Due Diligence and Credit Checks on Local Partner Companies
Background and Challenges
For Japanese companies entering the Vietnamese market, having a trustworthy local partner is a key factor in business success. In recent years, there has been a sharp increase in cases where companies consider partnering with local businesses for purposes such as: Identifying a joint-venture partner, or entering into a Business Cooperation Contract (BCC) Developing sales agents or expanding a distribution network Acquiring a company or project through M&A Each of these initiatives necessarily involves conducting due diligence — a credit check — on the counterparty. This is particularly true in Vietnam, where the accuracy and transparency of publicly available information is not as high as in Japan, making it extremely risky to rely on surface-level information alone. Accurately understanding a prospective partner's financial position, management structure, transaction history, litigation or dispute record, and compliance status is the single most critical process determining the success or failure of an investment or partnership — and an error in judgment here can expose a company to substantial risk. For this reason, a credit investigation conducted by trusted professionals is an indispensable step for Japanese companies seeking to do business in the Vietnamese market with confidence.
Why Clients Choose Us
As a law firm, NEXORA LAWFIRM does not center its work on "information gathering" for its own sake, in the manner of a typical investigation agency. Instead, we work with trusted investigation firms, using their findings as primary data, and then apply a lawyer's professional perspective to conduct risk analysis and legal evaluation — a more sophisticated and practice-oriented form of support. 2.1. Legal risk analysis by lawyers A standard credit investigation report is typically built on materials that a company has submitted to government authorities, together with other publicly available information. In Vietnam, however, it is not uncommon to find figures that diverge from reality, such as the use of "double bookkeeping." As a result, numbers and documentary information alone may fail to reveal fundamental risks such as the following: Companies whose actual management substance is difficult to see Conflicts of interest concealed within existing trading relationships Concealed litigation or dispute history Abnormal figures in assets or liabilities Companies whose ultimate beneficial owner (UBO) is unclear Ties to particular groups or interests Extreme dependence on a small number of key counterparties, among others We re-evaluate these investigation findings from a legal and compliance standpoint, analyzing both the safety of the transaction and the likelihood of risks arising in the future. 2.2. Practical judgment grounded in extensive experience handling disputes and fraud Our lawyers have handled a large number of the following types of matters: Disputes and litigation between Japanese and Vietnamese companies Breaches of contract within joint ventures (JVs) Embezzlement, breach of trust, and fraud committed by employees or partners Initial response to matters that developed into criminal cases This extensive practical experience has sharpened our ability to distinguish between a partner with genuine substance and a high-risk company that is merely well-dressed on the surface. We uncover the essential realities that a standard credit report alone cannot reveal, and provide advice grounded in deeper insight so that Japanese companies do not make the wrong call. 2.3. Practical advice for achieving safe transactions Based on the investigation findings, we provide practical recommendations covering matters such as: What safeguards should be built into the contract Which risks are acceptable and which should be avoided The scope of due diligence required (legal, financial, tax) The appropriate transaction structure (JV, M&A, agency agreement, BCC, etc.) The criteria for deciding when a transaction should be declined or negotiations halted Through this, we go beyond simply providing information to offer concrete support on exactly how to proceed safely in practice.
Service Details
At NEXORA LAWFIRM, we provide the following practice-oriented credit investigation and due diligence services to enable Japanese companies to transact and invest safely and effectively in Vietnam. ■ Basic Investigation and Corporate Information Verification Verification of a Vietnamese company's registration information, shareholder information, and corporate history Identification of the legal representative and ultimate beneficial owner (UBO) Analysis of relationships among major shareholders and group companies Review of the legality of business lines and business licenses Compliance status check ■ Assessment of Financial and Management Condition Verification of the reliability and consistency of financial statements Analysis of revenue and profit structure Assessment of debt and cash-flow risk Detection of possible double bookkeeping and abnormal figures Investigation of the actual state of management and internal control systems ■ Litigation and Dispute Risk Investigation Review of past and ongoing litigation and arbitration matters Investigation of administrative sanctions, penalties, and violation history Verification of labor disputes and internal fraud Investigation of ties to organized crime or similar entities (an important risk-mitigation measure) ■ Investigation of Actual Commercial Transactions and Business Operations Verification of major customers, suppliers, and sales agents Assessment of dependence on large transactions (concentration risk) Risks within the supply chain Contract performance capacity and history of past disputes ■ Due Diligence for M&A and Investment Consideration Preliminary investigation of the target company in an M&A transaction (Pre-DD) Legal due diligence (contracts, licenses, compliance, etc.) Tax and accounting due diligence (conducted by our partner team) Feasibility assessment for a JV (joint venture) or BCC (business cooperation contract) Risk analysis of the transaction structure and proposals for improvement ■ Legal Evaluation and Recommendations Based on Investigation Findings Legal risk assessment of the findings (identifying red flags and points requiring caution) Proposals for protective contract clauses (warranties, indemnification, termination clauses, etc.) Recommendations on the additional scope of due diligence to be conducted Support in deciding whether to proceed with or discontinue the transaction Advice on negotiation strategy and how to deal with the counterparty ■ Delivery of a Report (in Japanese) Preparation of a comprehensive report in Japanese A detailed report including analysis of the investigation data and legal evaluation Risk levels presented on a three-tier scale, organized in a format that facilitates decision-making An executive summary version is also available