How To Conduct Legal Due Diligence for M&A in Vietnam?

Legal Due Diligence helps management make better investment decisions in Vietnam

Mergers and Acquisitions (M&A) have become popular in Vietnam as the country develops and more investors are eager to invest and gain control of the business enough to engage in and decide important business matters through partial or full ownership of an enterprise.  A successful M&A means the parties achieve their financial and commercial goals (increasing capital, raising management capacity, branding, etc) and ensure safety and restraint of the risk at the lowest level, through legal due diligence undertaken by law firms in Vietnam.

The Importance of Legal Due Diligence of Enterprise in M&A Activities

Legal due diligence of enterprises focuses on a full and detailed assessment of legal issues relating to the legal entity, capital contribution status, shareholder status, legal rights and obligations. From the investigation information, the parties can anticipate legal risks, and assess opportunities to come up with alternatives. In addition, legal assessments help parties evaluate the reliability of their counterparts as well as understand their advantages and constraints for the negotiation process

What Legal Due Diligence in M&A Activities Entail?

Evaluate the factors related to the legal status and capacity of the target enterprise: Review the legitimacy of the establishment, operation, and possession of the enterprise; ensure that the enterprise is not subject to procedures for dissolution or bankruptcy and compliance with the law of the enterprise in the course of operation. The information to be checked includes: dossiers, certificates of enterprise establishment, operation licenses, practice certificates, professional liability insurance, company charter, the agreement between the company owner on rights of shareholders, capital contributors, minutes of meetings, member/shareholder register, and certificate of capital contribution.

Evaluate the factors related to the business and financial activities of the target enterprise: Review the system of customers and partners of the enterprise; the documents on economic contracts (with customers, suppliers, etc); dossier of investment, construction, land, project; information on the guarantee, mortgage (if any), debit and credit agreement, M&A, financial leasing contract, exclusive contract, franchise, etc, in terms of value, legality, validity, progress to evaluate legal risks in the future. Review the financial statements on the accuracy of the financial status of the business.

Verify the factors related to labour: Review labour contracts, labour agreements, and internal labour regulations to determine the enterprise’s financial obligations to employees, compliance with Labor law and reception of labour after the purchase or sale.

Verify the factors related to intellectual property: Review intellectual property rights of enterprises including trademarks, trade names, industrial designs, layout designs, business secrets, etc; the property has granted the patent/license. Review matters of infringement of intellectual property rights of other organizations, individuals or legal persons to anticipate the risks of being sued or claiming damages.