What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
Foreign investors invest in Vietnam by applying for a new investment project; these foreign investors should submit dossiers to register their investment projects with the proper authorities (eg, the Department of Planning and Investment or the industrial zone’s management authorities if investment projects are located in industrial zones). However, in certain investment projects, the foreign investors may also need to obtain ‘in-principle’ approvals from the state authorities, including the National Assembly, the prime minister or the Provincial People’s Committees. In particular:
the National Assembly’s ‘in-principle’ approvals for investment projects that have a significant impact on the environment, for example, nuclear power plants; investment projects that involve special-use forests, headwater protection forests or border protection forests of at least 50 hectares, of sand-fixing and windbreak coastal forests or protection forests for wave prevention of at least 500 hectares, or production forests of at least 1,000 hectares; investment projects involving the relocation of 20,000 or more people in mountainous areas or 50,000 or more in other areas; the conversion of land for wet rice cultivation of 500 hectares or more for other purposes; and other special investment projects as determined by the National Assembly;
the Prime Minister’s ‘in-principle’ approvals for investment projects that involve the relocation of 10,000 or more people in mountainous areas or 20,000 or more in other areas; airport projects, runways of airports and aerodromes; international passenger terminals; cargo terminals of airports and aerodromes with a capacity of at least 1 million tons per year; certain significant seaport projects; petroleum-processing projects; projects having gambling (except for prize-awarding electronic games for foreigners); residential housing and urban area projects that use at least 50 hectares of land or less than 50 hectares of land but with a population of at least 15,000 people in an urban area, or that use at least 100 hectares of land or less than 100 hectares of land but with a population of at least 10,000 people in a non-urban area, or projects regardless of the area of land used or population within the safety perimeter of relics recognised by the competent authority as national and special national relics; industrial or export processing or economic zone projects; projects of foreign investors in telecommunication with network infrastructure, afforestation, publications and the press; projects falling into in-principle approvals of two or more provinces; and other projects under the authorisation of the prime minister as regulated by other related laws of Vietnam; and
the Provincial People’s Committee’s ‘in-principle’ approvals for investment projects in which the state allocates or leases land without auction, tender or transfer; projects involving conversion of land-use purposes; golf course projects; residential housing and urban area projects that use at least 50 hectares of land or less than 50 hectares of land but with a population of at least 15,000 people in an urban area, or that use at least 100 hectares of land or less than 100 hectares of land but with a population of at least 10,000 people in a non-urban area, or projects regardless of the area of land used or population within a restricted development area or within a historic inner area (determined in accordance with urban area planning projects) of a special urban area; and projects implemented on islands or in border or coastal communes; in other areas affecting national defence and security.
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?
Acquisitions and investments by foreign nationals and investors are normally subject to the following substantive test for clearance:
- Foreign investment restrictions: foreign investment restrictions are provided in (1) Vietnam’s WTO commitments and other international or bilateral treaties of Vietnam; and (2) domestic laws. Vietnam’s WTO commitments are the most important and comprehensive international treaty provisions in relation to foreign investment. They provide for Vietnam’s commitments to give foreign investors market access (and limitations thereon) to all key service sectors. Vietnam’s WTO commitments and other treaties are supplemented by a set of domestic laws, including the Law on Investment No. 61/2020/QH14 and Law on Enterprises No. 59/2020/QH14, and other specialised laws regulating specific business sectors. Foreign investment restrictions exist primarily in the form of prohibition of foreign investment, foreign ownership limits, requirements for joint ventures with local partners, regulatory approvals for foreign investment, or a combination thereof. The foreign investors are responsible for providing a detailed analysis in their application on satisfying foreign investment restrictions. This may include consultation with relevant ministries, and preparation and presentation of evidence relating to the investor’s expertise and experience in the relevant industry.
- National security: Under the Law on Investment, ‘national defence and security’ is one of the key factors in considering foreign investment activities, including both issuing an investment registration certificate for a new investment project or approving M&A transactions. It is expected to have certain impacts on foreign investment in Vietnam, especially in real estate and energy projects.
- Antitrust: generally, a business combination involving a Vietnamese company may be subject to reporting requirements. Under the Law on Competition No. 23/2018/QH14, before carrying out acts of economic concentration by enterprises (defined as mergers, consolidations, acquisitions, joint ventures and other acts of economic concentration prescribed by law) are prohibited if they are evaluated to ‘have or potentially have the effect of significantly restricting competition in the Vietnam market’. The National Competition Commission will evaluate factors such as: the combined market share of the participating companies; the level of concentration in the relevant market before and after the economic concentration; and competitive advantages gained from the economic concentration.
- Corporate approval: corporate approvals need to be obtained in some specific cases to consummate the transaction. For example, the share transfer of founding shareholders within three years from the issuance date of the enterprise registration certificate to other persons other than founding shareholders must be approved by the general meeting of shareholders.
Which party is responsible for securing approval?
Vietnamese law does not stipulate that a particular party should be responsible for securing an approval. In practice, it is normally understood that all parties involved in M&A transactions should together engage in obtaining the approvals. However, in some certain cases, parties could negotiate or clearly appoint a party to be responsible for obtaining the approvals as a condition precedent to complete transactions.Review process
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?
With respect to a new investment project, the timeline for a foreign investor to obtain an investment registration certificate is 15 days from the date of full submission of the dossiers that are required under the Law on Investment. If the investment project is subject to the procedures for requiring ‘in-principle’ approvals from the state authorities, including the National Assembly, the Prime Minister or the Provincial People’s Committees, the foreign investors accordingly would need more than 90 days to get approvals from the National Assembly and more than 45 and 35 days to get approvals from the prime minister or the Provincial People’s Committees, respectively. However, in practice, the timeline is usually longer compared with the timeline stipulated in the Law on Investment.
In addition, there are any not exemptions or expedited or ‘fast-track’ options under Vietnamese laws.
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
Under the Law on Investment, approvals from the Department of Planning and Investment are required for acquisitions by foreign investors of a Vietnam-based company that engages in any business line that is conditional for foreign investors; acquisitions of a Vietnam-based company that lead to foreign ownership in this Vietnam-based company exceeding 50 per cent of shares or equity; or acquisition of a Vietnam-based company with the right to use land plots located on islands, border or coastal areas, or other areas affecting national defence and security.
If the foreign investors have not obtained these approvals for their acquisitions, they would not be officially recorded as a new member or shareholder of the Vietnam-based company, as the dossiers for registering the foreign investors as a new member or shareholder will likely be rejected by the Department of Planning and Investment owing to the lack of the above-mentioned approvals.Involvement of authorities
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
Normally, the foreign investors can officially, or unofficially, ask for guidance from the authorities prior to a filing being made. However, this guidance is non-binding and in some worst-case scenarios this guidance may be different from what is ultimately applied to the foreign investors’ investment.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
Generally, government relations, public affairs, lobbying or other specialists should not be used for supporting the review of a transaction by the authorities. Vietnamese law does not provide lawful informal procedures to facilitate or expedite clearance.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
The authorities (ie, the courts or arbitration) still have to review, challenge or unwind a transaction after its completion if either contractual party requests that the authorities declare the merger contract invalid. In addition, there are other cases where the investment project is forced to be terminated and its investment registration certificate or enterprise registration certificate is revoked because of false information, or the licensing authority finds that the investment project was made through a sham transaction (eg, nominee arrangement) in accordance with civil law.