Forex trading under the laws of Vietnam (Part 2)

In the first article, we answered the question “Is Forex trading regulated under the laws of Vietnam?”.

Accordingly, Forex business is not regulated under the laws of Vietnam and the competent authority in Vietnam, i.e., the State Bank of Vietnam has not, so far, issued any further guidance or instruction on such kind of business in Vietnam.

Today, in the second article, we will discuss the legal risks in doing Forex business in Vietnam without license.

Doing Forex business in Vietnam without license: legal risks

Doing Forex business has been excluded by Vietnam in the Schedule of WTO Commitments. Since Vietnamese legislation does not have specific regulations on this kind of business, any investor wishing to do Forex business in Vietnam must consult with and obtain the approval from various competent authorities in Vietnam, including Ministry of Planning and Investment, the Ministry of Finance, Ministry of Industry and Trade, the State Bank of Vietnam; and other relevant Ministry (if any) in accordance with clause dd, Article 10, Decree 118/2015/ND-CP[1]. In the absence of specific regulations under the Vietnamese laws on this kind of business, the competent authorities in Vietnam hardly accept and approve Forex business for the investor.

Doing Forex business in Vietnam without license shall be subject to administrative sanctions in accordance with Vietnamese law. In particular, any investor doing Forex business in Vietnam without license shall be subject to an administrative penalty of from VND 200,000,000 to VND 250,000,000 and foreign exchange operations of the credit institution shall be suspended for 03 – 06 months[2]. In addition, he/ she may be requested by the competent authorities to stop or suspend its operation until more regulations on this kind of business are issued.

Doing Forex business in Vietnam without license: current status

Currently, there are not any foreign-invested financial institutions licensed to do the Forex business in Vietnam. Vietnamese traders who want to do Forex trading will often choose the other prestigious Forex Exchange Platforms licensed in other countries to register to create accounts and link with banks via Visa or Master Card for the purpose of the transaction.

In a recent interview, an officer in charge from the State Bank of Vietnam verbally confirmed that “The nature of Forex trading (on Forex Exchange Platform) is foreign currency business through accounts, in margin trading form and the value will be revalued continuously according to the fluctuations of exchange rates of currency pairs or other commodities (included gold). Forex trading is not considered as buying and selling foreign exchange to serve the needs of using foreign exchange but in order to speculate on price fluctuations”. As such, organizations and individuals are only allowed to perform foreign exchange transactions in accordance with the laws after obtaining approval from the Prime Ministry and the State Bank of Vietnam. Since there are no specific regulations on the Forex trading, any Forex business activity without approval from the competent authorities of Vietnam is not allowed.

  1.  [1] Clause dd, Article 10, Decree 118/2015/ND-CP: ” With regard to sectors and sub-sectors excluded from commitments or not specified in Vietnam’s WTO Schedule of commitments and other international agreements on investment, if the investment conditions applied to foreign investors are also not provided for in Vietnam’s law, the investment registration authority shall consult with the Ministry of Planning and Investment and relevant Ministries”.
  2. [2] Clause 8 and Clause 9, Article 23 of Decree No. 88/2019/ND-CP regulates administrative sanctions for violations on foreign exchange as follows:
  3. “8. A fine ranging from VND 200,000,000 to VND 250,000,000 shall be imposed for committing one of the following violations:
  4. c) Carrying out foreign exchange operations without a license granted by a competent authority, or with an expired or revoked license, or against the license, except for the cases prescribed in Points d, o Clause 4, Points a, d Clause 5 of this Article.
  5. 9. Additional penalties:
  6. dd) Foreign exchange operations of the credit institution or foreign bank branch that commits the violation prescribed in Point c Clause 8 of this Article shall be suspended for 03 – 06 months.”

Forex trading under the laws of Vietnam (Part 1)

Further to our article on Cryptocurrency, today we will discuss another related topic which is increasingly popular in emerging markets, including Vietnam: Forex business/ trading.

In the first part of this Article, we will answer the question: “Is Forex trading regulated under the laws of Vietnam?”

With Forex trading, the Traders attempt to profit by buying and selling currencies by actively speculating on the direction currencies which are likely to fluctuate in the future. On the other hand, investing in foreign exchange trading is investing in the difference between the exchange rate of a pair of one currency or the price fluctuations of other commodities. It means Forex trading is not about buying and selling foreign exchange to serve the needs of using foreign exchange but rather to speculate on price fluctuations. However, the applicable laws of Vietnam do not provide any clauses on price fluctuation speculation as a legal foreign exchange activity.

According to the Schedule of WTO Commitments, foreign exchange services have been committed to open for the foreign investors’ access to the Vietnamese market provided that the foreign investors must meet/ satisfy a number of conditions/ requirements. In particular, Section II.7.B of the Schedule of WTO Commitments provides that a foreign finance company investing in Vietnam is only permitted to establish a commercial presence in Viet Nam in the forms of representative office, joint venture finance company, 100% foreign-invested finance company, joint venture financial leasing company and 100% foreign-invested financial leasing company. Besides, Article 36 of the Ordinance on Foreign Exchange Control[1] provides that only credit institutions and other organizations that have been licensed by the State Bank of Vietnam are entitled to do business and provide the domestic and offshore foreign exchange services. Accordingly, the foreign investor wishing to engage in foreign exchange business in Vietnam must be a foreign finance company, and must set up an entity under either of the above investment forms and then obtain an approval in writing by the State Bank of Vietnam.

Nevertheless, Forex business is not included in foreign exchange services as per the laws of Vietnam. In particular, according to Article 5 of the Circular No. 21/2014/TT-NHNN amended by the Circular No. 28/2016/TT-NHNN, the foreign exchange services include only the followings:

1.        Conduct foreign exchange spot transactions.

2.        Conduct forex forward transactions, swap transactions and option transactions.

3.        Receive deposits from, grant loans in foreign currencies to clients other than credit institutions.

4.        Factoring and issuing guarantee in foreign currencies.

5.        Issue international payment cards, act as an agent issuing international payment cards, pay international payment cards, and accept international payment cards.

6.        Provide the wire transfer or payment services in foreign currencies within Vietnam’s territory; provide foreign currencies payment services.

7.        Purchase, sell, discount and rediscount negotiable instruments and other valuable papers in foreign currencies.

8.        Authorize other credit institutions, branches of foreign banks or business organizations to act as agents to provide foreign exchange services, including foreign exchange and foreign currencies payment services.

9.        Provide asset management and preservation services in foreign currencies; grant loans in foreign currencies by delegation.

10.     Broker issuance of valuable papers in foreign currencies.

11.     Provide consultancy on foreign exchange to clients.

12.     Open payment accounts in foreign currencies at other commercial banks and branches of foreign banks that are permitted to conduct foreign exchange transactions.

13.     Take and grant loans in foreign currencies to other permitted credit institutions and domestic financial institutions.

14.     Make deposits and receive deposits in foreign currencies to other permitted credit institutions.

15.     Open current accounts for foreign credit institutions.

16.     Take foreign currency deposits from foreign credit institutions.

17.     Conduct interest rate derivatives and other forex-related derivatives on the domestic market.

18.     Provide forex transactions other than those specified from clause 1 through clause 17 of this Article on the international market.

From our point of view, Forex business is not considered/ recognized as a foreign exchange service in accordance with the laws of Vietnam for the following reasons:

i.          The Forex business is not included into the list of the foreign exchange services in accordance with Article 5 of the Circular No. 21/2014/TT-NHNN; and.

ii.        The nature of doing the Forex business is not a foreign exchange trading activity as prescribed by the laws of Vietnam. It is, instead, the trading of foreign exchange through accounts, similar to the form of margin trading and the value which will be revalued continuously according to the fluctuations of exchange rates of currency pairs or other commodities. Forex trading is not considered as buying and selling foreign exchange to serve the needs of using foreign exchange in accordance with the spirit of the laws of Vietnam. The nature of this activity is buying and selling foreign exchange to speculate on exchange rate/price movements, mostly the pair of currency and the price fluctuations of gold.

For the above reasons, from our point of view, Forex business is not regulated under the laws of Vietnam and the fact is that the State Bank of Vietnam has not, so far, issued any further guidance or instruction on such kind of business in Vietnam.

In the second part, we will discuss “Legal risks for doing/ investing in Forex business in Vietnam”

[1] Article 36 of the Ordinance on Foreign Exchange Control regulating principles for business and provision of foreign exchange services as follows:

1. Credit institutions, foreign banks’ branches and other institutions are entitled to do business and provide the domestic and offshore foreign exchange services after they are approved in writing by the State bank of Vietnam.

2. The State bank of Vietnam shall provide for the scope of business and provision of domestic and offshore foreign exchange services, conditions, orders and procedures for approval for the business and provision of foreign exchange services of credit institutions, foreign banks’ branches and other institutions

Legal risks for doing cryptocurrency business in Vietnam without license (Part 3)

Currently, the Government of Vietnam has not yet issued license to any investor wishing to do cryptocurrency business in Vietnam

In a press conference on monetary policy and banking operations in the first quarter of 2019. Mr. Nghiem Thanh Son, Deputy Director of Payment Department of the State Bank of Vietnam (SBV) verbally affirmed that the State Bank of Vietnam has not yet issued any license to any company wishing to do cryptocurrency business in Vietnam. 

Running cryptocurrency business has been excluded by Vietnam in the Schedule of WTO Commitments, and in the absence of Vietnamese legislation on this kind of business, any investor wishing to do cryptocurrency business in Vietnam is requested to consult with and obtain the approval from various competent authorities in Vietnam, including Ministry of Planning and Investment, the Ministry of Finance, Ministry of Industry and Trade, the State Bank of Vietnam; and other relevant Ministry (if any) in accordance with clause dd, Article 10, Decree 118/2015/ND-CP . 

Doing cryptocurrency business in Vietnam without license shall be subject to administrative sanctions in accordance with Vietnamese law. In particular, any investor doing cryptocurrency business in Vietnam without license shall be subject to an administrative penalty of VND 50,000,000 to VND 100,000,000 and the foreign exchange operations of the credit institution shall be suspended for 3 – 6 months ; 

In addition, according to point h, Clause 1, Article 206, Criminal Code 2015 (amended and supplemented by Criminal Code 2017) on the offense against regulations of law on banking operations and banking-related activities, from 1st January 2018, anyone who commits acts including issuing, supplying or using payment instruments causing damage to property from VND 100,000,000 to under VND 300,000,000 shall be fined from VND 50,000,000 to VND 300,000,000 or imprisoned from 6 months to 3 years.

Is use of cryptocurrencies as a payment method prohibited under Vietnamese laws? (Part 2)

In the first part of the article, we answered the question: “Are cryptocurrencies recognized as non-cash payment instrument under Vietnamese laws?, and in the second part, we will answer the question: “Is usage of cryptocurrencies as a payment method prohibited under Vietnamese laws?”

Article 1 Decree No. 80/2016/ND-CP, amending the Decree No. 101/2012/ND-CP, on non-cash payments provide that “6. Non-cash payment instruments in payment transactions (hereinafter referred to as payment instruments), including cheques, payment orders, collection orders, bank cards and other payment instruments as prescribed by the State Bank.

7. Illegal payment instruments are payment instruments not included in Clause 6 of this Article.”

Accordingly, only non-cash payment instruments, including cheques, payment orders, collection orders, bank cards, and other payment instruments as prescribed by the State Bank are recognized as legal payment instruments. Since the cryptocurrency has not yet been prescribed by the State Bank, it shall not be considered as legal payment instrument.

On 21st July 2017, the State Bank of Vietnam issued the Dispatch No. 5747/NHNN-PC (the “Dispatch”) to the Government Office for the purpose of responding to question about Bitcoin, Litecoin, and other virtual currencies. Accordingly, the Dispatch affirmed that the above cryptocurrencies are not currencies and legal payment instruments in accordance with Vietnamese laws. In particular, the Dispatch said “As stipulated in Vietnamese legislation, cryptocurrencies in general, or Bitcoin and Litecoin in particular are not currencies and do not act as lawful means of payment”.

In the third part, we will discuss “Legal risks for doing cryptocurrency business in Vietnam without license”.

Cryptocurrency under the laws of Vietnam (Part 1)

In this Article, we will help foreign companies wishing to do cryptocurrency business in Vietnam to understand legal aspects on this type of business under the applicable laws of Vietnam.

The first part of the Article will answer the question: “Are cryptocurrencies recognized as non-cash payment instrument under Vietnamese laws?”

To answer the above question, we have to review, among others, the following key legal documents:

a.             Civil Code No. No. 91/2015/QH13 issued by the National Assembly of the Socialist Republic of Vietnam dated 24th November 2015 (“Civil Code 2015”);

b.             Criminal Code No. 100/2015/QH13 issued by the National Assembly of the Socialist Republic of Vietnam dated 27th November 2016 (“Criminal Code 2015”);

c.              Law on Credit Institutions No. 47/2010/QH12 issued by the National Assembly of the Socialist Republic of Vietnam dated 16th Jun 2010 (“Law on Credit Institutions 2010”);

d.             Law No.17/2017/QH14 issued by the National Assembly of the Socialist Republic of Vietnam dated 20th November 2017 on amendments to the Law on Credit Institution (“Law on Credit Institutions 2017”);

e.             Law on Enterprises No. 68/2014/QH2013 issued by the National Assembly of the Socialist Republic of Vietnam dated 26th November 2014 (“Law on Enterprises 2014“);

f.               Law on the State Bank of Vietnam No. 46/2010/QH12 issued by the National Assembly of the Socialist Republic of Vietnam 16th dated June 2010 (“Law on the State Bank of Vietnam 2010”)

g.             Decree Non- Cash Payments No. 101/2012/ND-CP issued by the government of Socialist Republic of Vietnam dated 22nd November 2012 (“Decree No. 101/2012/ND-CP”);

h.             Decree on amendments to Government’s decree No 101/2012/ND-CP dated November 22; 2012 on Non-Cash Payments No. 80/2016/ND-CP issued by the Government of the Socialist Republic of Vietnam dated 01st July 2016 (“Decree No 101/2012/ND-CP”); and

i.               Decree Penalties for Administrative Violations on Monetary and Banking Sector No. 88/2019/ND-CP issued by the Government of the National Assembly Republic of Vietnam dated 14th November 2019 (“Decree No. 88/2019/ND-CP”).

Cryptocurrencies first appeared in Vietnam in 2013 and are known as a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems. Common virtual cryptocurrency includes Bitcoin, Ethereum, Litecoin, Ripple, IOTA, etc;

Vietnam has not yet provided any legal framework to regulate cryptocurrencies given the fact that controlling this kind of currency is extremely difficult.

Under the Civil Code 2015, cryptocurrencies are neither property nor payment instruments. In particular, Article 105 of the Civil Code 2015 provides as below:

Article 105. Property

1. Property comprises objects, money, valuable papers and property rights.

2. Property includes immovable property and movable property. Immovable property and movable property may be existing property or off-plan property”

Clause 6, Article 1, Decree No. 80/2016/ND-CP on non-cash payment further provides that: “6. Non-cash payment instruments in payment transactions (hereinafter referred to as payment instruments), including: cheques, payment orders, collection orders, bank cards and other payment instruments as prescribed by the State Bank”. However, up to now, the State Bank of Vietnam has not yet defined the so-called “other payment instruments”. As a result, only cheques, payment orders, collection orders, bank cards or any other payment instruments which are named/ defined by the State Bank of Vietnam are payment instruments. Since cryptocurrencies have never been named/ defined as the payment instrument by the State Bank of Vietnam, they are not legally considered as non-cash payment instrument under the Vietnamese laws.

In the second part, we will answer the question: “Is usage of cryptocurrencies as a payment method for transaction purposes prohibited under Vietnamese laws?”

ASIA LEGAL CEREBRATING 2ND BIRTHDAY!

I often talk to my colleagues that a company, with merely 2 years of operation, looks like a child learning to roll over. Everything just starts and for that child to run quickly and far, he must be able to roll over, crawl, walk, then when his legs are strong enough, he can start to run.

With the “going far” strategy, from the outset of the firm, we have determined that the top priority shall be given to building the internal management system, training personnel, and focusing on a number of key practice areas, and at the same time, selecting client segment that is in line with the firm’s strategy.

2 years for a firm is too short to achieve remarkable results. However, within those 2 years, we have managed to build up an internal management system, and are step by step running, testing before officially putting it into use; to team up to 9 members from the modest figure of 2 at the beginning; and to clearly define the firm’s core business and the client segment. 

During those 2 years, we have also obtained 2 international awards from AsiaLaw (1 for Dispute Resolution and 1 for Labor & Employment); 1 international award from the Global Law Expert for the category of Corporate Law Firm of the year.

Also within 2 years, we have organized and trained for at least 7 domestic seminars/ training programs, and 2 international seminars/ training programs, of which 1 was held in Singapore in early 2020, and another is virtual training program for the Overseas Human Resource Directors of Multinational Corporations.

Over the same years, we have set foot and brought our firm name to 5 foreign countries in Asia, Australia and will continue to set our foot in Europe and America far away in the time to come.

At least 12 in-house training programs have also been implemented over the past 2 years, with topics covering from professional knowledge to soft skills. Currently, the internal training programs have been organized more often, with 1 training program per month, when the firm’s internal training plan was planned and approved a year before.

Next year will be our 3rd birthday, with lots of plans and goals. We have nearly 365 days left to continue writing the next chapters of Asia Legal. On the way we have passed, there are much difficulties and obstacles. However, thanks to the stability and internal cohesion, the support of our clients, partners and friends, we are still walking steadily . We truly appreciate such support.

See you again, in our 3rd birthday, with much more to write!

LANGUAGE IN THE COMMERCIAL CONTRACT WITH FOREIGN PARTNER

One of my Clients asks: “My company is a local company. We plan to sign a commercial contract with a foreign partner. Can we draft the contract in both English and Vietnamese? I heard from the accountant that the contract in both English and Vietnamese is not allowed as our company is a local company”

I’m joking: “It’s fine, even when you add Lao language into that contract” 🙂

Vietnam has been deeply integrating into the world economy, with 13 free trade agreements signed. More and more Vietnamese businesses are doing business with foreign partners, and the parties usually agree that the contract is made in bilingual, including Vietnamese and another foreign language, most commonly English, followed by other languages such as Chinese (when the foreign partner is Chinese), and Japanese (when the foreign partner is Japanese), Korean (when the foreign partner is Korean)…

In addition to a number of special cases, for which the contract must be in Vietnamese (in the field of technology transfer, consumption, information technology …), the laws of Vietnam governing commercial transactions, typically the Civil Code 2015 and Commercial Law 2005, do not have specific regulations on language in the contract. In other words, the parties have the right to choose the appropriate language to express their will, not necessarily Vietnamese.

However, it should be noted that:

1) For state management agencies, including tax authorities: the language in the documents (including contracts) submitted … shall be Vietnamese. The state management agencies don’t care how many languages the contract is made into, what language the contract has, instead, they request that all documents submitted must be in Vietnamese. If the documents are not in Vietnamese, then they must be translated into Vietnamese, as provided in Vietnamese tax law, accounting law…;

2) For the local Courts: the language in civil proceedings must be Vietnamese, as provided in the Civil Procedure Code 2015. Similar to the item (1) above, the Courts don’t care how many languages the contract is made into, what language the contract has, instead, they request that all documents submitted must be in Vietnamese. If the documents are not in Vietnamese, then they must be translated into Vietnamese and the translation must be notarized;

3) For the Commercial Arbitration: the language for dispute settlement, in which at least one party is a foreign-invested enterprise, is agreed upon by the parties in the contract in accordance with the Commercial Arbitration Law 2010. Vietnamese language is NOT REQUIRED in this case. During the dispute settlement process, the parties may also agree otherwise, on the language for dispute settlement, provided that this agreement is accepted by the arbitration council. 

Just few words to share with you all. Hope it is helpful to those (Vietnamese) who have been doing business with foreign partners.

Is there any difference in similar case within your jurisdiction? Please share your idea. 

Thank you!

It’s a small world !

Nearly 10 years ago, I left the business law firm where I had been with for almost 2 years. My boss, the Deputy General Director of the firm, returned the resignation letter to me and asked me to stay longer with the firm. Many times after that, I kept sending resignation letter to him, but failed to persuade him to agree with my resignation. Finally, I talked in person to him, convincing him that I decided to leave the firm as I had my own career path. However, I still practice law, and there was big hope that we would, some day in the future, become partners in the same case. He then agreed with my resignation as he knew for sure that nothing could change my mind that time.

The hope becomes true when I and him worked together on a big project 3 year ago. Even though we were not going together till the end of the project, but it is enough to show that our hope in the past becomes true. Up to now, we have still been keeping in touch, and keeping good memories of each other to tell each time we meet again.

More than 4 years ago, I applied for another business law firm, where I have good impression on the firm’s leader. At that time, he was General Director of the law firm, and Vice Chairman of the Board of Directors of another local real estate group in Vietnam. I was given all favorable conditions to develop my career path, but after a short time, I found that it was not a suitable place for me, I decided to leave the firm. 

When he heard about my intention, he called me to his room, discussed with me for more than one hour about my work, my expectations and my career path. He offered me two management positions within the group, expecting that I would stay and develop myself with the group, if I no longer wanted to work for the law firm. I thought it over and then informed him that I would leave the firm, but expect that we would have chance to work together some days in the future. He respects my decision and wishes me success with my own plan.

Then I set up my own law firm, facing up with various difficulties in the early days, but still keeping in touch with him, and surprisingly, in the recent meeting, he said that that he would quit his job at the law firm, and also the group, to set up his own law firm. Again, the hope becomes true, and now we have chances to work together. 

The two stories above can prove that being kind and honest to, and acting on the spirit of respecting others can give us good memories and impression of each other, and something like fate, when we meet again, we easily become trusted partners and colleagues of each other.

Such a small world!

YES ! We Win

Finally, the Court declared that we won the lawsuit. Our hard work, time and numerous effort have been awarded. We are deserved for what we have been striving our best so far.

Due to lengthy proceedings at the Court, we often recommend the Clients resolve the disputes at Commercial Arbitration Centers except for some cases that must be resolved by the Court as per the laws of Vietnam.

With regards to the above lawsuit, we are not hired from the outset. Another local law firm with no deep expertise in real estate advised the Client – a China based enterprise, to receive a 5.6-ha land use rights, from a local company, while such transaction is illegal under the laws of Vietnam.

During our course of practice, we have resolved many disputes, as consequences of the fact that the Clients hire and engage law firms with no expertise in such practice areas. We do not intend to blame those law firms, as we understand that each law firm has its strengths and weaknesses, and due to limited resources, each law firm can focus on some practice areas only. Bear in mind that don’t engage a law firm that specializes in civil, criminal or family matters to advise you on the commerce, business or investment matters which are expertise of a business law firm and vice versa.

CONDITION PRECEDENTS IN M&A TRANSACTIONS IN VIETNAM

Few months ago, a corporate client (the Buyer) requested me to assist in its purchase of 100% equity from the owners of a private university in Vietnam (the Sellers). The Buyer and the Sellers had worked together before and reached an agreement on the payment. Accordingly, the Buyer shall deposit 10% of the value of the sale and purchase agreement (the SPA) to the Sellers after signing the Memorandum of Understanding and the remaining 90% shall be paid after the Buyer and the Sellers sign the notarized SPA at a licensed notary office, and after the Sellers hand over all original legal documents in connection with the private university to the Buyer.

This way of doing transaction was quite familiar in Vietnam 15-20 years ago. However, it is so risky for the Buyer if it follows this transaction structure when key steps in an M&A transaction, including without limitation, legal and financial due diligence are not done, which can help define the requirements that the Sellers must meet/ satisfy prior to the Buyer’s payment (the Conditions Precedent). Simply speaking, the Conditions Precedent are the requirements that must be satisfied before a party is obliged to performed under a contract or before a closing occurs. In the above case, it can be understood that the Conditions Precedent for the Buyer to pay 90% value of the SPA to the Seller include (i) the SPA is signed and notarized at the licensed notary office, and (ii) the Sellers hand over all original legal papers of the private university to the Buyer.

The Conditions Precedent are not so popular in M&A transactions between local (Vietnam-owned) companies in Vietnam, but are an integral part of any M&A transactions, involving foreign buyers. In such M&A transactions, the payment shall be made (into various installment) by the buyer, upon satisfaction of the Conditions Precedent by the Sellers.

The Conditions Precedent may vary among M&A transactions. However, in my own experience from many M&A transactions, some of the key/ common Conditions Precedent in M&A transactions include:

1) The Conditions Precedent for the seller’s representations and warranties. Accordingly, the seller’s representations and warranties must be true and accurate and the sellers must fully comply with such representations and warranties;

2) The Conditions Precedent for internal approval for M&A transaction. Accordingly, the seller must provide evidence/ proof to obtain internal approvals (from the General Meeting of Shareholders or the Board of Members, as the case may be), authorizing the execution, delivery and performance of the sale and purchase agreement;

3) The Conditions Precedent for approval in-writing by competent authorities of Vietnam for such M&A transaction. For any M&A transactions where the buyer is a foreign investor, one of the most important Conditions Precedent is that the seller must obtain the written approval from the competent authorities of Vietnam for the share/ equity acquisition by the foreign investor;

4) The Conditions Precedent for the tax obligations with the tax authorities, and/ or financial obligations to any third parties. As such, the seller commits that the seller hides no tax obligation and/ or financial obligation besides what are included in the sale and purchase agreement, and as the case may be the seller shall pay any pending tax obligation and/ or financial obligation before the buyer makes payment;

5) The Conditions Precedent for completing some other legal procedures to recognize the buyer as a new member/ shareholder of the target company such as amending the Enterprise Registration Certificate to recognize the buyer as a new member (for limited liability company), or update the Register of Shareholders recording the buyer as a shareholder and issue the Share Ownership Certificate to the buyer (for joint stock company);

n)…

Returning to the above case, it is clear that (i) signing and notarizing (optional) the SPA, and (ii) handing over all original legal documents of the private university to the Buyer are not sufficient enough for the Buyer to control the transaction and minimize legal risks which may occur to the Buyer in this transaction. Some of the potential legal risks can happen as consequences of the fact that the order to transfer the equity of the private university does not comply with the education regulations of Vietnam, if it is not made public and offered to the private university’s officials, and teachers prior to transfer to the Buyer; tax and financial obligations arise after the Buyer takes over the private university…?

The above M&A transaction should not be done in a way of “cash on delivery” like the way you buy an item in the supermarket. Instead, it must be done carefully, step by step so as to avoid “putting the cat among the pigeons”.

Please note that I have reviewed my case as per the laws of Vietnam. I would expect my conclusions to apply in other jurisdictions, and would be pleased to receive comments from lawyers from other jurisdictions.