From February 2024, companies and foreign investors applying for a contribution of capital or purchase of share/capital contribution by the foreign investor (M&A Approval) must state the actual price of proposed transfer, instead of the estimated transfer price as previously. This is one critical change in the new template for the application for an M&A Approval under Circular 25/2023 of Ministry of Planning and Investment (MPI).

The change may have an adverse effect on relevant parties, especially the foreign investor, particularly:

The parties of an M&A transaction may find it difficult to declare an “actual transfer price” since the M&A Approval will be issued well in advance of the closing of the transaction.
If the actual transfer price at closing is different from the actual transfer price in the M&A Approval, the relevant bank (especially DICA bank in Vietnam) may refuse to process the relevant payment until an amended M&A Approval is issued.
However, there is no administrative procedure for amending an M&A Approval under the current regulations. Accordingly, to comply with the law and the M&A Approval, the parties may need to apply for a new M&A Approval to record new actual transfer price which could take months to obtain. In the meantime the actual transfer price may change again.

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

Vietnam Business Law