Exiting Vietnam Through M&A: Methods, Process, and Key Points for Success

A Vietnamese attorney draws on extensive advisory experience to explain how to use M&A (share transfer) to exit a Vietnamese entity, together with the process involved and practical points to watch for — due diligence, contract negotiation, tax treatment, and more. Concrete advice is provided for minimizing legal and tax risk while achieving a smooth exit. NEXORA LAWFIRM has extensive experience supporting Japanese-affiliated companies in exit-oriented M&A in Vietnam, and its strengths include end-to-end execution support — from selecting the acquisition scheme, to drafting the transfer agreement, reporting to the authorities, and tax optimization.

01 - Methods of Exit via M&A

There are two methods of exit via M&A: (i) a transfer of the business, or (ii) a transfer of the company's charter capital/shares.

As discussed in [Methods of Exiting Vietnam], exit via M&A is considered the most effective means of withdrawal. That said, to find a prospective transferee, at least one of the following requirements must generally be met:

The company's business has room for improvement or future potential
The company holds special assets or rights (e.g., hard-to-obtain individual licenses, or excellent personnel)
The company holds under-utilized assets with development potential (e.g., real estate or other movable property)
The company is free of major fraud or legal problems
The company has some advantage relative to other companies (e.g., brand value)

The party exiting via M&A is, in effect, the seller in an ordinary M&A transaction. However, where the purpose is an exit, the position differs somewhat from an ordinary M&A. Even in an exit-oriented M&A, the ordinary M&A process can serve as a reference — please see [The M&A Process].

The key differences between an exit-oriented M&A and an ordinary M&A are as follows.

In an ordinary M&A, both parties can negotiate on an equal footing. By contrast, a seller pursuing an exit gives priority to disposing of the business or entity, and as a result is often in a weaker negotiating position.
Compared with an ordinary M&A, a seller in this position often cannot afford to wait for the M&A to be finalized, given the ongoing cost of operating the business, and tends to try to shorten the process and complete it as quickly as possible.
In an ordinary M&A, negotiations proceed on the basis of a market valuation of the business or company. In an exit-oriented transaction, however, the seller is typically at a disadvantage in setting the price and tends to be dependent on the buyer's judgment.

02 - Ancillary Methods

Finding an M&A counterparty and deciding on an exit method often takes time; however, if the business is deteriorating, continuing to maintain it generates ongoing daily operating costs. To address this, the following methods can be considered.

(1) Temporary company suspension (dormancy)

In preparing for dormancy, the company can wind down its employment relationships, terminate its lease agreements, and take other steps to reduce its cash outflow.

(2) Deciding on an exit and considering the exit method

A decision is made on whether to continue the business or to exit, and if exiting, the specific method is considered.

(3) Proceeding to the next step

The actual procedure is carried out based on the exit method decided upon.

"Points to note"

A single application for suspension can cover a maximum of 12 months. Once this period ends, a renewal is required.
No tax filings are required during the suspension period, but an audit must be conducted before the suspension begins.
If the company is to be liquidated after the suspension period, separate liquidation procedures must be carried out.
The bank account remains functional during suspension and can still receive incoming payments. However, accounting and tax treatment may still be required.

Exiting via corporate reorganization — such as a company split or merger that causes the company to cease to exist — can also be considered. In that case, the ordinary M&A process can serve as a reference.

03 - The Process of Exit via M&A

(1) Internal decision-making within the company

The decision-making procedure differs depending on the type of company (limited liability company or joint-stock company) and the provisions of its charter. The general process is as follows:

Limited liability company: a decision based on a resolution of the members' council or the agreement of the capital contributors
Joint-stock company: a decision by the general meeting of shareholders

(2) Approaching prospective buyers

Even after the capital contributors have decided to exit, many companies wish to keep the exit confidential so as not to alarm the company's stakeholders. Accordingly, careful consideration must be given to how prospective buyers are approached and to maintaining confidentiality.
In principle, prospective buyers can only be approached once the company's internal decision has been made — however, please also see [3. Points to Note When Exiting a Joint Venture via M&A] below.
Where the business relies on Japanese technology or know-how, there are many cases in which a local company, even if the business is currently loss-making, is able to improve its performance after taking over the business through improved management. For this reason, it tends to be more effective to approach a Vietnamese local company (approaching another foreign-invested company is generally not recommended, as the same problems could recur). If you wish to identify a suitable Vietnamese local company, it is generally more efficient to make inquiries through a local Vietnamese bank or law firm.

(3) Negotiating the transfer terms and executing the transfer agreement

Negotiations proceed with reference to the ordinary M&A process, but must take into account the special requirements applicable to an exit-oriented transaction.

(4) Closing procedures

These proceed with reference to the ordinary M&A process.

04 - Points to Note When Exiting a Joint Venture via M&A

When exiting a joint venture via M&A, the following points require attention.

The joint venture agreement takes priority above all else, and the conditions attached to the exit, the various adjustments, and the related procedures must be carried out in accordance with the joint venture agreement.

(Where there is a discrepancy between the joint venture agreement and the company's charter, the relationship between the capital contributors themselves and the relationship between the capital contributors and the company must be analyzed separately.)

A joint venture is a multi-member limited liability company or a joint-stock company with two or more members. Accordingly, before seeking a prospective buyer, the following internal procedures and adjustments are required:
In the case of a multi-member limited liability company: an offer must be made to the other capital contributor(s) to sell on the same terms, in proportion to their respective capital contribution ratios. If no consenting response is received from the other capital contributor(s) within 30 days of the date the sale offer is made, the interest may be offered to a third party on the same terms.
In the case of a joint-stock company: where a founding shareholder wishes to transfer shares to a party other than a founding shareholder within three years of the date the Enterprise Registration Certificate (ERC) is issued, approval of the share transfer must be obtained at a general meeting of shareholders.