Reform of Vietnam's M&A Approval Procedure: The Risks Foreign Investors Face from Mandatory Disclosure of the Actual Transaction Price
NEXORA LAWFIRM has substantial experience supporting foreign investors in responding to price-disclosure and tax-filing obligations arising at each stage of capital contribution, share transfer, and M&A transactions. In recent years in particular, the tightening of the obligation to disclose the actual transaction price has turned registration at a nominal price, and related tax-saving schemes, into a significant risk — making it essential to understand the regime and analyze the associated risks. This article is written for those interested in topics such as "Vietnam's actual transaction price disclosure obligation," "tax audit response for share transfers," "risk in tax filings for capital increases," "penalties for M&A price manipulation," and "tax compliance in Vietnam for foreign investors," and provides an accessible summary of the practical points of caution, the background to the disclosure obligation, and the countermeasures available to companies.
01 - Mandatory Disclosure of Price Information When Applying for M&A Approval
On December 31, 2023, Vietnam's Ministry of Planning and Investment issued Circular No. 25/2023/TT-BKHDT. This Circular prescribes the forms for documents and reports relating to investment activities within Vietnam, outbound investment activities, and investment promotion, and took effect on February 15, 2024.
Among the important changes introduced by this Circular is a new form for the approval procedure applicable when a foreign investor acquires shares or a capital contribution in a Vietnamese company (i.e., an M&A transaction). Specifically, the foreign investor is now required to disclose the "actual transaction price" as part of the information to be stated in the application.
Previously, it was sufficient to state only the "planned price" for the transaction; however, from February 15, 2024 onward, the actual contract price must be stated in the application documents submitted. Specifically, the format is as follows.
No.
Name of Foreign Investor
Nationality
Capital Contribution per the Charter
Actual Transaction Price of the M&A Transaction
VND
USD Equivalent
Ratio (%)
VND
USD Equivalent
Because of this change, price information will be recorded explicitly in a public document, raising the risk that investors will be at a strategic disadvantage in contract negotiation and deal terms. Investors are encouraged to consider an appropriate response to this new obligation at an early stage and to seek professional advice where necessary.
The above information must be stated not only in the M&A approval application, but also in the M&A approval certificate itself.
02 - Potential Risks This Change Poses to Investors
This change has the potential to adversely affect parties involved in M&A transactions, foreign investors in particular. Specifically:
Because M&A approval is typically obtained before the transaction is finalized (that is, before payment is made at the actual transaction price ultimately agreed), it is difficult to determine and state an accurate "actual transaction price" at the time the application for approval is filed.
If the transaction price stated in the approved application differs from the actual price paid when the transaction is finalized, the relevant bank (in particular, a DICA bank in Vietnam) may refuse to process the settlement on the grounds of inconsistency with the approved content. In that case, the parties would need to amend the M&A approval.
However, because current regulations do not provide an administrative procedure for amending an M&A approval, the parties would need to file for a new M&A approval in order to bring the approved content into line with the actual transaction. Obtaining a new approval could take several months, during which the transaction price could change yet again.
Investors are encouraged to consider an appropriate response to this new obligation at an early stage and to seek professional advice where necessary.