The steps to “equitise” (privatising) a Vietnamese State-owned enterprise (SOE) are not straightforward. For example, a potential strategic investor in an equitised Vietnamese SOE may have to enter into more transaction documents than those required in a private company. Under the equitisation regulations, a strategic investor in a Vietnamese SOE should enter into the following transaction documents:
- In-principle Agreement specifying at least the number of shares and the share purchase price to be purchase by the strategic investor;
- A deposit agreement whereby the strategic investor registers to purchase shares and deposits 10% of the share purchase price; and
- A share sale and purchase agreement whereby the strategic investor purchases shares in the Vietnamese SOE.
The need for three agreements instead of one is due to the following requirements under the equitisation regulations:
- A strategic investor is required to pay the purchase price within five working days from the signing date. Therefore, if a strategic investor only signs a share sale and purchase agreement, it may have to pay the purchase price earlier than expected;
- The strategic investor and the SOE are required to “agree” on the number of shares and the share purchase price before the strategic investor is approved to be a strategic investor. Therefore, an In-principle Agreement should be entered into for the purpose of obtaining necessary approval for the strategic investment; and
- A strategic investor is required to make 10% deposit at the time of “registration” for purchasing shares. The SOE may return the deposit to the strategic investor if the parties fail to reach agreement. An SOE does not have clear right to return the deposit to the strategic investor after the agreement is signed. Therefore, a deposit agreement is necessary to handle the deposit unless the strategic investor is prepared to pay 100% of the purchase price immediately.