A Practical Guide to Vietnam M&A for Japanese-Affiliated Companies: The Law, Procedures, Risks, and Keys to Success Explained in Full

NEXORA LAWFIRM has experience supporting numerous M&A transactions for Japanese-affiliated companies in Vietnam, providing one-stop support spanning regulatory compliance, response to foreign ownership restrictions, Share Purchase Agreements (SPA), investment approval, and post-closing obligations. This article is written for those interested in "success factors for Japanese companies in Vietnam M&A," "the flow of M&A procedures for foreign investors," "practical points in due diligence," "the relationship between ownership ratio and investment approval," and "measures to avoid M&A pitfalls for Japanese companies," and offers an accessible explanation of the legal and practical perspective needed for Japanese companies to succeed in M&A.

01 - The Current State of M&A in Vietnam and the Involvement of Japanese Companies

In recent years, Vietnam has attracted attention as a promising M&A (acquisition and merger) destination for foreign investors, with Japanese companies standing out as one of the leading players. According to data from RECOF Corporation (recof.co.jp), Vietnam has consistently ranked among the top three destinations in Southeast Asia for M&A deals by Japanese companies over the past decade, with the sole exception of 2014.

Alongside this growing interest and business opportunity, however, the complexity of Vietnam's M&A procedures remains a major practical challenge. Multiple surveys have cited the complexity of administrative procedures as one of the greatest investment risks for foreign investors.

Understanding the Law and Building Practical Response Capability Are Key to Smooth M&A

For Japanese companies to succeed in M&A in Vietnam, it is important not only to have a systematic understanding of Vietnamese law, but also to know concrete solutions to practical bottlenecks and pitfalls in the application process.

Drawing on our own experience supporting numerous Japanese clients, we set out below the points that require particular attention in Vietnam M&A practice, explained in an accessible way.

02 - Investment Registration Procedures for M&A and Points to Check Regarding Foreign Ownership Restrictions

A foreign investor considering an M&A transaction (capital contribution, share transfer, or acquisition of an equity interest) must first confirm whether the transaction is subject to "M&A approval" (approval for capital contribution or share acquisition).

This is because, under Article 26(2) of the 2020 Law on Investment, in any of the following cases, a change of shareholder or capital contributor is not permitted unless investment registration is completed in advance.

✅ Three Cases in Which Foreign Investors Are Subject to a Registration Obligation

Where the foreign investor is investing in a conditional business sector
Where the target company operates in a sector in which market access for foreign investors is restricted (a conditional or not-yet-open sector), M&A approval is required.
📌 Under Decree No. 31/2021/ND-CP, 84 business lines are subject to restrictions on foreign investors (of which 25 are not open, and 59 are conditionally open).
Where foreign ownership will exceed 50%
Where a foreign investor (or an economic organization deemed to have foreign investment) will raise its voting shares or capital contribution ratio in a Vietnamese company above 50%, or where an investor already holding more than 50% will further increase its stake, M&A approval procedures are required.
Where the target company holds land in an area important to national defense and security
Where the target company holds a land use right in a sensitive area such as an island, a border area, or a coastal area, state approval is required prior to the M&A from the standpoint of national defense and security.

Where none of the three cases above applies, the foreign investor may dispense with prior investment registration, and complete the procedure solely by registering the change of shareholder or capital contributor under the Law on Enterprises.

⚠ A Practical Point of Caution: Cases Where the Distinction Is Unclear

In practice, however, it is often difficult to clearly determine matters such as the "foreign ownership ratio," the "location of the land," or the "classification of the business," creating a risk that a transaction that in fact requires registration may be overlooked.

03 - Practical Challenges in Vietnam's M&A Procedures

While M&A procedures are relatively clearly defined under the law, in practice legal interpretation and operation often vary by locality and by the official handling the matter, and foreign investors, including Japanese companies, frequently encounter practical confusion as a result.
Below are some of the representative practical challenges that require particular attention, along with response measures.

① Divergence Between the Regulations and Local Practice

Even for transactions that are, under the law, exempt from M&A approval, some local authorities may nevertheless require "prior approval."

📌 Example: Where a 100%-foreign-owned company transfers a 40% interest to another foreign investor, approval should, in principle, not be required, since the overall ownership ratio does not change. In practice, however, some localities require M&A registration regardless.

② Misunderstanding as to Who Must File the Application

Because Article 26(2) of the Law on Investment states that "the foreign investor shall register," it is often misunderstood in practice that the foreign investor itself is the applicant.

📌 The Correct Interpretation: Under Decree No. 31/2021/ND-CP, the applicant is in fact the Vietnamese company receiving the foreign capital contribution.
In other words, it is the Vietnamese target company that must file the application for approval of the foreign investor's capital contribution or share acquisition.

③ Practical Issues Concerning Document Format and "Preliminary Agreements"

The basic documents to be submitted include the capital contribution registration application, the corporate documents of each party, and an agreement document, but there is often a gap between what the authorities expect and actual practice with respect to the form of the "M&A agreement document" (the authorities in Hanoi and Ho Chi Minh City generally understand this well, but authorities in the provinces tend to be quite rigid).

📌 In one case, the parties had already executed the final Share Purchase Agreement (SPA) and attempted to submit it as a supporting document, but the competent authority refused to accept it on the grounds that a formal contract was "premature" at that stage.

④ Challenges Regarding the Review Period and Scheduling

Under the law, the review period is set at 15 business days, but in practice it often takes longer.

In particular, the review period tends to be extended in the following cases, because the reviewing authority must make additional inquiries:

The target company holds a land use right in a sensitive area (land in an area important to national defense and security)
The investment target falls within a conditional business sector

📌 In these cases, the competent authority consults the Ministry of Public Security or the Ministry of National Defense, and review is held pending the response, which can result in the process taking more than 20 business days.

※ In connection with M&A approval procedures in Da Nang and its surrounding provinces, the competent authority invariably submits the documentation to the public security authorities for review, and the M&A approval decision is made based on the results of that review. For this reason, it is essential to build sufficient schedule buffer into any M&A approval process handled in Da Nang or its neighboring provinces.

04 - For Japanese-Affiliated Companies: Practical Advice for Successfully Navigating Vietnam's M&A Procedures

To navigate M&A in Vietnam smoothly, an understanding not only of the law but also of local practice and culture is essential. Below are concrete measures that Japanese companies should consider.

① Thoroughly Research the Applicable Law and Market Environment

Before undertaking an M&A, it is important to confirm whether the target company's business falls within a sector subject to conditions for foreign investors.
For example, in specific sectors such as banking, insurance, and telecommunications, conditions such as "additional licensing" or "an obligation to partner with a local partner" may be imposed.

Because M&A can also implicate laws beyond the Law on Investment and the Law on Enterprises, the following should be considered comprehensively as well:

The Competition Law (2018): large transactions may require prior antitrust review
The Land Law: where the capital contribution is to a company owning real estate, the impact on the designated land use and ownership structure should be examined

➡ Understanding these conditions in advance and structuring the optimal capital and contractual scheme minimizes risk down the line.

② Prepare Documentation Accurately and Thoroughly

Because of differences in language and documentation systems, "preparing the application documents" is an area the Japanese side often misunderstands.

➡ Because incomplete documentation triggers resubmission, submitting the correct format from the outset directly saves time.

③ Coordinate Early with Local Partners and the Authorities

Administrative practice varies considerably by locality, and "the same law may be interpreted differently" from place to place. It is therefore effective to coordinate with the Vietnamese target company and local personnel, and to consult with the competent authority in advance.

➡ Written inquiries and in-person consultations help clarify the authority's expectations and required documentation, preventing unnecessary misunderstanding.

④ Make Use of a Trusted Local Legal Partner

To bridge differences in law and language, it is effective to partner with an experienced local Vietnamese lawyer or legal advisor, who can provide:

Assistance in preparing, translating, and submitting documents
Negotiation and consultation with the competent authorities
Shared know-how from other cases (for example, tendencies of specific reviewing officers, or informal operational rules)

For Japanese Companies to Succeed in M&A in Vietnam

Vietnam is a high-growth emerging market offering many business opportunities. M&A, among other approaches, offers a fast means of entering the local market, and is an especially effective expansion strategy for Japanese companies.

However, overcoming institutional barriers and procedural complexity requires the following:

📌 Understanding of the law and of practice

📌 Building relationships of trust with local partners and the authorities

📌 Sound practical execution supported by coordination with legal advisors

➡ These measures form the foundation for reliable, smooth M&A execution and long-term business success.