Majority acquisitions, whereby foreign investors acquire majority equity interest in and, accordingly, management control of a local Vietnamese company (Local Co), become more and more common in Vietnam. The legal issues often arise from a majority acquisition including, among other things, the following:

• Investment Certificate: A Local Co is incorporated under a Business Registration Certificate or Enterprise Registration Certificate (BRC) under the enterprises regulations. Although there is no clear definition, a foreign-invested company is usually incorporated under an Investment Certificate under the investment regulations. Therefore, when a foreign investor acquires majority control of a Local Co, it is more likely than not that the foreign investor would require an Investment Certificate for the acquisition  before closing.
• Business lines: A Local Co  being a local Vietnamese company usually registers in its BRC more business lines than the business lines that it is actually conducting. While this practice is legally permitted for a Local Co, it may make a majority acquisition more difficult. This is because (1) some of the extra business lines may be subject to foreign ownership limit or additional licence or permit (e.g. business licence for import and trading business) or (2) the licensing authority may require additional clarifications or even new “projects” from the foreign investors. To avoid unnecessary licensing issues in obtaining the Investment Certificate, a Local Co may need to de-register all the irrelevant business lines when it is being acquired by a foreign investor.
• Branches/subsidiaries: A Local Co may have various subsidiaries and branches. If a foreign investor acquires control of a Local Co, the Local Co itself is also regarded as a foreign investor under the investment regulations. As such, the Local Co’s investments in its branches and subsidiaries may be regarded as investment by a foreign investor and be subject to separate Investment Certificates (Branches/Subs ICs). As such, in addition to the first Investment Certificate, a foreign investor would likely insisting on having all the Branches/Subs ICs in place before closing. Although not entirely correct, the local sellers may resist such a request by arguing that once the first Investment Certificate is issued, the local sellers are no longer in control of the Local Co. Therefore, the parties may need to develop a solution to satisfy both sides in case the Local Co has branches or subsidiaries.
• Land use rights: Land use rights may be allocated or leased to a Local Co for a fixed or indefinite term. However, a foreign-invested company may only acquire land use rights through leasing for a fixed term (usually up to 50 years). As a result of a majority acquisition by a foreign investor, the parties may have to adjust the nature of land use rights held by the Local Co. In addition, the term of the land use right held by the Local Co also determines the term of the Investment Certificate to be issued to the parties.
• Joint venture companies: A foreign investor who acquires control of a Local Co may still want the local sellers to remain as a minority shareholder/owner of the Local Co for some time. As such, under the Investment Law, the Local Co could be regarded as a joint venture company between foreign investors and Vietnamese investors. This would require a joint venture agreement to be signed between the parties.
• Public companies: Foreign ownership is capped at 49% in public companies in Vietnam. As such, a foreign investor may not acquire more than 49% shares in a Local Co if the Local Co or any of its subsidiaries is a public company. To acquire a Local Co being a public company, the parties would likely need to restructure the Local Co to avoid the 49% foreign ownership limit.
• Escrow Account: Majority acquisition often involves the purchase of shares or capital contribution of existing local controlling shareholders or owners (local sellers). Under the business registration regulations, to register the transfer of shares or capital contribution by founding shareholders of a joint stock company or members of a limited liability company, the business registration authorities often require evidence of the completion of the transfer which may include evidence of payment of the purchase price. Based on this requirement, in a majority acquisition, local sellers may require foreign buyers to pay the purchase price before the Investment Certificate is issued. On the other hand, a foreign investor would be reluctant to pay the purchase price before the Investment Certificate is issued. The usual compromise is for the foreign investor to pay the purchase price into an escrow account which will be released to the local sellers when the Investment Certificate and other conditions precedent are satisfied. Even if the parties adopt an escrow arrangement, the parties may agree to use an US$ escrow account instead of an VND escrow account although the purchase price is required to be paid in VND.