What you need to do before buying a company in Vietnam – Due Dilligence

due diligence for acquiring a company in Vietnam
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Once you have done the overall assessment of the potential business for acquisition, it may appear to be a good purchase and you will want to go ahead with that option. The next step to get everything ready for the transfer is to do Due Diligence, basically the step to ensure the company is legally ready for transfer. 

For more information: What you need to do before buying a company in Vietnam – Overall assessment

Having selected the right company for purchase, it is advisable to verify its legality and obligations by examining its certificates and documents.

What documents of the company are there that I need to check about?
1/ Business Registration Certificate (BRC)

A business registration certificate (BRC) is considered a legal document of an organization, which is a paper or electronic document that records information related to business registration that the Business Registration Authority grants to an enterprise.

The BRC serves as the official birth certificate for businesses in Vietnam, whether they are locally owned or foreign-owned.

 

Checking business certificate of the business before acquiring in Vietnam
Business registration certificate in Vietnam is the “birth certificate” of a company in Vietnam

The BRC is a business certificate in Vietnam containing general company information.

By reviewing this document, you can verify the company’s current status and tax code. This verification ensures the accuracy of the information for seamless progression to the next steps.

Furthermore, understanding the shareholders’ names and their total capital investment in a company, as indicated in the BRC, is crucial when assessing the ownership structure of the organization before purchasing.

2/ Investment Registration Certificate (IRC) for FDI company

When acquiring a foreign-owned company, you will also come across an additional document known as the Investment Registration Certificate.

Investment Registration Certificate is the special document for foreign owned company in Vietnam
Checking the IRC before conducting transfer of ownership in Vietnam

The IRC will define the precise business scope in Vietnam for foreign-owned companies

An investment registration certificate is a formal record, either in written or electronic form, that documents an investor’s registration details for investment projects. It encompasses a series of proposals outlining the utilization of medium to long-term capital for engaging in business investment endeavors within specific regions, for a defined duration.

The IRC will specify the scope of business with associated business codes that the company can operate in, so you can have an understanding of what scope you are allowed to do and whether you want to add or remove businesses in the future or not.

3/ Sub-license expiry date and validity

In Vietnam, all businesses are classified with specific codes and must meet certain requirements for operations to commence.

For instance, a recruitment agency that sources employees for clients in Vietnam or operates remotely for global corporations.

Upon completing the incorporation process, they must acquire the Recruitment sub-license to qualify for providing said services. This license remains valid for 60 months from its signing date.

Another example is the restaurant business, several sub-licenses, such as fire safety and food hygiene certifications, need to be obtained when setting up the company. These licenses ensure compliance with crucial regulations and standards to guarantee the safety and quality of the establishment for both customers and employees.

Therefore, it is crucial to thoroughly review these licenses to prevent any potential complexities or additional workload in the future, especially pre-acquisition of the company.

4/ Last fiscal year performance/ audited financial statements

For operating companies in Vietnam, they must keep the financial year performance and audited financial statements of the previous 12 months. This is to ensure transparency and proper financial management.

When contemplating the acquisition of a company, it is vital to meticulously review its financial documents. By evaluating not only the business’s performance but also examining its liabilities, remaining funds, and overall financial health, one can gain valuable insights. This information plays an important role in strategizing for the future, ensuring a well-thought-out financial strategy is in place.

Additionally, analyzing the cash flow meticulously can help guarantee smooth and seamless operations as the transition progresses and the newly acquired company integrates into the existing business framework.

5/ Proof of tax compliance and social security completion certificates

All businesses operating in Vietnam need to file compliance reports monthly, quarterly, and yearly to the authorities along with filing the taxes on time.

The employers are required to give a part of the social security to the employees. Any liabilities like late submitting reports, paying taxes, or social security will lead to penalties.

Moreover, owners must fulfill all compliance requirements before the government approves the ownership transfer.

You should ask the owners to confirm with a signature and stamp from the government to confirm the completion of tax, compliance, and social security requirements.

6/ Check the Credit Information of the company

By obtaining the (CIC), individuals can determine whether the company in question has any outstanding debts with banks in Vietnam. This certification provides crucial insights into the financial standing of the company and its relationship with local financial institutions.

How can VNBG assist you with buying a company in Vietnam?

VNBG, as the one-stop solution for businesses operating in Vietnam, provides assistance for you to check all the documents of the operating company, guaranteeing the company’s compliance with local regulations and laws.

Additionally, we can also provide comprehensive due diligence services to ensure that you are fully aware of any potential risks or liabilities associated with the company before making a purchase. This includes reviewing financial documents, contracts, licenses, and any other relevant information.

Furthermore, our team of expert professionals can assist you in negotiating a fair price for the company and handling all necessary legal procedures involved in the acquisition process.

In conclusion, buying a company in Vietnam requires thorough due diligence and knowledge of local regulations. With VNBG’s assistance, you can have peace of mind knowing that all aspects of the acquisition process are being handled efficiently and effectively. Contact us for a free consultation on acquiring an operating company and start your venture in Vietnam today!

 

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Micheal Dinh

Marketing Manager

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