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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