Vietnam Business Law is a website managed by lawyers of Venture North Law Limited (VNLaw). Venture North Law Limited (VNLaw) is a Vietnamese commercial law firm. We won the Rising Law Firm of the Year Award at the Southeast Asia Law Awards for the years 2020 and 2021 held by The Legal 500. Very few Vietnamese law firms have achieved a similar regional recognition.
On 6 April 2020, the Prime Minister issued a new Decision (Decision 13/2020) to replace Decision 11 dated 11 April 2017 on incentives for the development of solar power projects in Vietnam (Decision 11/2017), which expired 10 months ago. The summaries of certain key issues of this new Decision are here.
This post is written by Le Thanh Nhat and Nguyen Thuc Anh.
The merger filing thresholds under the new Decree 35/2020 are drafted broadly and have no exception (see more here). Accordingly, many M&A transactions, which have no anti-competitive impact in Vietnam are still subject to filing requirements. A filing process could take substantial time and effort since at law and in practice, the competition authority (NCC) has very broad discretion in demanding additional information or documents about the parties. Below are some potential structures for overcoming the merger filing threshold in Vietnam. The risks associated with these structures is that Vietnamese authorities may take the view that the parties have undertaken a transaction to conceal another transaction and therefore the first transaction is not valid. Failure to notify the NCC may be subject to a penalty from 1% to 5% of the total revenue in Vietnam of the parties.
Unincorporated joint venture
For a joint venture transaction, instead of incorporating a new joint venture company, the parties may consider entering into an unincorporated joint venture where no new entity is established (e.g., a Production Sharing Contract). An unincorporated joint venture does not fall into the types of economic concentration that is subject to merger filing in Vietnam. This is because the Competition Law 2018 only expressly applies to incorporated joint ventures but not unincorporated joint ventures.
The concept of control is important under the new merger control rules under the Competition Law 2018 and Decree 35/2020. In particular, economic concentration in the form of acquisition will arise if the acquiring entity acquires control over the target. Besides, the concept of control is also used to determine whether a company is an affiliate of another company when applying the size-of-person test under merger filing requirements.
Decree 35/2020, the acquiring enterprise establishes control over the target or a business line of the target in any of the following circumstances:
In September 2019, the Supreme Court has given an important opinion to lower courts about how to deal with a loan agreement by a borrower who has failed to obtain appropriate corporate approval. The opinion relates to a borrower being a limited liability company which has failed to obtain Members Council’s approval for a bank loan. However, the opinion should generally be applicable for borrower being joint stock companies. The court’s opinion is not a law. But it could still help lenders in protecting their loans in case a corporate borrower wants to get out of the loans on the ground the loan does not have appropriate corporate approvals.