Legal Due Diligence help management make better investment decision in
Vietnam
Mergers and
Acquisitions (M&A)
has become popular in Vietnam as the country develops and more investors are
eager to invest and gain control of the business enough to engage in, decide
important business matters through partial or full ownership of an enterprise.
A successful M&A mean the parties achieve their financial and
commercial goals (increasing capital, raising management capacity, branding,
etc) and ensuring safety and restraint the risk at the lowest level, though
legal due diligence undertaken by law firm in Vietnam.
The Importance of Legal Due Diligence of
Enterprise in
M&A activities
Legal due diligence of enterprises focuses on full and
detailed assessment of legal issues relating to the legal entity, capital contribution
status, shareholder status, legal rights and obligations. From the
investigation information, the parties can anticipate legal risks, assess
opportunities to come up with alternatives. In addition, legal assessments help
parties evaluate the reliability of their counterparts as well as understand
their advantages and constraints for the negotiation process.
What Legal Due Diligence in M&A Activities
Entail?
- Evaluate
the factors related to the legal status and capacity of the target
enterprise: Review the legitimacy of the establishment, operation,
possession of enterprise; ensure that the enterprise is not subject to
procedures for dissolution or bankruptcy and compliance with the law of
the enterprise in the course of operation. The information to be checked
includes: dossiers, certificate of enterprise
establishment, operation licenses, practice certificates, professional
liability insurance, company charter, agreement between the company owner
on rights of shareholders, capital contributors, minutes of meetings,
member/shareholder register, certificate of capital contribution.
- Evaluate
the factors related to the business and financial activities of the target
enterprise: Review the system of customers and partners of the enterprise;
the documents on economic contracts (with customers, suppliers, etc);
dossier of investment, construction, land, project; information on
guarantee, mortgage (if any), debt and credit agreement, M&A,
financial leasing contract, exclusive contract, franchise, etc, in terms
of value, legality, validity, progress to evaluate legal risks in the
future. Review the financial statements on the accuracy of the financial
status of the business.
- Verify the
factors related to labor: Review labor contracts, labor agreements,
internal labor regulations to determine the enterprise’s financial
obligations to employees, compliance Labor law and reception of labor
after the purchase or sale.
- Verify the
factors related to intellectual property: Review intellectual
property rights
of enterprises including: trademarks, trade names, industrial designs,
layout designs, business secrets, etc; the property has granted the
patent/license. Review matters of infringement of intellectual property
rights of other organizations, individuals or legal persons in order to
anticipate the risks of being sued or claiming damages.
In addition, in
an M&A deal, the acquirer should ensure that participation in capital
contribution or acquisition of the target enterprise is permitted, the form of
M&A implementation is in accordance with the law and the M&A deal was
approved by the competent authority of each party. After that, the factors
related to M&A transaction procedures and constraints and restrictions of
law (if any) must be evaluated.
Our lawyers in Vietnam constantly follow up with changes of
law to provide the client with update for better decision making process.
Source: ANTLawyers.vn
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