Important Things to Know when Selling a Business in Vietnam 

Selling a business in Vietnam is a prevalent business practice for foreign investors to roll the money into the next profitable venture.

However, before selling a business in Vietnam, there are things you must consider. In this article, InCorp Vietnam has listed out some of the important ones.

Get in touch with the InCorp Vietnam Team Regarding the Process of Selling your Business in Vietnam.

Selling a Business in Vietnam (Company Dissolution)

1. Know the Realistic Market Value

You must first understand the actual market value of your company and how to sell it for the highest possible price. The sale price of your firm must satisfy both your expectations and the buyer’s expectations as a fair market price.

Your company will be evaluated based on what your potential clients want to know about you to establish the value of the business you intend to sell.

For example

• Earning Before Interest, Tax, Depreciation, and Amortisation (EBITDA)
• Discounted Cash Flow (DCF)
• Debt and asset components

2. Determine if You Have a Proper Company Structure for Easy Exit

As company restructuring is sometimes tricky, expensive, and time-consuming, investors buying your business desire a company structure that can generate profits and enable a simple departure. To increase the market value of your firm, you must ensure that it has the proper corporate design and an effective exit plan.

Related: Your Guide to Company Restructuring in Vietnam

3. Find Out if There Are Applicable Taxes from Proceeds from Selling Your Business in Vietnam

You will be required to pay taxes at different rates depending on the profits received or the net gain, whether you are selling a business in Vietnam as an individual, a corporate, a non-tax resident, or a tax resident.

Type of Company	Tax Status	Tax
LLC	Tax Resident	20% of profits of sale
JSC	Tax Resident	20% of profits of sale
LLC	Non-tax resident	0.1% of the selling price
JSC	Non-tax resident	0.1% of the selling price

Exception

If you are the sole owner of an LLC, you do not have to pay taxes on the sale of your company.

4. Learn About the Investment Teaser/Teaser and the Information Memorandum

Find out if you need a teaser and an information memorandum to sell a Vietnam business. These two documents are essential because merger and acquisition (M&A) deals frequently include them.

You use a teaser and an information memo to highlight your company’s distinctive selling propositions and other pertinent details of your potential customers. An information memorandum typically has 50 to 80 pages of technical material.

Additionally, the information memorandum functions as a marketing piece that provides factual and thorough details about your company’s past, present, and future operations. An investment teaser is a two- to five-page document that highlights and summarizes your company’s activities, future growth, and financials.

An application for registration of capital contribution  or purchase of shares/stakes consists of the following:

1. A registration form for capital contribution or purchase of shares/stakes that details enterprise registration information about the company that foreign investors plan to invest in or whose shares or stakes they plan to buy.
2. Copies of legal documents of the individual or organization  that provides capital or purchases shares or stakes and of the corporate entity that receives capital from foreign investors or whose shares or foreign investors buy stakes.
3. A written agreement on the capital contribution or purchase of shares/stakes  between the foreign investor and the business entity receiving capital contribution from or selling shares/stakes to the foreign investor
4. A declaration document is enclosed with a copy of the business entity’s certificate of land use rights.  The legal duty for the declaration document’s honesty and integrity rests with the business organization.

5. Establish a Proactive Data Room

An “online data room” or “virtual data room” is an online warehouse of critical documents about a company. Online data rooms are widely utilized in connection with M&A transactions to help purchasers with their laborious due diligence process.

A well-organized data room is crucial to ensure a good and profitable transaction during the selling process. You should already have your data room prepared to fully manage the buyer’s information and data requests and streamline the buying and selling process before the potential buyer begins their due diligence on your company.

A buyer will ask for a sizable amount of information and data during the purchase process to perform their tax, financial, commercial, and legal due diligence on your company.

6. Perform Vendor Due Diligence

It is best to carry out your vendor’s due diligence before the buyer’s due diligence. Your vendor due diligence can assist you in discovering and identifying the risks and restrictions related to your appropriate corrective action before the investor or buyer becomes aware of any problems that could endanger the agreement.

The detailed stages of the due diligence process

Step 1: Summarize the following information about the business to perform due diligence:

1. Corporate matters

• License: ERC, IRC, and sub-license (if any)
• Company charter
• Confirmation letter on business lines of the target company
• Any Decision of the Existing Owner related to the Target Company
• Subsidiaries and affiliates (if any)

2. Capitalization and Ownership

• Existing Owner’s information
• Directly Investment Capital Account
• Capital Contribution

3. Organization structure and labor matters of the last 02 years (labor contract, work permit…)
4. Land, buildings, plant owned, and environment matters (Lease contract, fire fighting, and prevention)
5. Contracts, agreements, and commitments with the current validity.
6. Intellectual property
7. Legal proceedings and compliance

Step 2: Apply for approval to purchase contributed capital (as above)

Step 3: Amend ERC/IRC (as above)