Author: TNTP LAW

In the structure of a mergers and acquisitions (M&A) transaction, the mechanism for determining and paying the purchase price is a critical factor in the success of the deal. Rather than applying a fixed price paid entirely at the time of transfer, many transactions adopt flexible pricing models to balance expectations between the seller and the buyer, while also managing legal risks that may arise during and after the transfer. In this context, the “Earn-out” mechanism is increasingly used as a solution to align interests and allocate risks between the parties. This article analyzes the Earn-out mechanism from a legal perspective and offers in-depth recommendations for businesses and investors to minimize disputes and ensure transactional efficiency.

1.When should the earn-out mechanism be considered?

Before adopting a pricing structure, the buyer must conduct a thorough assessment of the target’s operational performance, financial structure, and forecasting reliability.

The Earn-out model is particularly appropriate in cases where the target has not yet reached financial stability, is undergoing growth, or holds substantial potential contingent upon the execution of future business strategies. It is commonly used in transactions involving: Startups and early-stage companies; Businesses in the midst of restructuring; Entities with licensed or promising projects that have not yet generated revenue.

Under this model, the buyer pays a portion of the purchase price at closing, while the remaining amount is paid contingent upon the target achieving pre-agreed financial metrics. This mechanism protects the buyer from overpaying if performance falls short of expectations, while motivating the seller to ensure strong post-closing performance.

2.Establishing verifiable and objective financial targets

The effectiveness of an Earn-out clause depends on whether the agreed financial targets are clearly defined, objectively measurable, and verifiable through independent means, thus reducing interpretive ambiguity and the risk of contractual disputes. Common financial benchmarks include net revenue, net profit after tax, and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

The share purchase agreement (SPA) should clearly specify: i) the calculation formulas; ii) the financial data sources to be used; iii) the applicable accounting standards (e.g., VAS or IFRS); and iv) the measurement periods. Where necessary, the parties should agree to use audited financial statements prepared by an independent firm to verify whether the agreed performance targets have been achieved. This not only enhances objectivity but also minimizes the risk of prolonged disputes over accounting technicalities or manipulation of operational data.

3.Safeguarding oversight and post-closing audit rights

As the Earn-out is inherently tied to post-closing performance, the buyer must retain reasonable oversight rights to ensure the integrity of data collection and reporting. Accordingly, the SPA should include provisions covering: i) Buyer’s access to accounting systems, financial software, business plans, and contracts; ii) Reporting frequency, data format, and disclosure scope; iii) Regular or ad hoc audit procedures; iv) Covenants prohibiting concealment, delay, or artificial adjustment of performance metrics.

Where the seller remains involved in management post-closing, the SPA should delineate limits on decision-making powers (e.g., no abnormal cost adjustments or unauthorized long-term contracts) to prevent interference with financial outcomes. Additionally, parties may consider mandatory post-closing audits conducted by a neutral third party jointly appointed by both sides.

4.Using escrow to ensure payment security

An escrow arrangement is an effective mechanism to ensure that Earn-out obligations are performed transparently and are not subject to the discretion of either party.

An escrow account should be established in the following cases: i) where the Earn-out period is extended (typically exceeding 12 months); ii) where the seller is an individual or a company that does not undergo regular audits; or iii) where the transaction involves a high value and carries significant potential risks.

The following matters should be clearly stipulated in the contract: i) the total amount and percentage of the escrowed funds; ii) the escrow account administrator (a bank or an authorized third party); iii) the disbursement conditions (e.g., confirmation of target achievement, absence of breach); and iv) the dispute resolution mechanism relating to the escrow fund.

Escrow not only prevents unilateral payment delays by the buyer but also safeguards the seller’s entitlement once conditions are met.

5.Establishing liability caps and exclusion clauses

To ensure fairness and predictability, the SPA should also include:

• Liability caps: Parties should agree on a maximum indemnification amount for post-closing breaches, often ranging from 10% to 30% of the total transaction value, depending on the extent of disclosures and the risk profile revealed during due diligence.
• Claim periods: The agreement should define the timeframe within which the buyer may assert claims for breach of contractual obligations, typically 12 to 24 months after closing to provide legal certainty and manage exposure.
• Exclusions from liability: For example, the seller shall not be held liable in cases arising from force majeure events as defined by law, including but not limited to natural disasters, war, pandemics, changes in legal or administrative policies, or industry-specific crises beyond the reasonable control of the parties.

The Earn-out mechanism is a sophisticated contractual tool that helps allocate risk, align expectations, and incentivize post-closing performance in M&A deals. Its effective implementation requires the buyer and seller to carefully evaluate the target’s current condition, possess robust internal assessment capabilities, and maintain close coordination with legal and financial advisors from the outset of the transaction through to post-closing compliance.

This article, titled “Legal Recommendations for the Application of the Earn-out Mechanism in M&A Transactions” is presented by TNTP. Should you require further legal consultation or support in structuring or executing M&A transactions, please do not hesitate to contact us.

Sincerely,

The amended Law on Corporate Income Tax (“the amended CIT Law”), passed by the National Assembly on 14 June 2025 and taking effect from 1 October 2025, is expected to usher in a new wave of tax incentives with broader scope, greater depth and closer alignment with modern development trends. Instead of focusing solely on capital scale or geographic location as before, the amended CIT Law redefines the concept of tax incentives: incentives must be linked to technology, innovation, environmental efficiency and substantial contribution to the economy. With these significant changes approaching, businesses need to proactively review their operational models and investment strategies to avoid missing opportunities from the new generation of tax incentive policies.

1.Key tax incentives under the amended CIT Law

• Tax incentives will focus strongly on high-tech industries

For the first time, certain high-tech industries such as software product development, network security, chip manufacturing, integrated circuits, embedded software and smart sensors have been designated as industries eligible for preferential tax rates and significant tax exemptions. This represents a clear policy shift: incentives are no longer limited to “traditional manufacturing” but now extend to modern service and technology sectors. Previously, although some technology industries were encouraged in terms of investment orientation, they were not clearly established by tax law as beneficiaries of incentives. This led many technology companies to face difficulties in obtaining confirmation, resulting in missed opportunities or being subject to standard tax rates. This codification provides technology companies with a clear legal basis, allowing them to confidently make long-term investments and expand operations.

Businesses operating in industries eligible for corporate income tax incentives under Clause 2, Article 12 of the amended CIT Law need to proactively review their business registration sectors, implement accounting systems, invoices, documents and pay taxes according to declarations. Additionally, businesses need to prepare documentation proving the high-tech, innovative or environmentally friendly nature of their business activities, such as technical documents, patents and technology certificates to provide sufficient basis for applying tax incentives.

• Opportunities for businesses investing in “green” industries

The amended CIT Law also offers significant incentives for businesses operating in sustainable development fields such as renewable energy, waste treatment, recycling, energy-efficient equipment manufacturing, green logistics and electric transportation.

Unlike previous policies that only incentivized large businesses, the amended CIT Law stipulates that small-scale businesses investing in the right strategic sectors can still benefit from incentives, provided they meet the criteria for technology and environmental contribution.

Businesses in these sectors should note:

• New investment projects in renewable energy, recycling and waste treatment need to clearly register their environmental and technological objectives to be considered for incentives;
• Investments in energy-saving equipment, electric transport and smart logistics systems can be counted toward incentive criteria if operational efficiency is demonstrated.

• Incentives for the press sector

A notable innovation in the amended CIT Law is the redefinition and expansion of tax incentives for the press sector, which plays an important role in guiding public opinion, media, policy and cultural preservation. According to Article 12 of the amended CIT Law, press (including advertising activities in newspapers) has been included in the list of industries eligible for tax incentives. Accordingly, income of press agencies from print media activities, including advertising in print media, will be subject to a corporate income tax rate of 10% throughout their operation period; for other press activities, a preferential tax rate of 15% shall apply.

Before the amended law, only income from print media and advertising in print media enjoyed the 10% tax rate, while other press activities including electronic or multimedia press were typically subject to the standard tax rate of 20%. The standardization of a 15% tax rate across all remaining press activities in the amended CIT Law represents a significant shift in tax policy, aiming to create conditions for press agencies to develop sustainably and adapt to the digital transformation model, while ensuring they maintain the political and social functions of the press in the market economy.

• Incentives are no longer a “privilege” of location

Previously, tax policies often prioritized specific regions such as remote areas, economic zones and high-tech zones. However, with the amended CIT Law, tax incentives are strategic in nature, meaning that in any locality, if businesses invest in industries eligible for incentives, industries applying advanced technologies and generating high socio-economic efficiency, they can all benefit from the best policies.

This opens up equal opportunities for businesses in major urban areas, where high-tech forces and innovation hubs are concentrated, which previously found it difficult to access incentives because they were not located in geographically encouraged zones.

2.Tax incentive rates and tax incentive periods

According to the amended CIT Law, preferential tax rates are applied to income of businesses from implementing investment projects in industries and areas eligible for tax incentives. Specifically, businesses implementing new investment projects in specially incentivized sectors such as microchip production, semiconductor chips, renewable energy, environmental technology, etc., may enjoy a tax rate of 10% for a period of 15 years, along with a tax exemption for 4 years and a 50% tax reduction for the following 9 years. For other incentivized industries or investments in areas with difficult development conditions, the preferential tax rates are also clearly specified in Article 13 of this Law.

A notable new feature in the amended CIT Law is the introduction for the first time of a fixed preferential tax rate of 17% that applies long-term, intended for businesses conducting production and business activities in incentivized industries but not belonging to the specially incentivized group or those investing in encouraged areas. Previously, the 17% rate only appeared in some implementing decree guidelines, was temporary in nature and limited in scope; now, the 17% rate has been codified and expanded, creating an additional clear intermediate incentive tier between the standard 20% rate and the deep preferential rates of 10%–15%. This helps diversify tax policies, increases stratification and better aligns with practical realities.

Businesses need to proactively determine their industry position within the incentive classification system, assess their ability to meet the revenue ratio conditions from incentivized activities and prepare complete legal and technical documentation to correctly apply the appropriate tax rates and incentive periods according to the new regulations.

3.Strategic next steps for businesses

The amended CIT Law has just been passed by the National Assembly on June 14, 2025 and will take effect from October 1, 2025, therefore, to take full advantage of the new policy, businesses should not wait but need to act early, specifically:

• Review business sectors, tax registration industry codes to update them in line with incentive directions;
• Reassess revenue models, identify which portions belong to incentivized activities to separate and substantiate them.
• Develop new investment or expansion plans, clearly positioning themselves in high-tech fields, innovation or green development…;
• Consult with legal and tax experts to develop strategies, prepare clear incentive documentation and prevent legal and financial risks.

Thus, the amended Corporate Income Tax Law not only expands the number of industries eligible for incentives but also reflects a new philosophy in tax policy: incentives must target the right entities, right industries and right impacts. Businesses that invest and create long-term value for society will receive proportionate tax policy incentives. Conversely, businesses that fail to operate and declare taxes transparently will face inspections, tax recovery and administrative and criminal liability sanctions. Therefore, the 2025-2026 period is a crucial time for businesses to proactively restructure their operations, shape appropriate investment strategies and prepare legal and tax documentation to be ready for the new phase of tax incentive policies.

Sincerely,

In mergers and acquisitions (M&A) transactions, determining the purchase price is not merely a matter of commercial negotiation but also presents significant legal and technical challenges, particularly where the value of the target company is substantially affected by its post-signing performance. To bridge the information and expectation gap between the parties, two prevalent pricing models have emerged in international and Vietnamese practice: the Earn-out and the Locked Box mechanisms. This article presents a comparative legal analysis of the two pricing mechanisms, highlighting their structural characteristics, legal benefits and risks, as well as offering practical guidance for businesses and investors in selecting and implementing the appropriate model.

1.Legal Concepts and Operational Structures

• Earn-out

An “Earn-out” is a pricing mechanism whereby a portion of the purchase price is paid upfront at the time of transfer, while the remaining balance is contingent upon the target company achieving agreed financial performance metrics post-transaction. Common indicators include revenue, EBITDA (earnings before interest, taxes, depreciation, and amortization), or profitability ratios.

Example: The buyer agrees to pay 70% of the purchase price upfront and withhold the remaining 30%, which will only be paid if post-merger revenue reaches at least VND 100 billion within 12 months.

This structure allows the seller to benefit from the upside potential if the business performs well, while the buyer mitigates downside risk should the performance fall short of expectations.

• Locked Box

The “Locked Box” is a fixed-price mechanism whereby the purchase price is determined based on a historical balance sheet prepared as of a specific date (the “Locked Box Date”). The seller undertakes not to extract any economic value from the company between the Locked Box Date and the completion date, except for pre-approved transactions explicitly listed as “permitted leakage”.

Example: The audited financial statements dated 31 December 2023 are used to determine the purchase price. Any dividends, executive bonuses, or related-party transactions not expressly approved are treated as “leakage” and must be reimbursed.

2.Comparative Summary: Earn-out vs. Locked Box

3.Legal Basis and Practice in Vietnam

Both the Earn-out and Locked Box models may be adopted, provided they comply with the applicable laws of Vietnam. However, as there are currently no specific legal guidelines governing these mechanisms under Vietnamese law, businesses and investors should pay particular attention to the following considerations:

• The transparency and auditability of financial data;
• Alignment between the transaction documents, corporate charter, and internal financial reporting systems;
• Tax declaration obligations and post-transaction cash flow recognition in accordance with tax and accounting regulations.

4.Legal Risks and Common Disputes

• Risks under Earn-out
• Sellers may claim buyers manipulated operations (e.g., deferring sales, inflating expenses) to avoid paying the deferred amount.
• Poorly defined performance metrics may trigger disputes over calculation methods.
• Absence of third-party audit or neutral verification mechanisms often leads to prolonged disagreements.
• Risks under Locked Box
• Undetected related-party transactions or unauthorized distributions may result in unaccounted leakage.
• Buyers may face challenges monitoring cash flow movements between the Locked Box Date and closing.
• Ambiguity in defining “permitted leakage” often leads to disputes regarding reimbursement obligations.

5.Recommendations for Enterprises and Investors

• Earn-out structures should be reserved for transactions involving growth-stage companies with high upside potential but uncertain valuation. Operational oversight during the Earn-out period is essential.
• Locked Box structures should be based on independently audited financial statements. All permitted leakage items must be enumerated in the Share Purchase Agreement (SPA).
• Pricing adjustment provisions must be drafted with legal precision and accompanied by a clearly defined dispute resolution mechanism.
• Consider escrow or holdback arrangements to secure post-closing obligations.

Earn-out and Locked Box represent two distinct yet valuable mechanisms for managing pricing risk and bridging valuation gaps in M&A transactions. While both aim to address information asymmetries and protect party expectations, their suitability depends on the specific context of the deal and the nature of the target business. A well-informed selection, reinforced by transparent contractual provisions and expert legal-financial advisory support, is critical to ensuring transactional success, stability, and minimizing future disputes.

This article, titled “Legal Framework of “Earn-out” and “Locked Box” in M&A Transactions: Comparative Analysis, Advantages and Disadvantages, Dispute Risks”, is provided by TNTP. For further inquiries, please contact our team for timely assistance.

Sincerely,

In civil judgment enforcement, payment obligations represent the most common type of obligation arising from court judgments, decisions, or arbitral awards. When the judgment debtor fails to voluntarily pay the amount due despite having the means, the civil judgment enforcement authority must implement coercive measures. These measures may target non-cash assets or directly seize cash assets held by the debtor. This article provides an in-depth analysis of two direct coercive enforcement measures applied to cash assets: deduction of money from accounts and subtraction of incomes of judgment debtors.

1.What is enforcement of a payment obligation?

Although the current legal framework does not provide a definition for “enforcement of payment obligation,” it can be interpreted based on the definitions of “enforcement” and “payment obligation” as the process by which the debtor fulfills the obligation to pay an amount of money as determined by a court judgment, decision, or arbitral award. 

2.Coercive enforcement of payment obligations involving cash assets

Where a debtor is obligated to pay money but refuses to comply voluntarily, and the judgment enforcement officer determines that the debtor possesses cash assets (e.g., cash on hand, money in bank accounts, or income), the law allows direct enforcement against those cash assets. These measures are generally more efficient, less procedurally burdensome, and yield quicker results compared to enforcement against other types of property. Two such measures are outlined below.

• Deduction of money from accounts

Deducting money from a debtor’s bank account is one of the fastest and most effective means of recovering amounts owed, particularly when the debtor maintains significant balances in accounts held at credit institutions or the State Treasury.

This measure is implemented upon the issuance of a deduction decision by the judgment enforcement officer, pursuant to Article 76.1 of the Law on Enforcement of Civil Judgments 2008, as amended in 2014. Upon receipt of this decision, the financial institution managing the account (e.g., a credit institution or the State Treasury) must promptly deduct the specified amount. The deducted money is then transferred to the civil judgment enforcement authority’s account or directly to the judgment creditor, as specified in the decision.

The amount deducted must not exceed the total payment obligation and any enforcement-related costs. If the debtor maintains multiple accounts at different institutions, under Article 21.2 of Decree No. 62/2015/ND-CP, the judgment enforcement officer may apply deductions to one or more accounts based on available balances.

Example: Mr. A is obligated to pay VND 500,000,000 under a court judgment and holds an account at Bank X with a balance of VND 600,000,000. Judgment enforcement officer C verifies the ownership of the account and issues a decision directing Bank X to deduct VND 500,000,000, plus enforcement costs, from Mr. A’s account.

• Subtraction of incomes

Where the debtor has a stable source of income such as salary, pension, or allowances the judgment enforcement officer may consider income subtraction to enforce the payment obligation.

This measure may only be applied under one of the following conditions: (1) the parties agree to the subtraction; (2) the court judgment or decision explicitly provides for such subtraction; or (3) the obligation involves periodic payments, relatively small amounts, or where the debtor lacks sufficient assets to satisfy the judgment.

Income includes wages, salaries, pensions, incapacity benefits, and other lawful income. The law sets a maximum subtraction to ensure the debtor and dependents retain a minimum standard of living. For wages, salaries, pensions, and incapacity benefits, the maximum subtraction rate is 30% of the monthly amount received, unless the parties have agreed otherwise. For other types of income, the subtraction amount is based on the debtor’s actual income, subject to the statutory minimum living conditions for both the debtor and their dependents. 

The enforcement process begins with the judgment enforcement officer issuing an income subtraction decision. The employer, organization, or social insurance authority responsible for disbursing the debtor’s income must cooperate and subtract the specified amount as required.

Example: Ms. D is employed at Company Y, earning VND 15,000,000 per month. Under a court judgment, Ms. D must pay VND 50,000,000 in damages to Mr. E. The court decisions that 30% of Ms. D’s monthly income be subtracted to pay the judgment debt. The judgment enforcement officer issues a subtraction decision requiring Company Y to subtract VND 4,500,000 per month from Ms. D’s salary and remit it to the enforcement authority until the full amount is satisfied. 

This article, “Coercive enforcement of payment obligations: Deduction of money from accounts and subtraction of incomes of judgment debtors” is provided by TNTP for readers’ reference. We hope it proves useful to those interested in this subject.

Sincerely,

Mergers and acquisitions (M&A) are strategic tools for corporate restructuring, expansion, and operational optimization. However, due to their inherently complex, lengthy, and high-value nature, M&A transactions carry a significant risk of disputes between the parties involved. To effectively manage and mitigate these risks, businesses must adopt a comprehensive strategy supported by legal governance mechanisms throughout the transaction lifecycle. This article outlines practical and actionable recommendations to help enterprises establish an effective dispute management framework during M&A transactions.

Recommendations for Managing Disputes in M&A Transactions Prior to Deal Completion

1.Drafting a Comprehensive and Well-Structured M&A Agreement

One of the most common causes of disputes is an inadequately drafted agreement. An M&A contract should be logically structured and comprehensive, covering all key provisions, including:

• Representations and warranties regarding the legal, financial, tax, asset, human resource, and dispute status of the target company, etc;
• Covenants and undertakings, such as non-compete obligations, non-solicitation of employees, and confidentiality commitments during the pre- and post-closing phases;
• Conditions precedent that must be fulfilled for the transaction to be legally effective;
• Indemnity and limitation of liability clauses, including mechanisms for determining liability, claim periods, and damage caps.

Legal counsel specializing in M&A should be engaged from the outset to ensure that the contract is robust and risk-mitigating.

2.Conducting a Comprehensive and Systematic Legal Due Diligence

Legal due diligence is indispensable in any M&A transaction. It enables the purchaser to assess the legal status of the target company and identify potential risks early. To be effective, due diligence should be conducted by a qualified legal advisor and cover the following areas:

• Legal status, charter documents, and ownership structure;
• Key contracts and contingent obligations;
• Assets and land use rights;
• Taxation, finance, and insurance matters;
• Labor, human resources, and social security issues;
• Ongoing or potential legal disputes;
• Regulatory compliance.

The due diligence findings should be reflected in the contract negotiation process and incorporated into provisions that safeguard the buyer’s interests.

3.Strict Compliance with Applicable Laws and Regulations

To avoid legal disputes or the risk of transaction invalidation, parties must strictly comply with all relevant legal requirements, including:

• The Law on Investment and the Law on Enterprises: Relating to investment conditions, foreign ownership limits, and procedures for capital contribution registration and share acquisition;
• Competition Law: Obligations to notify economic concentration where applicable;
• Tax Law: Governing the obligations to declare, pay, and finalize taxes on the transfer of ownership (including corporate income tax and personal income tax);
• Disclosure regulations, especially where parties include public companies or credit institutions.

4.Developing a Structured Post-Merger Integration (PMI) Plan 

Many post-closing disputes arise from the lack of a coherent integration plan. Businesses should prepare a clear and structured PMI strategy, including:

• Organizational restructuring;
• Integration of financial, accounting, and human resources systems;
• Consolidation of technology platforms and data systems;
• Internal communication and cultural alignment;
• Monitoring synergy targets and post-closing financial commitments.

PMI planning not only maximizes deal value but also prevents internal conflicts and supports long-term growth after the merger.

5.Engaging Legal Counsel Throughout the Transaction Lifecycle 

Lawyers not only play a role in contract review, but also serve as key advisors in structuring the legal framework of the transaction, assessing potential risks, negotiating critical terms, and addressing issues that arise during the execution of the deal. In particular, for cross-border transactions or those with a high risk of dispute, involving legal counsel from the early stages can help:

• Design an optimal legal and tax structure;
• Proactively address potential disputes;
• Handle legal matters such as charter amendments, minority shareholder rights, and disclosure obligations, etc.

Involving legal counsel from the start empowers businesses to safeguard their legitimate interests throughout the transaction lifecycle.

Disputes in M&A transactions are almost inevitable in the context of deepening global integration and economic competition. However, most of these disputes can be effectively managed or even prevented from the outset if enterprises adopt sound legal governance principles and engage experienced legal advisors. Establishing a well-structured contractual framework, implementing a comprehensive due diligence process, selecting an appropriate dispute resolution mechanism, and executing a systematic post-merger integration plan form the foundation for ensuring legal stability and long-term sustainability throughout and beyond the M&A process.

This article, titled “Recommendations for Managing Disputes in M&A Transactions Prior to Deal Completion” is provided by TNTP. For legal advice or assistance regarding M&A transactions or related disputes, please do not hesitate to contact us.

Sincerely,

Disputes arising in mergers and acquisitions (M&A) can significantly impact the efficiency and value of a transaction. Once the causes and stages of dispute emergence have been identified, parties must select and apply an appropriate dispute resolution mechanism. Following our previous article, this article focuses on the remaining mechanisms commonly used in M&A transactions – commercial arbitration and court proceedings. The article also offers comparative assessments and practical recommendations to assist parties in selecting the optimal mechanism at the contract drafting stage.

Dispute Resolution Mechanisms in M&A Transactions: Commercial Arbitration and Litigation

1.Commercial Arbitration

Arbitration is widely regarded as a suitable mechanism for resolving M&A disputes, particularly those involving cross-border elements or requiring strict confidentiality. Pursuant to the Law on Commercial Arbitration 2010, a valid and enforceable arbitration agreement – either embedded in the contract or set out in a separate document – is a prerequisite for arbitration. Parties should clearly specify the number of arbitrators, the arbitral institution (e.g., VIAC, SIAC, HKIAC), the governing law, the seat of arbitration, and the language of the proceedings.

Arbitration offers several advantages, including flexible procedures, expedited timelines, and a high degree of confidentiality especially beneficial for publicly listed companies or transactions involving proprietary technologies. Arbitral awards are final and binding, and they may be recognized and enforced internationally under the 1958 New York Convention. However, arbitration also presents certain limitations:

• Arbitration costs tend to be higher than court litigation;
• The enforcement of interim emergency measures remains limited, as such measures often require court assistance;
• Arbitral awards may be annulled under procedural grounds stipulated in the Civil Procedure Code and arbitration laws.

2.Litigation

Where the contract does not include an arbitration clause or where disputes arise outside the contract’s scope (e.g., shareholder disputes or charter-related conflicts), courts may be the competent authority for adjudication. Court litigation may also be preferable in specific scenarios, such as:

• When interim relief is urgently required: For example, bank account freezing, attachment of contested assets, or injunctions to suspend share/equity transfers. Although arbitration permits emergency relief, courts generally have broader authority and more direct enforceability in practice.
• When disputes involve administrative decisions: In cases concerning investment licenses, policy approvals, or administrative sanctions, only courts are authorized to invalidate such decisions under current Vietnamese law.

Despite these advantages, court proceedings are often prolonged and conducted publicly, which may damage trade reputation and confidentiality. Moreover, proper identification of the competent court is crucial to avoid dismissal of the lawsuit. Under the 2015 Civil Procedure Code, parties may agree on the competent court based on the respondent’s registered office (Article 39) or the place of contract performance (Article 40). Where foreign elements are involved, the governing law (Vietnamese or foreign) should also be expressly determined.

3.Recommendations on Selecting Dispute Resolution Mechanisms

There is no one-size-fits-all solution. Therefore, parties are encouraged to adopt a tiered dispute resolution clause, comprising the following stages: Mandatory negotiation – Mediation within a fixed period – Arbitration (or court proceedings if no arbitration clause is in place). This approach maximizes the opportunity for amicable resolution before escalating the dispute. In addition, legal documentation should be coherent and comprehensive, ensuring consistency between the M&A agreement and ancillary documents such as NDAs, MoUs, and LOIs.

Disputes in M&A transactions are often inevitable given the strategic nature, high value, and legal complexity of such deals. Nevertheless, in practice, most disputes can be mitigated or avoided altogether if parties adopt sound legal risk management principles – including contract standardization, thorough legal due diligence, appropriate selection of dispute resolution mechanisms, and consistent engagement of legal counsel throughout the transaction lifecycle.

This article, titled “Dispute Resolution Mechanisms in M&A Transactions: Commercial Arbitration and Litigation” is provided by TNTP. Should you have any inquiries, please contact TNTP for timely assistance.

Sincerely,

As capital markets and corporate activities continue to evolve, mergers and acquisitions (M&A) have become vital tools for restructuring, scaling up, and enhancing the competitiveness of enterprises. However, due to the inherently complex nature of M&A transactions, disputes are often unavoidable and may arise at any stage – during negotiation, contract execution, or post-merger integration. Choosing an appropriate dispute resolution mechanism plays a decisive role in protecting legitimate rights and interests, mitigating risks, and ensuring legal certainty for the parties involved. This article analyzes two non-adjudicatory mechanisms frequently used at the pre-litigation stage: negotiation and mediation.

Dispute Resolution Mechanisms in M&A Transactions: Negotiation and Mediation

1.Negotiation

Negotiation is a process in which the parties engage directly with one another to discuss and reach a resolution without third-party intervention. This is a flexible method and often the first approach used in M&A-related disputes.

In the M&A context, negotiation helps preserve strategic partnerships, especially in deals where the seller retains a minority stake in the target company or remains involved during the post-merger phase. However, the effectiveness of negotiation largely depends on the parties’ goodwill and the balance of power between them. If one party lacks the willingness to cooperate or no incentives exist to promote negotiation, the process may be stalled or misused to delay performance.

To improve the practical effectiveness of negotiation, parties are advised to specify in the M&A contract: the negotiation period, representatives with decision-making authority, documentation methods for outcomes and conditions triggering transition to other mechanisms.

2.Mediation

Mediation involves a neutral third-party mediator who facilitates dialogue and assists the parties in reaching a voluntary settlement. Unlike litigation or arbitration, mediation emphasizes consensus-building over adjudication. Mediation may be conducted under institutional rules – such as those of the Vietnam Mediation Center (VMC) – or through ad hoc arrangements agreed by the parties.

Mediators are often professionals with expertise in facilitation and conflict resolution, helping parties manage emotions, overcome differences, and identify substantive interests. Mediation is especially effective in emotionally charged disputes or multi-party M&A deals involving investors of unequal status.

Under Vietnamese law, a mediation agreement is binding only if it is documented and signed by the parties in a “record of successful mediation.” For the agreement to be enforceable through civil enforcement authorities, the parties must petition the court for recognition of its validity pursuant to civil procedural law.

However, a key limitation of mediation is its dependency on the parties’ goodwill. If one party is uncooperative or acts in bad faith, the process may fail. Therefore, the parties should agree on mediator selection criteria in the contract or opt for a reputable mediation center. Additionally, the contract should specify the procedure, maximum time for mediation, and conditions for escalation to litigation or arbitration if mediation proves unsuccessful.

3.Recommended Dispute Resolution Framework

An increasingly popular model adopted by enterprises is a multi-tiered dispute resolution clause, structured as follows:

• Mandatory negotiation within 15-30 days from the date a dispute arises;
• Mediation before an independent mediator or through a designated mediation center if negotiation fails;
• Arbitration or litigation if mediation does not yield a resolution.

This three-tiered approach allows the parties to:

• Retain autonomy in resolving disputes;
• Preserve long-term business relationships;
• Increase legal efficiency while minimizing litigation costs and risks.

Negotiation and mediation are essential mechanisms for managing disputes in M&A transactions, particularly for businesses seeking to minimize financial and reputational damage. An optimal combination of these methods, supported by experienced legal counsel, not only facilitates dispute resolution but also fosters stable and sustainable development post-transaction. In the next article, TNTP will explore the remaining adjudicatory mechanisms: commercial arbitration and court proceedings.

This concludes TNTP’s article titled “Dispute Resolution Mechanisms in M&A Transactions: Negotiation and Mediation”. Should you have any questions, please do not hesitate to contact TNTP for timely support.

Sincerely,

Contributing capital through assets is one of the most common methods used by individuals and organizations when establishing a business or increasing its charter capital. However, unlike capital contributions made in cash, contributing capital in the form of assets requires compliance with more complex legal regulations and carries various potential risks. The following article will outline key legal considerations and risks associated with contributing assets as capital to an enterprise.

1.Regulations on contributing assets as capital to an enterprise

• According to Clause 18, Article 2 and Article 34 of the Law on Enterprises 2020, capital contribution refers to the act of contributing assets to establish or increase the charter capital of an enterprise. Contributed assets may include VND, convertible foreign currencies, gold, land use right (LUR), intellectual property rights, technologies, technical secrets and other assets that can be converted into VND.

Only organizations and individuals who are lawful owners or have the legal right to use the assets are entitled to use those assets as capital contributions to an enterprise.

Within the scope of this article, TNTP focuses on analyzing the legal issues related to capital contributions made in forms other than cash, gold, or foreign currency—specifically, other tangible and intangible assets such as real estate, intellectual property, technology, etc.

• Capital contributions through assets are governed by the Law on Enterprises 2020, the Civil Code 2015, and other relevant legal regulations depending on the type of asset used (e.g., Land Law, Law on Housing, Intellectual Property Law, etc.). For each type of asset, capital contribution must meet specific conditions regarding ownership rights, transferability, and the procedures for transferring ownership or usage rights, among other requirements.

2.Key considerations when contributing assets as capital to an enterprise

a.Valuation and agreement on the value of contributed assets

• According to Article 36 of the 2020 Law on Enterprises, non-cash and non-gold assets contributed as capital must be valued either by the founding members/shareholders or by a professional valuation organization, and their value must be expressed in VND.
• For capital contributions made during the establishment of an enterprise, if the asset is valued by a valuation organization, the appraised value must be approved by more than 50% of the founding members or shareholders.
• For capital contributions made to increase charter capital during the enterprise’s operation, the contributed assets shall be valued either by agreement between the contributor and the owner, the Members’ Council (in limited liability companies and partnerships), or the Board of Directors (in joint stock companies), or by a professional valuation organization.

b.Procedures for transferring ownership of contributed assets

• According to Article 35 of the 2020 Law on Enterprises, a capital contribution is only considered fully paid when the legal ownership of the contributed asset has been transferred to the enterprise.

For assets that require registration of ownership or land use rights (such as land use rights, houses, automobiles, ships, intellectual property rights, etc.), the transfer of ownership or use rights to the enterprise must be carried out in accordance with the legal regulations applicable to each type of asset.

In cases where the contributed asset does not require ownership registration, the transfer must be documented in a written record clearly stating the company’s information; the contributor’s information; details of the asset (type and quantity of the asset; total value of the asset and its corresponding proportion in the company’s charter capital).

• For assets used in the business operations of a sole proprietorship, there is no requirement to carry out procedures for transferring ownership to the enterprise. This is because a sole proprietorship does not have legal personality, and its owner bears unlimited liability with all of their personal assets during the course of the business’s operations.
• In addition, enterprises should note that if the contributor fails to complete the transfer of asset ownership within the prescribed time limit (depending on the type of company), consequences may include liability for damages or forfeiture of the contributed capital portion.

c.Can the type of contributed asset be changed after commitment?

• According to the 2020 Law on Enterprises, during the process of capital contribution to establish a company, a member of a multi-member limited liability company may change the type of asset initially committed as capital if more than 50% of the remaining members approve.
• For other types of enterprises, the law does not provide specific regulations on changing the type of contributed asset. However, if such a change results in a modification of the contributed capital value, either an increase or decrease in the actual capital contributed by a member or shareholder – the enterprise must carry out the necessary procedures to adjust its charter capital in accordance with legal provisions.

3.Risks of contributing assets as capital to an enterprise

a.Risks arising from incorrect asset valuation

• According to Clauses 2 and 3, Article 36 of the Law on Enterprises 2020, if a contributed asset is overvalued compared to its actual value at the time of contribution (due to lack of knowledge, subjective judgment, or intentional misrepresentation), the contributor and the owner (if applicable) must jointly contribute the shortfall and are also jointly liable for any damages caused by the intentional overvaluation of the contributed asset.
• In addition, certain types of specialized assets—such as intellectual property rights, technology, and technical know-how—are inherently difficult to value accurately. Even when a valuation organization is engaged, it may be challenging to find one with both sufficient expertise in the relevant fields and the capability to perform in-depth market analysis. In such cases, the enterprise may face significant risks in determining the responsibilities of involved parties if disputes arise in the future.

b.Risks arising from ownership or usage rights disputes

• Many enterprises overlook the importance of completing the legal procedures for transferring ownership or usage rights of contributed assets. As a result, such assets may remain registered under the contributor’s personal name and are not officially recognized as company assets. This can lead to disputes during dissolution, profit distribution, or the settlement of financial obligations.

If, after the capital contribution, a dispute arises over the ownership of the asset (for example, the asset is subject to ongoing legal disputes or has not been registered under the contributor’s name), the enterprise may lose ownership or usage rights over the asset, potentially resulting in significant losses.

4.Recommendations and risk mitigation measure

• Conduct legal due diligence on the asset before accepting it as a capital contribution to ensure that it is not subject to seizure, not involved in any disputes, and legally owned by the contributor.
• Carry out asset valuation in an honest and transparent manner. In cases involving high-value or hard-to-value assets, it is advisable to engage an independent valuation organization.
• Complete all legal procedures for transferring ownership of the asset within the prescribed time frame in accordance with applicable regulations.

Contributing capital in the form of assets is a common investment method but carries significant legal risks if the parties involved do not fully comply with applicable laws. Therefore, investors and business owners should exercise particular caution in the valuation process, establishing ownership rights, and completing legal procedures in order to protect their interests and avoid unnecessary disputes.

The above is the article titled “Legal considerations and risks when contributing assets as capital to an enterprise” presented by TNTP to our valued readers. We hope this article proves helpful and informative.

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