7. To what level of detail is due diligence customarily undertaken?

Before officially contacting the potential target, the buyer conducts a preliminary assessment based on publicly available information. The buyer then contacts the target, expresses its intention of buying shares/subscribing for its shares and the parties sign a confidentiality agreement before the due diligence process. The confidentiality agreement basically includes confidentiality obligations in performing the transaction. The enforcement of confidentiality agreements by courts in Vietnam remains untested.

A buyer’s legal due diligence usually covers the following matters:

• Corporate details of the target and its subsidiaries, affiliates and other companies that form part of the target.
• Contingent liabilities (from past or pending litigation).
• Employment matters.
• Contractual agreements of the target.
• Statutory approvals and permits regarding the business activities of the target.
• Insurance, tax, intellectual property, debts, and land-related issues.
• Anti-trust, corruption and other regulatory issues.

8. What are the key decision-making organs of a target company and what approval rights do shareholders have?

It is necessary to obtain the approval of the general meeting of shareholders when there is a share transfer of a founding shareholder of a joint stock company within three years from the issuance of the Enterprise Registration Certificate. The approval normally includes the:

• Number of shares offered.
• Price of the offer.
• Conditions of the offer.

There is no statutory requirement that prohibits a target board from soliciting or recommending other offers before completion of a transaction. However, in practice, the parties can agree on such restrictions.

9. What are the duties of the directors and controlling shareholders of a target company?

Shareholders of a public company must (i) not take advantage of the major shareholder’s status to influence rights and interests of the company and other shareholders as prescribed by law and the company’s charter; (ii) disclose information as prescribed by law; and (iii) other obligations prescribed by law and the company’s charter.

10. Do employees/other stakeholders have any specific approval, consultation or other rights?

There is no requirement under Vietnamese law that the employees must be consulted about the offer. However, if a layoff is to be conducted, the employer must:

• Prepare a labour usage plan.
• Consult with the employee representative.
• Notify the competent labour authority on the implementation of the labour usage plan.

Author: Dr. Oliver Massmann

Email: omassmann @duanemorris.com