where several co-founders participated in the research, if one files in their own name alone, that application is defective as to the right holder — the buyer must require written confirmation from all co-founders.

Second, the right to register is itself a transferable asset: Article 86(3) permits transferring the right to register to another organization or individual by written contract, even after the application has been filed. In an M&A deal, if due diligence finds a pending patent application in a founder's personal name, the solution is not to cancel and refile (which would lose the priority date) but to sign a written contract transferring the right to register — a simple step many deals overlook.

One point often forgotten: the inventor's rights when they are not the owner. Article 122 provides that a patent inventor holds moral rights (being named in the patent) and economic rights to remuneration under Article 135. The minimum remuneration is guided at 10% of the profits the owner earns from using the patent, and 15% of the total amount the owner receives in each payment from licensing the patent. The buyer should check whether the target has paid remuneration to employee-inventors; if not, this is a latent liability the inventor could sue to recover after the deal closes. Note: the 10%/15% figures are cited from a Q&A on thuvienphapluat.vn referencing the implementing guidance — for each specific case, cross-check the currently applicable guidance with counsel.

4. Trade secrets: the easiest intangible asset to lose

For many tech startups, the most precious asset is not what has been registered but what nobody knows: the core algorithm, formulas, customer lists, pricing strategy, operating processes. The law calls these trade secrets, and their ownership regime is set out in Article 121 of the IP Law: trade secrets obtained by a hired party or a party performing an assigned task in the course of the hired or assigned work belong to the hiring or assigning party — unless the parties agree otherwise.

This provision seems to protect the company, but a trade secret is only protected when it meets the conditions: it is not common knowledge, it is capable of business application, and — most importantly — its owner has applied the necessary measures to keep it secret. In due diligence, the buyer should not only ask "what are the trade secrets" but verify "what has the company done to keep them secret": is there an internal confidentiality regulation, have employees signed NDAs, how is access to source code and data tiered, and when employees leave is there a procedure to revoke accounts and remind them of confidentiality obligations?

The greatest risk lies with departing key personnel. A CTO who leaves carrying knowledge of the system architecture in his head is something the law can hardly prevent entirely — an employee's general knowledge and skills are not trade secrets. The buyer must therefore draw a sharp line in the diligence file: which items are identified and protected trade secrets (documents, source code, databases with security measures), and which are know-how attached to individuals (to be handled through retention mechanisms, not IP law).

5. Trademarks and trade names: check who is named

A startup's brand — product name, logo, domain — is often highly valued by the buyer because it is tied to users and market share. Trademark due diligence has two steps: checking the protection status and checking the ownership chain.

On protection status: search at the Intellectual Property Office of Vietnam to see whether the mark has been granted a registration certificate, whether it remains valid (10 years, renewable multiple times), and which classes of goods and services the protection covers. Many startups register a mark for only a narrow class while their actual business has expanded across many classes — this gap is a risk of prior registration by third parties or disputes.

On the ownership chain: check whose name is on the certificate. It is not uncommon for a startup's trademark to be in an individual founder's name — because in the early days the founder filed it personally for speed. The deal must then include transferring the mark from the individual to the company (or directly to the buyer) before or simultaneously with closing.

When transferring a trademark, Article 139 of the IP Law sets limits the buyer must know: the transfer must not cause confusion about the characteristics or origin of the goods or services bearing the mark; the rights in a mark may only be transferred to an organization or individual meeting the conditions of a person entitled to register that mark. In practice, the IP Office's examination also considers cases where the mark is identical or confusingly similar to the transferor's trade name — if the founder keeps an old company whose trade name matches the transferred mark, the transfer contract registration file may be refused.

A note on trade names: under Article 139, rights in a trade name may only be transferred together with the transfer of the entire business establishment and business operations under that trade name — they cannot be separated. In a share deal, the target legal entity does not change so the trade name stays automatically; but in an asset deal, the buyer must structure the transaction to meet this condition.

If due diligence uncovers that the target's mark is being infringed (counterfeit goods, knockoffs), the buyer needs to assess the damage and the handling plan — the checklist for handling counterfeit trademark goods (T-571) can serve as a related reference for the post-M&A phase.

6. Transferring IP at closing: contracts and registration

Once due diligence is complete, all IP confirmed as belonging to the seller must be transferred to the buyer in a legally effective manner. The IP Law imposes two layers of requirements: contract form and registration procedure.

On form: Article 138 requires transfers of industrial property rights to be made by written contract. Article 140 lists the mandatory principal contents: full names and addresses of the parties, the basis of transfer, the transfer price, and the parties' rights and obligations. For copyright, Article 45 applies a similar principle to the transfer of economic rights. In a tech deal's SPA, the buyer should require a separate IP schedule listing each asset in full (source code, patents, trademarks, domains, identified trade secrets) rather than a generic transfer clause — because whatever is not clearly listed becomes a source of future disputes.

On registration procedure: this is where many deals are most complacent. Under Article 142 of the IP Law (paragraphs 3 and 4 added by the 2022 IP Law), industrial property transfer contracts must be registered with the Intellectual Property Office of Vietnam and take effect against third parties only after registration. In other words, a contract signed between the two parties binds the two parties, but without registration the buyer cannot assert rights against third parties — for example, it cannot sue for infringement as the owner, or it loses priority if the seller (intentionally or not) transfers the same asset to someone else afterward.

Practical closing for a tech M&A deal should include: signing the IP transfer contract simultaneously with the SPA; filing the transfer contract registration dossier at the IP Office immediately after closing; for pending patent and trademark applications, signing contracts transferring the right to register (under Article 86(3)); for IP registered abroad, checking the transfer recordation procedure in each jurisdiction — because effectiveness in Vietnam does not automatically take effect elsewhere.

7. Employment contracts in mergers and acquisitions

Unlike IP, employment relationships are not "transferred" in the sense of a sale — labor law has its own mechanism when a business changes owners. Buyers of startups must understand this mechanism correctly to avoid two mistakes: assuming they can freely replace the entire team after purchase, or assuming employment contracts automatically terminate on a change of ownership.

Article 43 of the Labor Code 2019 sets out employer obligations in cases of division, separation, consolidation, or merger; sale, lease, or conversion of enterprise type; or transfer of ownership or use rights over the enterprise's or cooperative's assets. Three core contents:

First, if the change of ownership affects the employment of many employees, the employer must develop a labor usage plan under Article 44. The plan must include: the number and list of employees continuing to be employed, those to be retrained for continued employment, those switching to part-time work; the list of retiring employees; the list of employees whose labor contracts must be terminated; the rights and obligations of the parties; and measures and financial sources to ensure implementation. The plan must be publicly notified to employees within 15 days of its adoption.

Second, the current employer and the succeeding employer are responsible for implementing the adopted plan. In a merger deal, the surviving company inherits all labor rights and obligations — it cannot invoke "change of ownership" to refuse commitments in the plan.

Third, employees laid off under the plan receive a job-loss allowance under Article 47 (one month's salary per year of service, minimum two months' salary), distinct from the severance allowance under Article 46 applicable to ordinary termination cases.

An important note on deal structure: in a share deal (purchase of shares/capital contributions), the employing legal entity does not change — labor contracts continue in force, and Article 43 only bites when the purchase leads to organizational restructuring affecting many employees' jobs. In a merger or consolidation, the merged legal entity terminates and Article 43 applies directly. The buyer must identify the correct deal structure to apply the right obligations — and this is also a point the purchase agreement should clearly allocate, as to which side bears allowance costs.

8. Retaining key personnel after the deal

Labor law protects employees' rights on a change of ownership, but no clause "retains" key personnel for the buyer. This is a commercial problem the buyer must solve through deal structure. Experience from tech startup M&A deals shows four commonly combined tools:

Retention bonuses: a payment to key personnel if they stay for a defined period after closing (typically 12–24 months). Simple and easy to implement, but it only incentivizes "staying," not "performing." Best designed in multiple tranches with part tied to specific work objectives.

Personnel-linked earn-outs: part of the purchase price paid later, contingent on key personnel remaining (or the company hitting business targets they are responsible for). An earn-out is both a retention mechanism and a price-adjustment mechanism — but the trigger conditions must be drafted very carefully to avoid disputes over how targets are measured later.

New employment contracts with suitable terms: after closing, the buyer typically re-signs employment contracts with founders, the CTO, and key positions — with titles, authority, and remuneration (salary, bonuses, preferred shares) matching their new roles. This is also the opportunity to review and supplement IP and confidentiality clauses missing from the old contracts — closing the gaps found during IP due diligence.

Non-compete agreements: prohibiting key personnel from working for competitors or starting a competing business for a defined time and scope after departure. This is the most sensitive tool: the Labor Code 2019 does not directly regulate post-termination non-competes, so their enforceability depends on drafting under civil law and court practice. This article makes no hard claims about the validity of every non-compete template — for key personnel, work with counsel to draft bespoke agreements balancing the scope of restriction, duration, and proportionate compensation to the employee, rather than using one common template for all.

Beyond these four tools, the SPA should include protective clauses: the seller's representations on personnel status (no material labor disputes, all payables accrued), conditions precedent on signing new contracts with a defined key employee list, and indemnity or price-adjustment mechanisms if listed personnel leave during the lock-up period.

9. Foreign investors acquiring startups: procedures under the Investment Law 2025

Most tech startup M&A deals in Vietnam involve a foreign element — investment funds and foreign tech groups acquiring shares in Vietnamese startups. From 01/3/2026, the governing framework is the Investment Law 2025 (No. 143/2025/QH15, passed 11/12/2025, replacing the Investment Law 2020). Foreign buyers need to grasp three groups of rules:

Conditions for capital contribution and share/capital purchase. Foreign investors must satisfy: market access conditions under Article 8 of the Law; national defense and security safeguards; and land law regulations on conditions for receiving land use rights and using land on islands, in border areas, and coastal areas. For tech startups, the point to check most carefully is market access conditions — some technology, telecommunications, and data sectors may fall under conditional market-access business lines. The list of conditional business sectors for foreign investors should be cross-checked from the moment the deal is structured.

Registration procedures before changing members or shareholders. Not every share purchase must be registered, but foreign investors must complete capital contribution/share purchase registration before changing members or shareholders in any of three cases: the contribution or purchase increases the foreign investor's ownership ratio in an economic organization operating in a conditional market-access sector; the contribution or purchase results in the foreign investor holding over 50% of charter capital (rising from at or below 50% to above 50%, or increasing further when already above 50%); or the economic organization holds a land use right certificate for land on islands, in border areas, coastal areas, or areas affecting national defense and security. In deals where foreign funds acquire controlling stakes in Vietnamese startups, the second case is the most common.

Notes on guiding documents and transitional provisions. At the time of this article (September 2026), the Government is finalizing the decree guiding the Investment Law 2025; under Official Letter 2519/BTC-PC dated 04/3/2026 of the Ministry of Finance, administrative procedures in the investment field continue to be resolved under Decree 31/2021/ND-CP and Decree 19/2025/ND-CP until replacement documents are issued. Buyers should cross-check the guiding documents in force at the time of filing, as detailed regulations may change. An overview of the law's new points is presented in the article on the key changes of Investment Law 143/2025; practical experience in foreign investors acquiring Vietnamese companies is also a useful reference for structuring cross-border transactions.

10. 12-step IP and personnel due diligence checklist

Summarizing the above, the buyer should run this checklist before signing the purchase agreement — each step tied to a specific legal risk analyzed above:

  1. Inventory all of the target's intellectual assets: source code, patents/utility solutions, trademarks, domains, trade secrets, data.
  2. Cross-check each asset against its certificate or protection title: is the named holder the company or an individual; is it still valid; does the protection scope cover all actual business operations?
  3. Review employment contracts of all technical staff: do they contain IP and confidentiality clauses; which personnel signed contracts lacking these clauses?
  4. Review contracts with collaborators, freelancers, and software outsourcing vendors: do they contain copyright transfer clauses; for gaps, require supplementary transfer documents before closing.
  5. Check patents and pending patent applications: who holds the right to register under Article 86; are there co-authors or co-investors who have not consented; has inventor remuneration under Article 135 been paid?
  6. Assess the trade secret protection system: confidentiality regulations, NDAs, access tiering, procedures when employees leave.
  7. Search for IP disputes: are trademarks or patents under dispute or invalidation requests; does the source code use open-source components with copyleft licenses requiring source disclosure?
  8. Prepare IP transfer dossiers: draft transfer contracts (Articles 138, 140), contracts transferring the right to register (Article 86(3)), and a plan to file registration at the IP Office immediately after closing (Article 142).
  9. Determine the deal structure (share deal vs. merger) and assess obligations under Articles 43 and 44 of the Labor Code 2019: must a labor usage plan be developed; which side bears job-loss allowance costs (Article 47)?
  10. Build the key employee list and design retention mechanisms: retention bonuses, earn-outs, new employment contracts, non-compete agreements — drafted individually for each person, not one common template.
  11. Check market access conditions and capital contribution/share purchase registration procedures under the Investment Law 2025 if the buyer is a foreign investor.
  12. Convert all findings into SPA terms: representations and warranties on IP and personnel, conditions precedent, price-adjustment and indemnity mechanisms where the seller does not own the IP or key personnel leave during the lock-up period.

Conclusion

In tech company M&A, the buyer does not buy machinery or factories — the buyer buys intellectual property rights and the people who create value from that intellect. IP due diligence under the Intellectual Property Law (who owns the source code, who has the right to register patents, how trade secrets are protected, in whose name trademarks stand, whether transfer contracts have been registered) and people handling under the Labor Code 2019 (labor usage plans in mergers and acquisitions), plus key personnel retention mechanisms, are three indispensable layers of defense for a successful deal. Missing any layer, the buyer risks paying full price for assets it does not truly hold.

If your business is preparing to buy, sell, or invest in a tech company or startup in Vietnam, FLAT Law Firm's lawyers can accompany you from IP and personnel due diligence, reviewing the chain of title of intellectual assets, to deal structuring, drafting purchase agreements, and registration procedures under the Investment Law 2025. Contact our hotline 0988424851 for advice on your specific deal.

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