Vietnam’s economic fire continues to blaze, attracting foreign investors eager to tap into its potential. But starting from scratch isn’t the only path to success. Acquiring an existing Vietnamese company offers a compelling alternative – a chance to leverage established operations, customer base, and local expertise.
Imagine taking the reins of a thriving Vietnamese company, and instantly gaining a foothold in this dynamic market. Fast-track your growth by acquiring a business with a proven track record, bypassing the initial hurdles of establishing a new entity.
What are the benefits of buying an existing business in Vietnam?
Acquiring an operating company in Vietnam offers a treasure trove of benefits:
Hit the ground running: Skip the lengthy setup process and begin operations immediately, leveraging existing infrastructure and personnel.
Established customer base: Inherit a loyal customer base, reducing the need for extensive initial marketing efforts.
Local knowledge: Benefit from the acquired company’s experience navigating Vietnamese regulations and business practices.
Qualified workforce: Tap into a team of skilled and experienced employees, minimizing recruitment challenges.
What are the steps to buy an operation business in Vietnam?
While enticing, navigating the process of buying a Vietnamese company can be complex. Unforeseen legal or financial hurdles can derail your ambitions. Proceeding without proper due diligence can lead to acquiring a business with hidden issues, impacting your bottom line.
This comprehensive guide equips you with the knowledge and steps to confidently acquire an operating company in Vietnam.
Here’s your roadmap to a successful acquisition:
Step 1: Due Diligence
This step is crucial in the acquisition process when buying an operational company in Vietnam. The due diligence process involves the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party or an act with a certain standard of care.
This step requires verifying the company information to confirm its accuracy and integrity. Assessing the company for tax debts, state agency matters, revenue status, business assets, legal document completion, operational structure, employees, and adequacy of charter capital for acquisition. Sometimes it is necessary to check the registered business lines to see if they are committed to foreign investment.
Additionally, the due diligence process also involves reviewing the company’s financial statements to assess its financial health and sustainability. This may include analyzing income statements, balance sheets, cash flow statements, and other relevant financial documents.
Another important aspect of due diligence is conducting background checks on key personnel within the company. This can involve verifying their qualifications, experience, and any potential conflicts of interest.
Consider engaging a professional consulting firm in Vietnam to conduct a comprehensive due diligence process before finalizing any investment decisions. Their insights and expertise can be invaluable in navigating the local business terrain and pinpointing potential risks.
Step 2: Acquiring the “Approval for capital contribution”
This certificate is to confirm that the buyer is qualified to process the acquisition of the target company. It includes verifying the buyer’s legal status, financial capacity, Sales contract, and other requirements set by the local authority.
Step 3: Updating the information on the business certificate
After completing the first steps, you can start to adjust the company business certificate and change the information for you.
Every business in Vietnam is required to possess a Business Registration Certificate (BRC). Think of it as the company’s birth certificate, detailing essential information such as ownership details, capital, and address.
Depending on the type of business (local or foreign ownership) that you are buying, there will be another paper called the Investment Registration Certificate (IRC) that you need to be aware of.
The IRC is an exclusive certificate awarded solely to foreign-owned companies and local businesses lacking these particular documents.
When acquiring a foreign-owned company, remember to update the BRC’s details and also make the necessary changes on the IRC. This guarantees that all official paperwork and agreements accurately mirror the latest information.
What is the difference between acquiring a local Vs a foreign-owned company?
The local businesses do not have the IRC, so any activities related to this document will require Approval for Capital Contributions to function as the IRC of the company in the future.
However, post-complete acquisition of the company, there’s the option to request an official IRC from the government. We strongly recommend this approach for ensuring strict adherence to the law in all documents. Additionally, acquiring the IRC can facilitate future business expansion plans and obtain approvals for any forthcoming changes.
During this step, it’s crucial to note that, in addition to the owner information, you have the flexibility to modify other aspects such as the business address, capital amount, and company name on both certificates if needed.
Our clients frequently consider updating the capital amount. This fund is crucial for company operations. Over the years of business operations, the previous owners may have utilized this capital. When you acquire the company, you may find that the amount available is less than stated on the certificate.
To serve your plans, you should consider increasing the capital if necessary.
Step 4: Settling the purchasing price and capital contribution
Upon revising the documents, please proceed with the payment via the Direct Investment Capital Account (DICA). The sum will be allocated into 2 categories.
One crucial aspect is the agreed-upon purchase price between you and the owner. Once this sum is deposited into the company’s bank account, it will be transferred to the owner’s account.
The second is the capital investment of the company. In the previous stage, if you increase the capital investment of the company, you need to contribute an extensive amount of capital.
For example, the current capital is USD 10,000 and you want to put USD 5,000 more. You need to update the capital to USD 15,000 and then contribute USD 5,000 to the DICA.
Please be advised that the DICA is accessible to foreign-owned companies only, allowing foreign investors to contribute capital to the company.
The local companies do not have this account because they can make the capital contribution with cash. If you acquire a local business, you must establish this account before making any contributions to the company.
Step 5: Changing the owner information with the Tax Department and bank
At this stage, the process is nearing completion. Kindly notify the bank regarding the company’s new ownership and conclude the update of owner details, ensuring all necessary signatures are in place.
The whole process will take around 4-6 weeks from the document submission date if there are no questions arise from the officers.
How VNBG help you to acquire an operating business in Vietnam?
VNBG with extensive experience in assisting hundreds of acquisition deals for clients in Vietnam. We are confident that our services will help you to successfully acquire and operate a business in Vietnam. Our team of experts will guide you through the entire process, from conducting thorough due diligence on potential businesses to negotiating fair purchase prices and handling all legal and financial aspects of the acquisition.
Our objective is to guide our clients toward the optimal choices, ensuring that the selling companies are secure, free of debt, and devoid of legal complications before acquisition. We provide distinct due diligence services to verify the company’s compliance and advise our clients on the potential risks associated with purchasing specific businesses.
We provide a comprehensive service package that covers everything from identifying prospective companies and performing due diligence to guarantee the safety of acquisition options. Our services extend to preparing the necessary documentation, guiding you through the entire acquisition process, assisting in setting up the DICA account and providing instructions on capital contribution.
Following the ownership transfer, we offer additional secretarial services such as recruitment, accounting, compliance, tax advisory, and more. These services aim to enhance the smooth and efficient management of your business operations.
Don’t hesitate to contact us for more information on how we can help you acquire an operating business in Vietnam. With VNBG by your side, you can confidently enter into the Vietnamese market and achieve your business goals.
