On 14 January 2021, the Competition Management and Consumer Right Protection Authority (VCA) organized a seminar on “M&A regulation under Vietnamese Competition Law”. During the Q&A sections, the head of the merger filing division responded to various questions raised by lawyers from Venture North Law and other law firm. The official from the VCA has given some notable clarification as follows:

· Internal restructuring. Internal restructuring transactions within companies under the control of the same ultimate parent company is subject to the notification requirement. However, since the parties to the transactions in this case belong to the same group companies, the market share report of each party in this case will include market share information of the individual entity which is the party to the internal restructuring but not the whole company group. It is not clear on what legal basis, the official from VCA gave this explanation.

· Minority acquisition. A minority acquisition which confers veto rights to the acquirer is not automatically treated as having control over the target company and is subject to merger filing. Instead, the authority will need to look at the whole transaction to see if the overall arrangement satisfies the control criteria under Decree 35/2020. This clarification seems to address the confusion among practitioners about whether a minority acquisition would trigger a merger filing due to the view expressed by VCA’s official in other seminar or correspondences.

· Parties who are obliged to submit the notification of economic concentration include all parties involving in the transaction. For example, in case A (the purchaser) purchases 51% shares in the charter capital of C (target company) from B (the seller), then all A, B, and C will be treated as the “parties participating in the economic concentration” and must sign the notification submitted to NCC.

· The size-of-person test is met if the total assets/total turnover of either party in the transaction exceeds VND 3,000 billion. VCA adopts the same interpretation of size-of-person calculation of the Decree 35/2020 draftsman as discussed in our previous blog.

· Withdrawal of notification. After submitting the notification dossier to NCC, parties are entitled to withdraw the dossier anytime by giving a written withdrawal request to NCC. There is no form or required format of the withdrawal request.

· Offshore Transactions. For an offshore transaction, concerning parties must calculate market share in accordance with methods and criteria provided under Competition Law 2018 and Decree 35/2020, instead of using market share calculation under regulations of other jurisdictions (e.g., the jurisdiction where the offshore transaction takes place). In case of offshore mergers, parties need to provide information about goods and services traded in Vietnam only.

· Decree 35/2020 separates the notification thresholds into two groups, one is for the insurance/securities/banking industry (Special Industry) and the other is for other industries (Normal Industry). In case of a transaction between one party operating in a Special Industry and the other operating in a Normal Industry, all notification thresholds of two groups are applicable. Accordingly, parties in such M&A transaction must check thresholds of both Special Industry and Normal Industry to determine whether the notification is required for their transaction.

· For a transaction that takes place in several stages and has the same concerning parties in all stages, parties can submit a single notification covering all stages and all entities of the transaction.

This post is written by Le Minh Thuy and edited by Nguyen Quang Vu.

Vietnam Business Law