In the context of M&A (Mergers and Acquisitions), using shares as a payment method is becoming increasingly popular. However, it requires strict adherence to legal regulations. To ensure the legality and effectiveness of the transaction, companies must be well-versed in the legal requirements and regulations related to issuing shares in M&A.

Legal Regulations on Using Shares in M&A

In Vietnam, public companies commonly use shares to exchange with shares of other companies. The State Securities Commission (SSC) oversees this practice. Legal documents, such as Decree 155/2020/ND-CP and Circular 118/2020/TT-BTC, officially recognize this practice.

The forms of share issuance for exchange include:

• Issuing Shares for Exchange: Issuing additional shares to exchange for shares or equity interests in another company, or to exchange a debt of the issuing organization to creditors (Clause 10, Article 3 of Decree 155).
• Issuing Shares for Exchange to Shareholders of Non-Public Joint-Stock Companies: Exchanging equity interests for members of a limited liability company (Article 49 of the Decree).
• Issuing Shares for Exchange with Specific Shareholders in Another Public Joint-Stock Company: (Article 51 of the Decree).
• Issuing Shares for Exchange with Non-Specific Shareholders of Another Public Joint-Stock Company: This must be done through a public offering with the newly issued shares (Article 53 of the Decree).
• Issuing Shares for Exchange under a Merger or Acquisition Contract: (Article 55 of the Decree).

Articles 49, 51, and 53 of Decree 155/2020 state that shares issuance for exchange will not dissolve the exchanged company. It may, however, change the company type or cause delisting.

Requirements for Companies Using Shares as Payment

When using shares as a payment method in M&A, companies must comply with regulations on the conditions for issuing shares for exchange. Specifically:

Failure to comply with these regulations may render the transaction illegal and lead to severe legal consequences.

International Share Exchange Possibilities

Currently, Vietnamese law does not provide specific regulations and legal frameworks for share exchanges between a company based in Vietnam and a foreign legal entity, or among all non-public companies. Therefore, conducting international transactions requires careful consideration and thorough legal preparation.

Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town Building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn | Email: miller@hmlf.vn