Requirement For Pricing Information In The Application For An M&A Approval Could Cause Troubles To Investors

From February 2024, companies and foreign investors applying for a contribution of capital or purchase of share/capital contribution by the foreign investor (M&A Approval) must state the actual price of proposed transfer, instead of the estimated transfer price as previously. This is one critical change in the new template for the application for an M&A Approval under Circular 25/2023 of Ministry of Planning and Investment (MPI).

The change may have an adverse effect on relevant parties, especially the foreign investor, particularly:

  • The parties of an M&A transaction may find it difficult to declare an “actual transfer price” since the M&A Approval will be issued well in advance of the closing of the transaction.

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Written by Nguyen Quang Vu On In ,

How Agreements On ROFO, ROFR, Tag Along And Drag Along Could Work In A Multiple Member Limited Liability Company In Vietnam?

In a shareholder agreement (or joint venture agreement) between members of a multiple member limited liability companies (Multiple LLC), the members often agree on various transfer restrictions such as right of first offer (ROFO), right of first refusal (ROFR), tag along or drag along rights. These transfers are intended for the parties to control the ownership structure of the Multiple LLC and their exit from the Multiple LLC. However, implementing such agreements on transfer restriction may be inconsistent with the statutory transfer restrictions provided in Article 52 of the Enterprise Law 2020. Therefore, a shareholder agreement relating to a Multiple LLC should have specific provision to resolve such inconsistencies.

The table below sets out the potential inconsistencies between agreements on ROFO, ROFR, Tag Along and Drag Along and the transfer procedures under Article 52 of the Enterprise Law 2020.

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Written by Nguyen Quang Vu On In ,

Comments on New Law on Real Estate Business 2023 – Part 2

Please download the pdf version here.

In this post, we continue discussing the new changes introduced by the Real Estate Business Law 2023. Part 1 of our discussion can be found Here.

This post is written by Nguyen Hoang Duong and Nguyen Bich Ngọc, and edited by Nguyen Quang Vu.

1)         New restriction when collecting deposit for purchase of off-plan real estate

Under the Real Estate Business Law 2023, real estate developers can only collect a deposit of up to 5% of sale price of the relevant real estate from purchasers when the residential houses, construction works are qualified to be put into trading. The law further requires a deposit agreement to expressly set out the sale price and area of the off-plan real estate. The off-plan real estate under the deposit agreement must satisfy conditions for sale under law. This indicates that collecting a deposit is considered putting relevant off-plan real estate into business.

The new requirements may pose significant difficulty for real estate developers with weak financial capacity when it comes to funding for pre-construction phase of their projects.

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Written by Nguyen Quang Vu On In ,

Consequences Of Breaches Of Representations And Warranties Under Vietnamese Law

Introduction

As detailed in a prior post, in our opinion, representations and warranties (warranties) should constitute obligations of the person giving it under Vietnamese law. They could imply an obligation on the part of the person providing them (Warrantor) to guarantee that the stated facts and matters are true. In this post, we will try to examine the consequences of breaches of representations and warranties under Vietnamese law. As discussed further below, depending on the context, a breach of warranties might give rise to:

·        liabilities for breach of warranties as independent obligations; or

·        liabilities for breach of obligations to deliver conforming goods; or

·        liabilities for breach of obligations to provide information to contracting parties; or

·        indemnity (or reimbursement) of losses to the extent the parties have agreed for an indemnity (or reimbursement) of losses arising from a breach of warranties.

Given that “representations and warranties” are exclusively common law concepts and no specific legal framework for them is provided under Vietnamese law, it is important that Vietnamese law contracts should have provisions dealing with the above in order to achieve the intended outcome of the parties.

Based on the discussion below, probably, the preferable approach is to have specific wording in the share sale and purchase agreement that warranties form part of the description and quality of the sale shares so that, among other things, seller could be subject to the remedies applicable to breach of obligation to deliver non-conforming goods.

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Written by Nguyen Quang Vu On In ,