1. General Overview of Mergers and Acquisitions

1.1 Legal Nature of Establishing an Acquisition Method

In corporate mergers and acquisitions (M&A), determining the implementation method is a fundamental legal and technical step that defines how ownership, control, and commercial obligations are transferred between the acquirer and the target. This decision shapes the entire trajectory of the due diligence process, internal approval procedures, administrative compliance with state authorities, labor relations resolution, and the establishment of tax bases.

1.2 Classification under Customary Practice and Vietnamese Law

Under the current legal framework, corporate acquisitions are typically executed through two core models:

• Share Purchase (or Equity Purchase): An acquisition where the object is the charter capital of a corporate entity.
• Asset Purchase: An acquisition where the object comprises specific, legally owned assets of a corporate entity. Each approach generates entirely distinct legal consequences regarding the continuity of corporate status, asset composition, and the debt obligations of the participating parties.

2. Legal Regulations Governing the Share Purchase Model

2.1 Legal Nature and Object

A share purchase entails the buyer acquiring ownership of a portion or the entirety of the charter capital from the shareholders (in a Joint Stock Company) or capital-contributing members (in a Limited Liability Company) of the target enterprise. The object here is the shares or capital contribution portions, not the specific physical or intangible assets owned by the target entity.

Upon completion of the transfer, the target enterprise continues to exist independently without any interruption to its corporate status. The entity retains its entire portfolio of tangible and intangible assets, property rights, and all existing debt obligations. The only legal alteration occurs within the ownership structure. The buyer establishes control over business operations through voting rights corresponding to the acquired capital proportion.

2.2 Direct Governing Legal Framework

 This acquisition model is governed by the following systems of legal instruments:

• Enterprise Legislation: Directly regulated by the Enterprise Law No. 59/2020/QH14, as amended and supplemented by Law No. 03/2022/QH15, Law No. 43/2024/QH15, and Law No. 76/2025/QH15. Participating parties must strictly comply with internal transfer conditions, particularly the obligation to transparently disclose ultimate beneficial owners. For a multi-member Limited Liability Company, the transferring member must respect the right of first refusal of existing members. For a Joint Stock Company, founding shareholders are restricted from transferring their ordinary shares to non-founding shareholders for three years from the issuance date of the Enterprise Registration Certificate.
• Investment Legislation: Mandatory when the buyer is a foreign investor or a foreign-invested economic organization, governed by the Investment Law No. 143/2025/QH15. This law notably removes the requirement for foreign investors to establish an investment project prior to setting up an economic organization. Nevertheless, parties must ensure compliance with market access conditions, adhere to foreign ownership limits under international treaties, and execute the registration procedures for purchasing capital contributions at the Department of Planning and Investment where required by law.
• Securities Legislation: If the target enterprise is a public company, the process must comply with the Securities Law No. 54/2019/QH14, as amended and supplemented by Law No. 56/2024/QH15. This framework dictates obligations regarding cross-ownership, mandatory public tender offers when reaching statutory ownership thresholds, and information disclosure regimes for insiders to protect minority shareholders.

2.3 Implementation Sequence and Legal Procedures

The execution process involves the following sequential steps:

1. Signing a Non-Disclosure Agreement (NDA) and a Term Sheet.
2. Conducting comprehensive legal, financial, and tax Due Diligence.
3. Negotiating and signing the Share Purchase Agreement (SPA).
4. Executing M&A approval procedures at the investment registration authority for transactions involving foreign elements as prescribed.
5. Opening a direct or indirect investment capital account and executing the payment in compliance with foreign exchange management regulations.
6. Notifying the Business Registration Office of changes to the enterprise registration contents and updating the shareholder/member register.

3. Legal Regulations Governing the Asset Purchase Model

3.1 Legal Nature and Object

 An asset purchase involves the buyer contracting directly with the target corporate entity to acquire ownership of a specifically defined portfolio of assets. The objects of this approach are tangible assets (real estate, machinery, inventory) or intangible assets (intellectual property rights, software, customer databases).

Under this model, the charter capital structure and ownership ratios of the selling entity remain unchanged. The buyer only receives the transferred legal assets and does not automatically inherit the financial obligations or legal liabilities of the seller, unless specific liability-assumption clauses are stipulated in the contract.

3.2 Direct Governing Legal Framework

 Purchasing assets requires simultaneous compliance with multiple specialized legal systems, depending on the asset category:

• Civil and Enterprise Legislation: The Civil Code No. 91/2015/QH13 governs the general principles of contracts, the timing of ownership transfer, and the assumption of risk. The current Enterprise Law dictates internal authority conditions. Selling assets valued at or greater than 50% of the total asset value recorded in the most recent financial statements must be approved by the competent corporate body via a valid resolution.
• Land and Real Estate Business Legislation: Transactions involving land use rights and real estate projects must adhere to the Land Law No. 31/2024/QH15 and the Real Estate Business Law No. 29/2023/QH15. Investors transferring a project must prove the project has a land allocation or lease decision, has fulfilled financial land obligations, possesses a Certificate of Land Use Rights, and is not subject to any preventive measures.
• Intellectual Property Legislation: The transfer of intangible assets must comply with the Intellectual Property Law No. 50/2005/QH11, comprehensively amended by Law No. 07/2022/QH15. Contracts transferring industrial property rights are only valid against third parties upon registration with the state management authority for industrial property.

3.3 Implementation Sequence and Legal Procedures

1. Preparing a detailed inventory and conducting independent appraisals for each asset.
2. Executing asset legal due diligence to verify ownership origins and search for registered security interests at competent registration authorities.
3. Passing a resolution approving the contract under the proper internal authority of the enterprise.
4. Signing the Asset Purchase Agreement (APA) and accompanying transfer documents.
5. Fulfilling financial obligations and registering ownership changes for assets subject to mandatory registration.
6. Drafting and signing the physical asset handover minutes.

4. Comparison of Legal Risks and Inherited Liabilities

4.1 Extent of Inheriting Property Rights, Obligations, and Debts

• For Share Purchases: The principle of comprehensive inheritance applies. Acquiring capital means the buyer assumes all legal consequences arising from the target’s past operations. The enterprise continues to be liable for all unfulfilled obligations, tax arrears, administrative penalties, or undisclosed non-contractual damage compensation liabilities.
• For Asset Purchases: The principle of limited liability based on the transferred object applies. The buyer is only responsible for obligations directly attached to the transferred assets as agreed. Undisclosed debts, history of statutory violations, or litigation risks of the target entity are completely isolated and remain the seller’s responsibility.

4.2 Continuity of Licensing Systems and Administrative Approvals

• For Share Purchases: This model ensures maximum operational continuity. All Investment Registration Certificates, Enterprise Registration Certificates, and specialized operational licenses (e.g., food safety, environmental discharge, fire prevention) granted to the target entity maintain full legal validity. However, buyers must review contracts with “change of control” clauses to execute notification or re-approval procedures.
• For Asset Purchases: Operating licenses are tied to the legal entity’s capacity and are not transferable objects. When purchasing a physical production facility, the buyer must submit applications to obtain entirely new environmental, fire safety, and production licenses under their own corporate entity.

4.3 Labor Relations and Labor Law Compliance

• For Share Purchases: Under the Labor Code No. 45/2019/QH14, the corporate employer remains unchanged. Existing labor contracts and collective bargaining agreements remain effective. If the acquisition leads to technological or structural changes threatening mass layoffs, the target enterprise must formulate a Labor Utilization Plan and bear the responsibility for paying job-loss allowances.
• For Asset Purchases: The selling entity is responsible for terminating labor contracts due to the reduction in production scale and fulfilling all financial obligations to employees. The buyer possesses complete independence in evaluating and executing new labor contracts, entirely eliminating the risk of inheriting past labor disciplinary disputes.

4.4 Continuity of Commercial Contracts and Transfer of Property Rights

• For Share Purchases: The continuous existence of the corporate entity guarantees the legal validity of all contracts previously executed with suppliers, strategic partners, and credit institutions.
• For Asset Purchases: Transferring contractual rights and obligations constitutes a civil transfer. Pursuant to the Civil Code, transferring an obligation strictly requires written consent from the obligee (the third party). A partner’s refusal to consent can severely diminish the commercial value of the transaction.

5. Comparison of Financial and Tax Obligations

5.1 Corporate Income Tax (CIT) and Personal Income Tax (PIT)

• For Share Purchases:
  • Institutional Transferors: Subject to the Corporate Income Tax Law, income from capital transfers is taxed at the standard rate of 20%. The taxable base is the difference between the transfer price and the purchase cost plus reasonable transfer expenses.
  • Individual Transferors: Based on the Personal Income Tax Law, transferring capital contributions in a Limited Liability Company incurs a 20% tax on the taxable income. Transferring shares in a Joint Stock Company is subject to a 0.1% tax on the gross transfer value of each transaction.
• For Asset Purchases: The enterprise selling assets records the revenue under other income. The generated profit, after deducting the residual value of the asset and liquidation costs, is subject to Corporate Income Tax at 20%.

5.2 Value Added Tax (VAT) and Registration Fees

• For Share Purchases: Transferring capital contributions or shares falls under the category of non-taxable VAT objects. This exemption prevents tax payment obligations, minimizing financial pressure at the point of closing. This method also does not trigger registration fee obligations for the assets owned by the enterprise.
• For Asset Purchases: Selling assets is subject to VAT. The seller must issue an invoice and declare tax, generally at the standard rate of 10% for most tangible assets. The buyer must allocate supplementary capital to cover this tax, and must concurrently pay registration fees when establishing ownership of statutory assets (e.g., real estate, vehicles).

5.3 Strategy for Establishing Tax Basis and Depreciation

• For Share Purchases: The depreciation of the target enterprise’s assets continues to be calculated based on the historical cost recorded in the existing accounting books, regardless of any premium the buyer paid to acquire the company.
• For Asset Purchases: This model establishes a superior accounting advantage. The buyer is permitted to record the new assets on the balance sheet at the actual purchase price. Stepping up the asset basis to fair market value allows the buyer to record higher depreciation expenses, creating a foundation to reduce pre-tax profits in subsequent fiscal years.

6. Compliance Constraints Regarding Competition Law

6.1 Identification of Economic Concentration Acts

 Pursuant to Article 29 of the Competition Law No. 23/2018/QH14, the law does not distinguish between share purchases and asset purchases when identifying economic concentration. Both acquisition models, if resulting in the buyer gaining control or dominance over the target enterprise or a business sector of the seller, are regulated by economic concentration control provisions.

6.2 Notification Obligations and Legal Consequences

Participating parties must independently review the project against the economic concentration notification thresholds stipulated by the Government, which include: Total assets; Total revenue in the Vietnamese market; Transaction value; or Combined market share. If a statutory threshold is met, the parties are required to submit an Economic Concentration Notification Dossier to the National Competition Commission. The transaction may only be finalized upon receiving an approval decision. Violations may result in maximum monetary fines of up to 5% of the violating enterprise’s total revenue.

7. Specific Characteristics in the Real Estate Sector

7.1 Transfer of Partial or Entire Projects

 This transaction, inherently an asset purchase, is intensely regulated by the Real Estate Business Law and the Land Law. The transferring investor must prove fulfillment of strict legal prerequisites: the project must possess a land allocation or lease decision, have fulfilled financial land obligations for the transferred portion or the entire project, possess a Certificate of Land Use Rights, and not be suspended. The procedure to obtain an Approval Decision is complex and subject to rigorous appraisal dossiers.

7.2 Acquisition of the Project Investor (Corporate Entity)

 To bypass administrative bottlenecks, institutional investors frequently prioritize purchasing the capital contribution of the legal entity registered as the project investor. Under this model, the real estate project undergoes no direct change in ownership status. Consequently, parties eliminate the procedure for obtaining project transfer approvals, maximizing the speed of closing. However, the trade-off requires the buyer to absorb full liability for any past planning or construction violations committed by the former investor.

8. Practical Recommendations for Planning and Contract Drafting

8.1 Priority Criteria for Applying the Share Purchase Model

 This approach is highly effective when the target enterprise holds complex conditional business licenses, possesses an extensive distribution network, and maintains non-transferable strategic commercial contracts. This choice is also prioritized when due diligence reports verify that the seller has a transparent history of legal compliance, standardized accounting systems, and low-risk potential liabilities. Adopting this model allows investors to maintain operational continuity and optimize cash flow.

8.2 Priority Criteria for Applying the Asset Purchase Model

Directly purchasing assets is a decisive risk-prevention tool when the target enterprise has a history of severe statutory violations, complex outstanding debts, or is implicated in judicial disputes posing substantial compensation liabilities. Furthermore, this model is perfectly suited for localized integration strategies aimed at acquiring specialized production lines or isolating intellectual property portfolios. The mechanism of stepping up the asset basis also yields long-term benefits regarding tax expense optimization.

8.3 Techniques for Establishing Protective Safeguards in Contracts

 Regardless of the operational method, the purchase agreement must be designed to maximize the protection of the acquirer’s interests through the following elements:

• Representations and Warranties (R&Ws): Requires detailed listing covering standards of lawful ownership, absolute accuracy of financial statements, and comprehensive compliance with tax, environmental, and labor regulations.
• Conditions Precedent (CPs): Establishes mandatory obligations for the seller to rectify identified legal risks, such as releasing bank mortgages or clearing tax arrears, prior to the buyer’s payment obligation being triggered.
• Escrow and Indemnities: A focal mechanism for managing undisclosed debt risks. The buyer must negotiate retaining a percentage of the payment or establishing an escrow account for a defined period post-closing. These funds act as security, enabling the buyer to execute deductions or demand immediate indemnification should previously undisclosed financial liabilities materialize.

9. Conclusion

Determining the acquisition method in a merger and acquisition is the outcome of a comprehensive evaluation balancing expected commercial benefits against the tolerance for inherited legal risks. The share purchase model offers superior advantages regarding operational continuity, preservation of licensing systems, and short-term cash flow optimization by avoiding value-added tax obligations; however, it demands profound risk management capabilities to address the potential assumption of the former entity’s undisclosed liabilities. Conversely, the direct asset purchase approach establishes a secure liability limitation mechanism, enabling the buyer to proactively select profitable assets and completely isolate historical debts, while also generating accounting advantages through asset revaluation—despite accepting immediate tax payment pressures and the time burden of securing new regulatory licenses.

The decision to apply either model mandates that investors conduct an in-depth due diligence process, meticulously contrasting variables related to tax, administrative procedures, and labor relations. The involvement of professional legal counsel from the initial negotiation phase is a prerequisite for structuring an agreement that comprehensively integrates representations, mandatory conditions, and stringent indemnification mechanisms. This preparation constitutes the fundamental framework for transparently allocating risk, ensuring strict compliance with current regulations, and maximizing the commercial value of the entire transaction.

This article is for informational purposes only and does not replace professional legal advice. For support tailored to your situation, please contact a lawyer or legal professional.

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