Big Changes in M&A-related Laws

Some changes in the Law on Enterprises of 2015 like “company holds the absolute right to decide on having corporate seals or not”, “consistently applying procedures of Law on Enterprises on business establishment, share purchase or capital distribution by domestic and foreign investors” and “regulations on improved security and safety of investment items” will drive M&A activities in Vietnam. Mr Phan Duc Hieu, Director of Business Environment Department under the Central Institute for Economic Management (CIEM), said Vietnam is ranked 116th out of 188 countries in the world on the degree of investor protection, but the new law will push up the county’s ranking by 50 places to 60th-70^th position in the standings if other countries do not have changes. This has exerted a strong impact on investor confidence in Vietnam.

 

The second largest change is the new Law on Enterprise does not restrict M&A or merger of companies of different types as old laws. For example, a joint stock company can be merged with a limited liability company without having to transform the type of company as earlier.

 

The third biggest change is the Law on Investment eases M&A deals. M&A procedures are easier and simpler for foreign investors than new business establishment. For example, foreigners must fulfil at least 30 procedures when it sets up a new business entity. But according to the new law, when buying stake or contributing less than 50 percent of stake in companies not operating in conditional fields, they do not need to do anything but registering membership change. Simpler procedures will stimulate M&A activity.