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Experts warn investors of legal risks in M&A transactions

04/01/2019 09:27

Despite a slew of opportunities given to foreign investors to conduct merger and acquisition (M&A) transactions in Vietnam, investors might encounter legal risks when disputes arise.

Lawyers and arbitrators attend the seminar on December 20 – PHOTO: TAM AN 

Speaking at a seminar under the theme: “Closer Look into Legal Risks & Disputes in M&A Transactions,” held by the Vietnam International Arbitration Center (VIAC) and Korean Commercial Arbitration Board on December 20, Pham Duy Nghia, an arbitrator from VIAC, mentioned the Lavenue Crown project at 8-12 Le Duan Boulevard in District 1, a prime location in the central business district, as he pointed out the legal risks investors might face when they acquire stakes in State-owned firms.

Nghia raised questions related to the legality of the transfer format, usage rights and the revocation of the land designated for lease and transfer. He also wondered who would take responsibility if investors’ interests were affected.

From the story of the land dispute at 8-12 Le Duan Boulevard in District 1, Nghia said that M&A deals between State-run enterprises and foreign investors are complicated, not only in terms of the Enterprise Law, the Civil Code or the Investment Law but also in terms of compliance with the Land Law and the Law on Management and Use of Public Property.

As such, the arbitrator suggested investors carefully research M&A deals before conducting transactions to minimize these risks.

In addition to the Government’s commitment to creating favorable conditions for foreign investors and State-owned firms’ strict compliance with business laws, it is necessary for investors to understand the country’s laws and legislation and to flexibly apply regulations to successfully secure deals, Nghia remarked.

Truong Nhat Quang, a lawyer with YKVN, said that many risks have arisen during M&A transactions with Vietnamese firms.

Also, Quang attributed disputes over M&A deals to incompatibility between British or U.S. law and Vietnamese law.

Quang said that even though M&A activities are on the rise, providing various opportunities, investors need to prepare for their investment to cover project costs, workforce and legal consultation to alleviate the effects of possible disputes.


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