Valuation in Distressed Exits in Vietnam: Discounts and Negotiation — An FDI company has posted losses for several years, cash flow is negative, and the investor wants to sell its stake, yet buyers offer only a fraction of the contributed capital. In a distressed exit the valuation gap rarely sits in tangible assets; it sits in hidden debts, unsettled tax exposure and licence risks that nobody has quantified.
Legal basis and the nature of the issue
Transfers of capital contributions and shares follow the Law on Enterprises 59/2020/QH14 (amended by Law 76/2025/QH15): an LLC member must first offer its stake to the remaining members before selling to outsiders, while JSC shareholders transfer freely except for voting preference shares and charter restrictions. Where a foreign buyer changes ownership in a case requiring registration, an approval for capital contribution or share purchase under the Law on Investment 143/2025/QH15 (effective 1 March 2026) is needed. The transfer price is a civil agreement under the Civil Code 91/2015/QH13, but the tax authority may assess a market price where the declared price is not arm’s length, under the Law on Tax Administration 108/2025/QH15.
Scope of this article and its distinguishing point
This article covers valuation only where the seller negotiates from weakness because the business is distressed. It differs from the article on selling a loss-making business, which focuses on finding buyers, and from the exit-plan article, which is about planning from day one. The core here is the discount mechanism and how negotiation narrows the price gap.
Answering each client question
How large is the discount in a distressed exit?
No statute fixes the discount. In practice it is built from three layers: accumulated losses and payables that shrink equity value; the alternative shutdown cost (severance, lease termination) the buyer must absorb; and a reserve for tax and environmental risks not yet visible. A seller reduces the discount by proving each layer is smaller than the buyer assumes, using due-diligence numbers rather than argument.
Where should price negotiation start?
Start by fixing the valuation method in the term sheet: adjusted net asset value, discounted cash flow, or an earnings multiple. Once both sides use the same method, the debate narrows to input assumptions. Sellers should propose a completion-accounts price adjustment with an escrow holdback for unclear liabilities, instead of accepting a fixed price that deducts every risk up front.
Is an independent valuation mandatory for a capital transfer?
The law does not require an independent valuation for private transfers, except where state capital or regulated assets are involved. Still, when the transfer price diverges sharply from book value, a valuation certificate from a licensed appraiser is key evidence for the tax authority and for approval by the members’ council or the general meeting of shareholders.
How is a distressed exit taxed?
A foreign organisation transferring capital pays corporate income tax on transfer gains under the Law on Corporate Income Tax 67/2025/QH15; an individual pays personal income tax under the Law on Personal Income Tax 109/2025/QH15. A sale at a loss may produce no taxable gain, but the filing duty remains and the valuation file is the evidence that the loss is genuine, protecting against a market-price assessment.
What the business should do next
Practical steps: build a data room with three years of audited financial statements, a schedule of debts and guarantees, and the status of licences and land before approaching buyers; sign an NDA and a term sheet with a short exclusivity window; fix a price mechanism combining a base price, a completion adjustment and an escrow; then obtain the M&A approval under the Law on Investment 143/2025/QH15 where the foreign buyer falls in a registration case, before signing the definitive transfer agreement.
This article has been quality-reviewed by the FLAW AI Legal Council