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; such foreign investors should submit dossiers to register their investment projects with the proper authorities (for example, 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 involving the relocation of 20,000 or more people in mountainous areas or 50,000 or more in other areas; or 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, seaport projects, oil and gas projects, projects having gambling, cigarette-manufacturing projects, industrial/export processing/economic zone projects, and golf course projects; projects with total investment from 5 trillion dong; projects of foreign investors in sea transportation, telecommunication with network infrastructure, afforestation, publication, press, establishment of a scientific and technological company with 100 per cent foreign-owned capital; 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; and projects utilising technology on the technology transfer restricted list.
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 (i) Vietnam’s WTO commitments and other international or bilateral treaties of Vietnam; and (ii) 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 and Law on Enterprises, 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: this is a new policy that was issued on 20 August 2019. On that day, the Politburo of the Communist Party of Vietnam issued Resolution No. 50-NQ/TW on orientation for completing the legal framework and policies, and improving the quality and effectiveness of foreign cooperation and investment up to 2030. Accordingly, ‘national security’ is one of the key factors in considering FDI and new regulations will be issued to implement this policy. When issuing investment certificates to new projects or M&A transactions, licensing authorities will likely need to also take into account national security considerations. This is something we need to watch closely and will have negative impacts on Chinese investments given the recent tension between the two countries.
- Antitrust: generally, a business combination involving a Vietnamese company may be subject to reporting requirements. Under the Law on Competition 2019, 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: (i) the combined market share of the participating companies; (ii) the level of concentration in the relevant market before and after the economic concentration; and (iii) 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 as mentioned in question 8, 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, or acquisitions of a Vietnam-based company that lead to foreign ownership in such Vietnam-based company exceeding 51 per cent of shares or equity.
If the foreign investors have not obtained such approvals for their acquisitions, they would not be officially recorded as a new member or shareholder of the Vietnam-based company since 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, such guidance is non-binding and in some worst-case scenarios such 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?
General speaking, 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 the authorities to declare the merger contract invalid. In addition, there are other cases where an investment registration certificate or enterprise registration certificate is revoked because of false information.