Q&A: completing public M&A transactions in Vietnam

Finishing the transaction

Hostile transactions

What are the particular issues for unsolicited transactions for public corporations?

The Securities Regulation establishes three conditions the place the investor buying voting shares of a public firm should tender a public provide to accumulate. As well as, the legislation supplies for seven exempted conditions that aren’t topic to public providing:

• if the proposed acquisition of newly issued shares ends in the investor proudly owning shares reaching the tender provide triggering limits based on the issuance plan already handed by the shareholders of the general public firm;
• if the switch of shares ends in the investor proudly owning shares reaching the tender provide triggering limits which have already been permitted by the shareholders of the general public firm. On this case, the final shareholder assembly should clearly determine the transferor and the transferee;
• an inside switch of shares between corporations working within the type of a bunch of corporations, together with financial teams, companies, mother or father corporations and subsidiaries, which doesn’t end in cross-ownership beneath the Regulation on Enterprises;
• an acquirer proudly owning shares within the public sale of public providing shares, state capital providing or providing of state-owned enterprises capital invested in different enterprises;
• an acquirer proudly owning shares from the division, separation, consolidation or merger of enterprises;
• gifting or inheriting shares; and
• switch beneath a courtroom’s resolution or judgment that’s in impact or an arbitral resolution.

Typically, the method in a takeover is as follows:

• the investor should appoint a securities firm as a young provide agent. Such agent shall be accountable for instructing the investor to conduct the tender provide in accordance with legal guidelines on securities and taking joint duty for any the investor’s violation of rules on tender provide;
• the investor should put together and submit a young provide utility to the State Securities Fee (SSC) and ship a replica thereof to the goal;
• the goal makes an announcement of the receipt of the provide on its web site and the inventory change inside three days of the receipt of the tender provide utility;
• the SSC notifies in writing of the receipt of the correct tender provide utility and posts on its web site inside 15 days of the receipt of the correct tender provide utility;
• the board of the goal should make a public announcement to buyers and shareholders of the goal on suggestions with respect to the applying for the tender provide and report back to the SSC inside 10 days of the receipt of the tender provide utility. The board’s opinions have to be in writing;
• the investor should make a public announcement of the disclosure or prospectus on the web sites of the investor (if any), the tender provide agent and the inventory change inside seven days of its receipt of the SSC’s notification;
• the tender provide is performed no less than three days after the date of the general public announcement;
• the provide interval have to be no shorter than 30 days and not than 60 days; and
• the investor should report the outcomes of the provide to the SSC inside 5 days of completion of the provide and on the identical time make a public announcement on the results of the provide.

Break-up charges – frustration of further bidders

Which varieties of break-up and reverse break-up charges are allowed? What are the restrictions on a public firm’s capability to guard offers from third-party bidders?

Vietnamese legislation doesn’t prohibit or in any other case regulate break-up charges and reverse break-up charges. Typically, breaches to the break-up charge agreements might result in contractual penalties whereby the breaching occasion has to pay a pre-determined quantity to the opposite events. It’s vital to notice {that a} liquidated damages clause is just not particularly recognised beneath Vietnamese legislation. As a common understanding, the quantity of liquidated damages is set by reference to an estimate of the probably loss suffered by the non-defaulting occasion because of the breach. In different phrases, the quantity of damages is pre-agreed and doesn’t rely upon the non-defaulting occasion demonstrating the quantity of loss truly suffered. Alternatively, Vietnamese legislation supplies for 2 varieties of financial treatments for breach of contract, specifically, penalty for breach and compensation for damages. By way of a penalty for breach, the events might agree upon the penalty quantity, however the quantities might not be greater than 8 per cent of the worth of the contractual obligation that’s the topic of the breach if they’re thought of as a penalty. Moreover, the aggrieved occasion can request damages for loss. The worth of damages for loss shall comprise the worth of the particular and direct loss that the aggrieved occasion has suffered owing to the breach, in addition to the direct income the aggrieved occasion would have earned had such a breach not been dedicated. Moreover, though not particularly regulated, the charges ought to be totally disclosed within the provide doc that’s registered with the SSC and within the provide announcement. The break-up charges would even be permitted by the shareholders of the goal. The place the transaction is between affiliated corporations, points akin to switch pricing and related-party transactions ought to be thought of. If the charges are to be paid to a international occasion, it can additionally increase a international change subject.

We’re not conscious of any provisions that prohibit or limit monetary help in enterprise combos.

Vietnamese legislation doesn’t place limitations on an organization’s capability to guard offers from third-party bidders. The board of the goal should ship its evaluation and suggestions concerning a takeover provide to the SSC and shareholders inside 10 days of the receipt of the tender provide utility. The board’s opinions have to be in writing. If the board objects to the provide, it’s unclear whether or not the deal can proceed or be aborted. Aside from some particular circumstances, shareholders usually are not restricted from promoting their shares.

Authorities affect

Aside from via related competitors rules, or in particular industries through which enterprise combos or acquisitions are regulated, might authorities companies affect or limit the completion of such transactions, together with for causes of nationwide safety?

A international funding approval from the native international funding authority is required previous to the completion of a enterprise mixture involving international buyers.

The Vietnamese authorities might limit or prohibit sure cross-border transactions for causes of nationwide safety or public insurance policies of Vietnam.

Beneath the Regulation on Funding, a international investor buying shares in a Vietnam-based firm having a land use rights certificates for land situated on islands or border and coastal commune-level areas or different areas that will have an effect on nationwide defence and safety shall be topic to M&A approval of the native international funding authority. Upon the receipt of the correct M&A registration utility, the native international funding authority shall gather opinions on the satisfaction of safety and nationwide defence circumstances from the Ministry of Nationwide Defence and Ministry of Public Safety inside three working days.

In precept, cross-border M&A transactions should guarantee nationwide defence and safety. The Prime Minister might droop half or the entire operation of an funding mission if the implementation of the mission would hurt or can be vulnerable to harming nationwide defence and safety, upon request from the Ministry of Planning and Funding.

Cross-border M&A transactions shall adjust to the commitments of Vietnam upon accession to the WTO, and the checklist of companies topic to market entry restrictions stipulated in Decree No. 31/2021/ND-CP. Aside from enterprise strains falling throughout the checklist of companies topic to market entry restrictions, international buyers shall be handled the identical as home buyers when it comes to market entry circumstances. Transactions involving a Vietnam-incorporated firm lively in a number of companies normally require value determinations of varied line ministries and the satisfaction of quite a few industry-specific circumstances. Owing to the workload in some large cities, a scarcity of inter-agency coordination and a scarcity of implementing rules in a number of sectors, these causes might break offers or delay enterprise combos in some conditions.

Conditional provides

What circumstances to a young provide, change provide, merger, plan or scheme of association or different type of enterprise mixture are allowed? In a money transaction, might the financing be conditional? Can the graduation of a young provide or change provide for a public firm be topic to circumstances?

Basically, a conditional provide is allowed beneath the Civil Code 2015 so long as it’s drafted in a way that explicitly expresses the intent of binding to the provide of the offeror, and due to this fact in most types of enterprise mixture, a suggestion could be conditional on any occasion occurring, together with acquiring financing, aside from the general public tender for the shares of a public firm the place it seems that the minimal variety of shares being tendered (ie, 25 per cent) is the one allowable situation to the provide. In the course of the tender provide course of, the offeror might withdraw its provide beneath sure circumstances, akin to a rise or lower in its variety of voting shares or the disposal of a part of or the entire property or enterprise of the goal firm, and topic to the approval of the SSC.

A young provide of a public firm should guarantee the next rules:

• all phrases laid out in a young provide apply equally to all shareholders within the goal firm;
• the related events can totally entry the tender provide info;
• the self-determination proper of the shareholders of the goal firm is totally revered; and
• the occasion making the tender provide should appoint a securities firm as an providing agent.

A young provide have to be between 30 and 60 days. 

Throughout a young provide course of, the offeror shall not:

• straight or not directly buy or undertake to buy the topic shares of the provide outdoors the provide tranche;
• promote or undertake to promote the topic shares of the provide;
• deal with shareholders holding the topic shares unfairly;
• provide separate info to a sub-group of shareholders or present a special degree of data to totally different teams of shareholders or at totally different occasions;
• refuse to buy the topic shares of the goal firm, aside from circumstances when the tender provide is legally withdrawn; or
• buy the goal firm’s shares opposite to the phrases disclosed within the registration of the tender provide.

After making a public announcement, the offeror might solely withdraw the provide within the following circumstances, and such circumstances have to be specified within the tender provide:

• the overall variety of shares registered to promote fails to achieve the minimal ratio as introduced by the offeror;
• the goal firm will increase the variety of its voting shares conversion of choice shares;
• the goal firm reduces its variety of voting shares;
• the goal firm points further securities to extend constitution capital; or
• the goal firm sells property accounting for 35 per cent of its complete property worth based on the most recent monetary assertion.

Financing could also be conditional upon profitable completion of the tender provide, however usually is escrowed prematurely as proof of cost is typically required to be offered to the licensing authorities.

Financing

If a purchaser must acquire financing for a transaction involving a public firm, how is that this handled within the transaction paperwork? What are the everyday obligations of the vendor to help within the purchaser’s financing?

If a purchaser wants debt financing to finish a transaction, the vendor might require the customer to supply and fix the related financing or dedication paperwork as an exhibit to the transaction settlement and require the customer to take all actions mandatory to acquire that financing.

Vietnamese legislation is silent on the vendor’s obligations to help the customer’s financing in an M&A deal. Whereas sellers in Vietnam are inclined to cooperate with the customer for acquiring financing for the transaction, sellers usually don’t have, and can be reluctant to just accept, any contractual obligation to assist or help within the purchaser’s financing. In follow, the vendor might, upon mutual settlement by the events, help the customer in its financing by recommending some sound financing entities to the customer or signing mandatory paperwork referring to the customer’s financing functions.

Minority squeeze-out

Might minority stockholders of a public firm be squeezed out? In that case, what steps have to be taken and what’s the timeframe for the method?

Vietnamese legislation doesn’t particularly regulate conditions the place minority shareholders are squeezed out. Because the legislation doesn’t require the consent of all shareholders, a enterprise mixture should happen towards the need of the minority shareholders. Within the case of a merger permitted by a supermajority representing 65 per cent or extra of the voting rights of the shareholders current or by proxy, the merger plan can be binding on all of the shareholders. If the merger plan requires the switch of all the corporate’s shares, then your complete share capital of the corporate can be transferred to the acquirer (together with the shares of any dissenting shareholder). There are not any rules specifying the steps to be taken and timeframe for the method on this explicit minority squeeze-out.

The squeezed-out shareholders are entitled to request that the corporate purchase again their shares on the prevailing market worth or worth calculated pursuant to rules prescribed within the firm’s constitution in the event that they vote towards a merger. The request shall be made to the corporate in writing inside 10 days of the shareholders’ assembly approving the merger. After receiving the request, the corporate shall purchase again the shares of the dissenting minority shareholders at a market worth or worth calculated pursuant to the rules prescribed within the firm’s constitution inside 90 days of receiving the request. In distinction, if there isn’t any mutual settlement reached, the events might retain knowledgeable worth appraiser to find out a good worth. The corporate shall introduce no less than three skilled worth appraisers for the shareholder to make the ultimate resolution.

The minority shareholders of a public firm are however protected in a takeover state of affairs the place they will refuse to promote the shares to the offeror or are even entitled to withdraw the topic shares in the course of the provide course of in circumstances the place the circumstances of tender provide are modified, or there are aggressive tender provides being made concerning the topic shares.

Ready or notification intervals

Aside from as set forth within the competitors legal guidelines, what are the related ready or notification intervals for finishing enterprise combos or acquisitions involving public corporations?

The general public tender is topic to a notification interval. Transactions involving shares of inside shareholders have to be notified three days prematurely.

For a standard merger:

• the general public firm should notify the shareholders of the scheduled assembly concerning a merger no less than 21 days prematurely;
• the corporate should ship collectors and staff notification of the merger settlement inside 15 days of its approval and make a public announcement; and
• the authorities should resolve on whether or not to approve a home merger inside 5 working days of receipt of all of the required paperwork.

For a merger with a international ingredient, the prescribed approval interval is between 15 and 45 working days.

For a takeover deal:

• the goal makes an announcement of the provide inside three days of receipt of the tender paperwork;
• the SSC critiques the tender paperwork inside 15 days;
• the board should ship its assessments and suggestions concerning the provide to the SSC and the shareholders of the goal inside 10 days of receipt of the tender paperwork;
• the acquirer makes an announcement on its web site (if relevant), the web site of the tender provide agent and the web site of the inventory change the place the shares are listed inside seven days of its receipt of the SSC’s opinions;
• the size of the provide interval is between 30 and 60 days from the date recorded within the provide registration despatched to the SSC; and
• the acquirer experiences the outcomes of the tender to the SSC inside 5 days of completion.

Corporations in particular industries are topic to industry-specific rules that stipulate totally different ready and notification intervals for finishing enterprise combos. Particular authorized recommendation ought to be sought concerning such mergers.

Regulation acknowledged date

Appropriate on

Give the date on which the above content material is correct.

The knowledge on this chapter was verified between February and April 2019.