Vietnamese Dong is not freely convertible. The payment and remittance of foreign currencies whether inbound, outbound or within Vietnam are subject to controls by the State Bank of Vietnam (“SBV”) and by the banking system in general. As a result, payment and closing arrangements for M&A transactions may be more complicated than in countries which have less foreign exchange control. For example:

• payments for “indirect investment” must be made in VND and be paid from a VND capital contribution account opened in Vietnam in the name of the investors. The term “indirect investment” usually covers investment in by way of purchasing shares or other equity interests in domestic or local companies which operate under business registration certificates;
• payments for "direct investment" can be made in US$ and paid directly from offshore to the capital contribution account in Vietnam of the target company. Quite strangely, this requirement may even apply to a secondary transfer from a shareholder of target company to an investor which does not involve the target company. Direct investment usually covers investment in foreign invested companies which operate under an Investment Certificate;
• investment in form of convertible loans, convertible bonds or shareholder loans are subject to foreign loans regulations. Under the foreign loan regulations, all foreign loans are required to be registered with the SBV. The registration needs to specify the accounts for drawdown, disbursement and repayment schedule;
• the exchange rate between US$/VND is tied to the interbank rate published daily by the SBV. If there is oversupply or over demand for US$ and the SBV’s published US$/VND rate does not reflect such situation then it may be difficult for foreign investors to convert their US$ into VND at the permitted exchange rate; and
• all banks in Vietnam are required to verify whether any payment or transfer of foreign currencies complies with the foreign exchange regulations. Failure to do so may result in administrative or even criminal liability. Therefore, parties to a M&A transaction in Vietnam will need to ensure that their bankers (or gatekeepers in term of foreign exchange control), are on the same page about the payment and closing mechanism.