Is “business transfer” a “share transfer”, “project transfer” or “assets transfer”?

A business transfer can generally understood as the transfer of, among other things, the assets, employees, contracts, clients and goodwill associated with a particular business. However, “business transfer” is not clear legal concept under Vietnamese law. In Vietnam, when one mentions "business transfer", it is not clear whether it refers to the transfer of (1) shares of the company that runs such business or (2) the assets and other components that constitute such business.

In case of (1), then a business transfer should probably better called as a share transfer transaction. In case of (2), commercially, a business transfer could be structured as the transfer of an “investment project” (see earlier post here) as provided under Article 66 of Decree 108/2006. However, there is no clear procedures under Decree 108 for a "project transfer" transaction which does not involve the transfer of shares of the project company. In particular,

• Article 66.2 of Decree 108 provides that in the case of assignment of a project of an economic organization not associated with the termination of operation of the assigning economic organization, the assignment of the project will comply with the conditions and procedures for assignment of capital;
• Article 66.3 of Decree 108 provides that in the case of assignment of a project of an economic organization associated with the termination of operation of the assigning economic organization, the assignment of the project shall comply with the conditions and procedures for merger with or acquisition of an enterprise;
• Article 66.4 of Decree 108 provides that in the case of assignment of an investment project associated with the termination of operation of the assigning organization and the assignee establishing an economic organization to continue implementation of the project, the investment procedures stipulated by this Decree must be carried out.

A “project transfer”, which is not a share transfer, is not associated with the termination of the assigning organization so Articles 66.3 and 66.4 of Decree 108 are not applicable. However, Article 66.2 of Decree 108 requires a transfer of project not associated with the termination of the assigning organization to follow procedures for assignment of capital. It is not clear how a project transfer by way of selling assets could comply with the procedures for assignment of capital.

As such, in case of (2), to avoid all the complications of a project transfer regulations, the parties can just structure a business transfer as a transfer of assets and other components of the transferred business.

Pre-emptive rights of existing shareholders over new shares issued by a joint stock company

It has never been clear whether an existing shareholder of a joint stock company (JSC) has pre-emptive rights over new shares issued by the JSC. However, in the past, under Decision 12/2007 of the Ministry of Finance on corporate governance rules applicable to public listed JSCs, “shareholders may refuse to exercise their priority right to purchase new shares. This right of refusal shall be clearly stated in the relevant resolution of the  general meeting of shareholders.” Many legal practitioners have relied on this provision of Decision 12/2007 to take the view that in case a public listed company issues new shares to a strategic investor by way of private placement,

• a collective waiver of pre-emptive rights recorded in the Shareholder resolutions of the target company approving the transaction is sufficient; and
• there is no need for the target company to collect individual waiver from each individual shareholder regarding their potential pre-emptive over the new shares to be issued to the strategic investor.

This view was particularly helpful to parties who want to expedite the deal process.

Decision 12/2007 has now been repealed by Decision 121/2012, which does not contain the provision on collective waiver of pre-emptive rights. On the contrary, Decision 121/2012 just basically repeats the provision in the Enterprise Law, which serves as the basis for pre-emptive rights of existing shareholders. While the model charter attached to Decision 121/2012 still contains a provision similar to the provision under Decision 12/2007, the legal arguments for not obtaining individual waiver from each individual shareholder regarding their potential pre-emptive over the new shares to be issued to the strategic investor have clearly become weaker.

Foreign investors purchasing assets of a Vietnamese company

Purchasing existing assets of a Vietnamese company may be an option for a foreign investor who wants to overcome the foreign ownership limit applicable to a public company or wants to avoid (or cheery pick) the liabilities associated with the target company. However, there are certain issues associated with an asset deal:

• Usually, the foreign investor cannot directly own assets especially land use rights and buildings in Vietnam. Accordingly, the foreign investor would need to set up its own subsidiary in Vietnam (Buyer Sub) to acquire the target assets from the Vietnamese seller. And the asset transfer agreement needs to be entered into between the Vietnamese seller and the Buyer Sub. However, from the seller’s perspective, the Buyer Sub is not a company of substance at least until the Buyer Sub’s capital is fully paid up and as such the foreign investor may need to act as a party to the asset purchase agreement and to be liable for the Buyer Sub’s performance;
• There is a risk that the foreign investor cannot set up the Buyer Sub as this may involve a discretionary investment evaluation process by the licensing authority. So even if the foreign buyer and the Vietnamese seller have agreed to a definitive agreement, the agreement cannot be completed until the Buyer Sub is set up. This is a risk that both the Buyer Sub and a target company have to consider when negotiating an asset deal;
• An asset purchase agreement between the Buyer Sub and a target company being a contract between two companies in Vietnam is likely to be subject to Vietnamese governing law. In addition, it is more likely than not that land use right and buildings are part of the target assets. In such case, the asset purchase agreement (or at least the part relating to land use right and buildings) may be subject to jurisdiction of the Vietnamese courts;
• An asset purchase agreement between the Buyer Sub and a Vietnamese seller being a contract between two companies in Vietnam will need to be settled in Vietnamese Dong under the foreign exchange regulations. As such, it may be difficult for the Vietnamese seller to fix the transfer price in US$;
• If the transferred assets include assets the ownership of which is subject to registration such as trademarks, buildings and land use rights then the parties may need to enter into separate transfer instruments for the purpose of filing with the relevant authorities. Transfer instruments relating to real estate in Vietnam must usually be notarized. As such there is a risk that there is inconsistency between the notarized transfer instrument and the asset transfer agreement which are not notarised;
• The transferred assets might involve numerous contracts and require third party’s consents. The Civil Code requires the transfer of rights to demand to be notified to the obligors. In addition, transfer of receivables will need to be registered with the National Department of Registration of Security Interests. The Civil Code requires the transfer of obligations to be consented by the obligee. Therefore, if the target company has substantial external debts and has granted security interest over its assets, it may be difficult to obtain consents from the target company’s lenders for the transfer of assets unless simultaneous or escrowed closing can be arranged to ensure that the lenders will be repaid.

Vietnam investment regulations – Direct investment v.s. indirect investment

Under the Investment Law, direct investment means a form of investment whereby the investor invests its invested capital and participates in the management of the investment activity. On the other hand, indirect investment means a form of investment through the purchase of shares, share certificates, other valuable papers or a securities investment fund and through other intermediary financial institutions and whereby the investor does not participate directly in the management of the investment activity.

The confusing point here is what “participating in the management” of investment activity. If having purchased shares of a listed company in Vietnam, a foreign investor attends the shareholders meeting of such company and exercises its voting rights then arguably the investor has “participated in the management” of the company in Vietnam. A more relevant example is a foreign investor purchases a minority stake in a domestic joint stock company and nominates its personnel to hold position in the Board of Directors of such company. In such case, it is not clear if the investor could be deemed to have “participated in the management” of the company in Vietnam.

The consequences of being treated as a direct investment and an indirect investment may be material. If an investment is an indirect investment then the parties may not need to obtain an Investment Certificate and must settle the transaction in Vietnamese Dong through a VND capital contribution account.  If an investment is a direct investment then the parties may need to obtain an Investment Certificate and could settle the transaction in foreign currency.

It would have been clearer if the Investment Law replaces the concept of “participating in the management” with “control”. In such case, an investor will be deemed to make a direct investment if it has “control” of the investment activity. In other cases, the investor will be deemed to make an indirect investment. 

Vietnam Business Law Blog

New Decree Implementing Resolution 171 on Pilot Mechanism for Commercial Housing Development in Vietnam

about a week ago

As discussed in our previous post, we believe the pilot mechanism introduced under Resolution 171 will bring a significant improvement to the legal framework for commercial housing development in Vietnam. With the enactment of implementing Decree 75/2025, this pilot mechanism is now fully set up. In this post, we will highlight key takeaways from Decree 75/2025 and discuss potential implications for housing developers.

New regulations on indirect investment account under Circular 3/2025

about a week ago

On 29 April 2025, the State Bank of Vietnam (SBV) has issued Circular 3 on the opening and using of VND account for conducting indirect investment in Vietnam (Circular 3/2025). From 16 June 2025, Circular 3/2025 will replace Circular 5 dated 12 March 2014 of the SBV (Circular 5/2014) guiding the opening and using of indirect investment capital account (IICA) for conducting indirect investment in Vietnam.

Vietnam Enacts Major Government Restructuring in Early 2025

about 2 weeks ago

n a landmark reform for 2025, the Government of Vietnam has commenced a significant restructuring of its ministries. This major overhaul, approved by Resolution No 176 of the National Assembly dated 18 February 2025, aims to create a leaner, more efficient, and effective state apparatus to better support the nation's development.

The restructuring involves a series of complex mergers and transfers of functions between ministries. Based on the guiding decrees, the key changes include:

Foreign Investment in Vietnamese Credit Institutions: Key Changes in Decree 69/2025

about 2 weeks ago

The Vietnamese government recently issued Decree 69/2025 (effective 19 May 2025), which amends Decree 01/2014 regarding foreign investor’s share purchase in Vietnamese credit institutions. Here are the main changes:

1.         Scope of application

Decree 69/2025 clarifies that foreign-invested economic organisations (FIEOs) which are required to comply with investment conditions and procedures applicable to foreign investors must now follow the same rules (in Decree 01/2014 as amended by Decree 69/2025) applicable to foreign investors when buying shares in Vietnamese credit institutions.

Under the Investment Law 2020, these FIEOs refer to entities where foreign investors hold a majority of the charter capital (FIEO-F1). Notably, Decree 69/2025 does not explicitly state whether it applies to economic organisations majority-owned by an FIEO-F1, even though such economic organisations are also treated as foreign investors under the Investment Law 2020.

Handling Civil Claims In Vietnamese Criminal Proceedings

about a month ago

In criminal proceedings in Vietnam, civil claims (e.g., claims for compensation, repair of damaged property) often arise alongside criminal charges against criminals. The Criminal Procedure Code 2015 introduces the position of “civil claimants” (nguyên đơn dân sự) and “civil defendants” (bị đơn dân sự) to facilitate the handling of civil claims in Vietnamese criminal proceedings. However, other than creating these positions, the Criminal Procedure Code 2015 lacks detailed provisions on how these civil matters should be addressed in criminal proceedings. This legal gap, coupled with inconsistent judicial practices, makes the resolution of civil claims within criminal cases particularly complex and problematic. This post will explore the key challenges in resolving civil claims during criminal proceedings.

• No clear procedures - Article 30 of the Criminal Procedure Code 2015 provides that civil matters in criminal cases are to be resolved during the adjudication of the criminal case. However, the Criminal Procedure Code 2015 provides no further instructions on the procedure for resolving civil claims within criminal proceedings. It remains unclear what procedural rules apply—whether the criminal court should follow its own process or adopt the procedures set out in the Civil Procedure Code 2015 to settle a civil claim during criminal proceedings. This uncertainty can lead to inconsistent judicial practices and procedural confusion.

• Scope of civil claims - Article 64.1 of the Criminal Procedure Code 2015 defines a civil defendant as “an individual, agency, or organization that, as prescribed by law, is responsible for compensating for damages”. It appears from the definition of civil defendant that a civil claim during criminal proceedings only relates to the issue of compensation for damages. It is not clear whether other issues such as ownership of assets or return of illegal property could be covered in a civil claim during criminal proceedings. In addition, the court may also designate the person making or subjecting to a claim on civil issues which are not claim for damages to another position (e.g., person with related rights and obligations) during the proceedings.

Decree 125/2024: Licensing Uncertainty for Continuing Education Service Providers

about a month ago

Decree 125 of the Government dated 5 October 2024 (Decree 125/2024) introduces updated regulations for the education sector, including a requirement that a license must be obtained for establishing "other centres performing continuing education tasks" (trung tâm khác thực hiện nhiệm vụ giáo dục thường xuyên in Vietnamese and in the rest of this article, Other Continuing Education Centres). Crucially, the education law fails to clearly define these centres, creating significant ambiguity for education service providers, particularly those centres teaching K-12 subjects (e.g., math, literature).

First, the Education Law 2019 and Decree 125/2024 lack an explicit definition of Other Continuing Education Centres. Interpreting relevant provisions of the Education Law 2019, it appears that Other Continuing Education Centres are centres providing:

Vietnam Refines The Framework For Direct Power Purchase Agreement With Decree 57/2025

about 2 months ago

Following the issuance of the Law on Electricity 2024, Vietnam's Government has swiftly replaced its initial framework for Direct Power Purchase Agreements (DPPAs) under Decree 80/2024 by issuing Decree 57/2025 on 3 March 2025. Coming into effect immediately, Decree 57/2025 repeals Decree 80/2024, which had only been active since 3 July 2024. Decree 57/2025 largely maintains the two DPPA models introduced by Decree 80/2024  (1) via private line (Private DPPA) and (2) via the national grid (Grid-Connected DPPA), but introduces important changes impacting eligibility, pricing, and contractual details. Key changes include:

• Flexible customer eligibility - Decree 57/2025 links customer eligibility (for initial participation and ongoing qualification) to a minimum consumption threshold (Minimum Take Amount) defined in the Wholesale Electricity Market Operation Regulations issued by the Ministry of Industry and Trade (MOIT). Decree 80/2024 instead used a fixed threshold (average ≥200,000 kWh/month). Accordingly, eligibility for participating in either DPPA model now depends on potentially dynamic wholesale market rules rather than a static figure, requiring ongoing monitoring of MOIT's regulations.

• Stricter customer eligibility – A Large Customer in a DPPA arrangement which has been implemented for 12 months must ensure that in a calendar year, it has purchased from EVN the Minimum Take Amount for the 12 month periods ending on 31 October of the previous calendar year. Under Decree 80/2024, there is no requirement that the Minimum Take Amount must be purchased from EVN. It is not clear if this requirement will apply to a Private DPPA under which the customer purchases directly from the RE Generator.