Standard Procedure for Acquiring Shares in an Enterprise

Procedure for Acquiring Shares must be properly structured to prevent investors from paying without being recorded as shareholders or facing suspended filings due to foreign ownership issues. The transaction should distinguish share transfers from existing shareholders and subscriptions for newly issued shares that raise charter capital. Foreign investors must complete share acquisition registration where required under the Law on Investment and update shareholder records within the prescribed timeline. Long Phan Consulting assists with reviewing the Charter, Shareholder Register, transfer limitations, and transaction compliance controls.

Legal Substance and Ramifications of Corporate Share Acquisitions

Investors must accurately determine the underlying transactional structure prior to executing a Term Sheet or a Share Purchase Agreement (SPA). Selecting an incorrect structure can result in misaligned tax liabilities, non-compliant internal corporate procedures, rejected regulatory approvals, and delays in the legal recognition of share ownership.

Conceptually, a share acquisition operates either as a secondary share transfer from existing shareholders or as a primary share acquisition via an additional share issuance by the target company. Investors hold the statutory right to select either a primary subscription or a secondary transfer structure pursuant to Clause 1, Article 74 of Decree No. 96/2026/NĐ-CP; notably, acquiring primary shares constitutes a capital contribution that directly increases the company’s charter capital pursuant to Clause 18, Article 4 of the 2020 Law on Enterprises.

For institutional buyers, this structural classification dictates all post-closing administrative filings. If the transaction involves foreign investment, a comprehensive evaluation of mandatory M&A approval and registration requirements must be conducted prior to releasing any funds.

Secondary Share Transfers from Existing Shareholders

A secondary share transfer entails the acquisition of shares directly from current equity owners. This transactional format alters the specific ownership of the shares but does not expand the total charter capital of the target enterprise.

Management must verify three primary checkpoints before initiating any financial disbursement:

• Title Verification: Confirming the selling counterparty is validly recorded in the official Shareholder Register and possesses the unencumbered legal right to dispose of the shares.
• Transfer Restrictions: Cross-referencing the corporate Charter, internal resolutions, and outstanding credit facilities to detect any hidden lock-up periods or transfer encumbrances.
• Commercial Valuation: Establishing a commercially reasonable transfer price. For public entities, the market price can be anchored to the average trading price over 30 consecutive trading days immediately preceding the valuation date, pursuant to Clause 14, Article 4 of the 2020 Law on Enterprises (as amended by the 2025 Law on Enterprises).

Where a foreign investor is involved, the payment for the transfer of share ownership must strictly comply with foreign exchange management regulations via authorized capital bank accounts, unless the payment is executed through asset swaps or alternative non-cash settlement methods permitted under Clause 5, Article 35 of the 2020 Law on Enterprises.

Primary Share Acquisitions via Additional Share Issuances to Increase Charter Capital

Subscribing to an additional share issuance requires the investor to inject capital directly into the target entity in exchange for newly created shares. This mechanism successfully expands the registered charter capital only when the underlying issuance and subsequent capitalization are executed in strict accordance with statutory requirements.

The most critical hazard under this structure is the inflation of phantom capital. The law strictly prohibits the fraudulent declaration of inflated charter capital, the failure to fully remit registered capital contributions, or the intentional overvaluation of non-cash capital assets pursuant to Clause 5, Article 16 of the 2020 Law on Enterprises (as amended by the 2025 Law on Enterprises).

At a minimum, investors must audit the following operational risk categories:

• The corporate issuance dossiers, formal resolutions approving the distribution plan, and the clear internal corporate governance authority of the approving body.
• The actual capital contribution timelines, banking payment vouchers, and the precise capability to register the expanded charter capital with the competent Business Registration Authority.
• The personal statutory liability of the legal representative if the issuance, capitalization, or registration causes material financial damage to the enterprise. This personal administrative and civil liability is enforced pursuant to Clause 2, Article 13 of the 2020 Law on Enterprises (as amended by the 2025 Law on Enterprises).

Consequently, subscribing to an additional share offering must be treated as a complex corporate capitalization process rather than a basic bilateral purchase agreement.

Legal Due Diligence (LDD) and Conditions Governing Share Transfers

Pre-transactional legal due diligence (LDD) is the mandatory operational mechanism used to determine whether target shares are legally eligible for transfer. For institutional investors, the primary compliance risk is not the execution of the SPA, but rather the total failure to secure valid, legally recognized ownership of the shares post-closing.

Investors must systematically audit the primary corporate records maintained at the target company’s principal office, including the Charter, internal operational regulations, official Shareholder Register, asset titles, and the minutes of the Board of Directors or Board of Members. This corporate documentation inspection and retention obligation is explicitly established under Clause 1, Article 11 of the 2020 Law on Enterprises.

The scope of the pre-closing LDD must encompass:

• Corporate Records Audit: Verifying the current corporate Charter, valid enterprise registrations, active business lines, and the proper internal governance approvals required for the transaction.
• Share Title Verification: Inspecting the official Shareholder Register, checking share classifications, auditing full capitalization statuses, and identifying any hidden transfer locks.
• Asset Title Review: Verifying absolute ownership of material corporate assets, checking registered encumbrances, reviewing credit agreements, and identifying outstanding banking obligations.
• Litigation and Tax Assessment: Identifying pending judicial disputes, outstanding tax arrears, claims from existing shareholders, and unfulfilled third-party contractual commitments.

Omitting a comprehensive legal due diligence review exposes investors to the hazard of purchasing shares that are contractually restricted, subject to third-party claims, or legally ineligible for recording. This omission represents the primary cause of post-closing transaction failures in local M&A deals after funds have been wired.

Statutory Transfer Restrictions on Founding Shareholders and Preferred Shares

Not all share classifications can be freely transferred on the open market. Investors must accurately classify the target shares prior to executing binding agreements, with particular emphasis on the shares held by founding shareholders and those categorized as voting preferred shares.

The primary legal risk of non-compliance is contract invalidation or the total inability to exercise actual shareholder rights. Signatories to an invalidated transaction and any related parties face joint and several liability for all resulting financial damages, and must return all illegally obtained profits to the target enterprise pursuant to Clause 5, Article 167 of the 2020 Law on Enterprises.

Auditing the Shareholder Register and Statutory Rights of First Refusal

The Shareholder Register is the definitive corporate document that establishes whether an investor is legally recognized by the enterprise. Consequently, investors must never disburse the full purchase price before cross-referencing the physical Shareholder Register against the corporate Charter and the executed transfer documentation.

The closing verification workflow must include:

• Verifying the precise identity of the selling shareholder, total share volume, specific share classification, and full payment status.
• Auditing the corporate Charter to identify hidden rights of first refusal, transfer approvals, or internal board consents.
• Inspecting all corporate minutes, board resolutions, and internal shareholder notifications relevant to the equity transfer.
• Structuring a financial holdback mechanism where a portion of the purchase price is withheld until the company officially enters the buyer into the Shareholder Register.

In limited liability companies, outstanding equity stakes must be formally offered to all existing members in proportion to their current holdings prior to any external transfer, pursuant to Point a, Clause 1, Article 52 of the 2020 Law on Enterprises (as amended by the 2025 Law on Enterprises). The same regulatory control logic must be deployed in joint-stock M&A transactions whenever the target Charter institutes explicit rights of first refusal or transfer limitations.

When corporate disputes arise, any shareholder or group of shareholders initiating derivative litigation on behalf of the enterprise bears absolute liability for the accuracy, legitimacy, and truthfulness of all supporting evidence and documentation submitted to the court, pursuant to Clause 4, Article 115 of the 2020 Law on Enterprises (as amended by the 2025 Law on Enterprises).

Market Entry Conditions for Foreign Investors Acquiring Corporate Shares

Foreign investors must evaluate more than just the commercial purchase price and their targeted ownership percentage. The primary legal focus is determining whether the transaction requires formal regulatory M&A approval before the share acquisition can be legally finalized.

The target enterprise receiving foreign inbound capital must submit a single complete dossier to the competent investment registration authority where its principal headquarters is located, provided the transaction falls under mandatory registration categories. This administrative workflow is strictly enforced pursuant to Clause 3, Article 76 of Decree No. 96/2026/NĐ-CP.

The application dossier must accurately reflect the underlying commercial substance of the transaction, the investing entity, and the target enterprise. Pursuant to Clause 4, Article 76 of Decree No. 96/2026/NĐ-CP, the core required documentation includes:

• A formal registration application for share acquisition.
• Certified legal identity and corporate registration documentation of the foreign investor and the target economic organization.
• A valid Principle Agreement or executed Term Sheet governing the share acquisition.
• Verifiable land use rights documentation if the target company holds land titles in border areas, coastal regions, or locations subject to national defense and security reviews.

If the transaction is executed without securing formal M&A approval prior to signing the definitive SPA, the investor’s application may be indefinitely suspended post-payment. This represents a catastrophic risk in transactions involving sectors with strict market entry restrictions or sensitive real estate assets.

Foreign Ownership Limits (FOL) and Conditional Business Sectors

The permissible Foreign Ownership Limit (FOL) cannot be determined through simple commercial negotiations. Investors must rigorously analyze the registered business lines, active operational scopes, statutory market entry conditions, and maximum ownership caps applicable to the target company.

When acquiring corporate shares, foreign direct investment (FDI) must strictly satisfy all regulatory criteria regarding charter capital ownership ratios, permissible investment formats, specific operational scopes, and domestic partner capacities pursuant to Clause 3, Article 8 and Clause 2, Article 21 of the 2025 Investment Law. Furthermore, the transaction must not engage in any prohibited business lines or sectors that have not yet been opened to foreign market access under Clause 2, Article 17 of Decree No. 96/2026/NĐ-CP.

For economic organizations established prior to March 1, 2026, if a foreign investor subsequently acquires a charter capital ownership stake exceeding 50% or gains dominant control, the target entity must satisfy the same regulatory market entry conditions as a foreign investor when acquiring shares in other enterprises, pursuant to Clause 2, Article 104 of Decree No. 96/2026/NĐ-CP. However, if the target entity already holds more favorable market entry conditions formally recorded in an existing Investment Registration Certificate, those grandfathered rights remain fully protected under Clause 9, Article 52 of the 2025 Investment Law.

In multi-tiered corporate structures, the FOL must be calculated by evaluating both the direct investing entity and the ultimate controlling structure behind it. Focusing solely on the superficial share percentage stated in the SPA will lead to an incorrect assessment of market entry compliance.

Regulatory Risks in National Defense and Security Sensitive Areas

A share acquisition within an enterprise holding land use rights in sensitive geographic regions must be treated as a highly regulated investment control filing. The underlying compliance risk extends beyond the land titles themselves to the fundamental ability to secure formal M&A approval.

The sensitive geographic zones requiring rigorous scrutiny include:

• Islands, border communes, wards, or designated border economic zones.
• Coastal territories and contiguous marine zones.
• Other strategic regions impact national defense and security.
• Manufacturing, logistics, real estate, or infrastructure projects positioned on sensitive land plots.

The share transaction is subject to mandatory national defense and security reviews if the target economic organization holds land use rights certificates within these designated zones, pursuant to Point c, Clause 3, Article 21 of the 2025 Investment Law. Consequently, the M&A registration dossier must include verified land title documentation proving compliant usage in border or coastal areas pursuant to Clause 4, Article 76 of Decree No. 96/2026/NĐ-CP.

Adopting a strategy of “closing the deal now and legalizing the paperwork later” will jeopardize the entire M&A timeline. If a registration or amendment dossier is found to contain fraudulent declarations or untruthful statements, the Business Registration Authority is legally empowered to revoke the issued Enterprise Registration Certificate pursuant to Clause 1, Article 68 of Decree No. 168/2025/NĐ-CP.

The Structural 6-Step Risk-Mitigation Workflow for Corporate Share Acquisitions

Share acquisition procedures must be executed through a highly regulated risk-mitigation workflow rather than a basic payment schedule. For institutional buyers, each operational stage must be tied to verified documentation, valid corporate signatures, and enforceable title recognition.

The standardized workflow comprises the following 06 steps:

1. Audit the Charter, Share Classifications, and Transfer Restrictions: Verifying the precise rights attached to common shares, preferred shares, or founding shareholder stakes, while identifying internal corporate approval requirements.
2. Negotiate and Execute the Principle Agreement or SPA: Establishing the commercial price, mandatory conditions precedent, document delivery obligations, financial holdback mechanisms, and closing conditions for updating the Shareholder Register.
3. Secure Internal Corporate Approvals: Obtaining formal authorizations from the Board of Directors, the General Meeting of Shareholders, or the competent governing body as dictated by the corporate Charter or transaction structure.
4. Execute Mandatory M&A Registration and Approval Procedures: Filing the required application dossiers with the competent investment registration authority for foreign investors subject to mandatory regulatory screening.
5. Disburse Funds, Execute Transfer Documents, and File Tax Declarations: Controlling capital bank flows, executing formal transfer deeds, and settling mandatory securities or share transfer tax liabilities.
6. Update the Shareholder Register and Complete Business Registrations: Recording the buyer as a legal shareholder of record, issuing new physical or electronic share certificates, and filing corporate changes with the Business Registration Authority.

If an enterprise registration dossier was formally submitted to the Business Registration Authority but had not received final approval prior to July 1, 2025, the application must be processed under the updated administrative frameworks set forth in Article 117 of Decree No. 168/2025/NĐ-CP.

Negotiating Principle Agreements and Enforceable Share Purchase Agreements (SPA)

A Principle Agreement or Term Sheet serves as a vital legal mechanism to lock in the transactional architecture prior to executing the definitive Share Purchase Agreement (SPA). This preliminary framework enables investors to enforce strict conditions precedent, regulate document delivery timelines, and maintain a clear exit pathway if mandatory regulatory approvals are denied.

The core contractual clauses subject to rigorous negotiation must include:

• Conditions Precedent (CPs): Requiring the successful completion of legal due diligence, the receipt of unencumbered internal corporate resolutions, and the issuance of formal M&A approvals for foreign investments.
• Payment Structuring and Holdbacks: Dividing the consideration into milestones and retaining a strategic financial holdback until the buyer is registered in the official Shareholder Register.
• Representations and Warranties: Securing absolute disclosures regarding unencumbered share title, the absence of pending litigation, zero tax encumbrances, and freedom from third-party pledges.
• Post-Closing Covenants: Delineating strict timelines for filing capital gains tax, delivering corporate records, and coordinating corporate registration updates.
• Cross-Ownership Prohibitions: Verifying internal corporate structures to ensure the transaction does not trigger restricted cross-ownership thresholds within corporate groups.

Enterprises that do not hold state capital and formally executed cross-ownership investments or share acquisitions prior to July 1, 2015, are protected against retroactive divestment mandates; however, these entities are strictly prohibited from increasing their existing cross-ownership percentages pursuant to Clause 1, Article 218 of the 2020 Law on Enterprises.

Foreign Exchange Capital Accounts and Mandatory M&A Licensing Procedures

The actual disbursement of capital represents the primary point of regulatory control within a share acquisition transaction. If capital flows violate foreign exchange management laws or if the mandatory M&A approval remains incomplete, the investor cannot secure legal recognition as a shareholder.

For foreign investors, all payment transactions transferring ownership of corporate shares or equity stakes must be routed through authorized capital bank accounts in strict compliance with foreign exchange management regulations, unless the consideration is settled via asset swaps or alternative non-cash mechanisms explicitly permitted under Clause 5, Article 35 of the 2020 Law on Enterprises.

The closing transaction dossier must be categorized into three distinct operational sets:

• Transactional Documentation: Incorporating the signed Term Sheet, executed SPA, formal share transfer deeds, banking payment confirmations, and corporate tax receipts.
• Internal Corporate Records: Compiling the updated Charter, board resolutions, shareholder minutes, validated Shareholder Register, and newly issued share certificates.
• Statutory Authority Filings: Including the formal M&A approval text, certified corporate identity dossiers, principle agreements, and verified land use title clearances where sensitive geographies are triggered.

The administrative timeline required to secure a formal M&A approval depends heavily on the accuracy of the dossier, the targeted business lines, and underlying land characteristics. Consequently, investors must never execute non-refundable payment obligations before the investment registration authority grants its formal approval.

Ultimate Beneficial Owner (UBO) Declarations and Corporate Registration Updates

Following the physical execution of transfer documents, the transaction has not reached legal completion. The purchasing investor remains legally exposed until their title is recorded in the physical Shareholder Register and the corresponding corporate changes are updated on the National Enterprise Registration System.

An unlisted joint-stock company must notify the competent Business Registration Authority of any changes to its foreign shareholders within 03 working days from the receipt of the transfer information or the occurrence of the modification, pursuant to Clause 3, Article 176 of the 2020 Law on Enterprises (as amended by the 2025 Law on Enterprises).

Enterprises incorporated prior to July 1, 2025, must explicitly disclose and supplement their ultimate beneficial owner information during their very next corporate registration update or notification filing, pursuant to Clause 1, Article 3 of the 2025 Law on Enterprises. Therefore, compliant UBO registers should be compiled prior to submitting any post-closing M&A dossiers.

Transaction Structuring and M&A Licensing Services by Long Phan Consulting Company

Share acquisition transactions can face regulatory failure even if commercial terms are aligned, provided the underlying corporate architecture, share titles, and foreign market entry conditions are poorly engineered. Long Phan Consulting Company provides expert legal counsel to help international investors structure compliant M&A transactions that ensure clear corporate governance rights and valid title recognition.

Our core M&A legal services include:

• Executing rigorous Pre-Transaction Legal Due Diligence (LDD) on target charters, shareholder ledgers, corporate issuances, tax histories, and asset encumbrances.
• Designing strategic M&A Transaction Structures, clearly differentiating between secondary transfers and primary subscription structures while assessing capital and tax impacts.
• Drafting, reviewing, and negotiating bilingual (English-Vietnamese) Share Purchase Agreements (SPAs), Term Sheets, and Principle Agreements.
• Managing end-to-end M&A Approval and Licensing Procedures, verifying FOL caps, conditional business lines, and national security clearances.
• Securing post-closing compliance, including updating the Shareholder Register, filing foreign shareholder notifications, declaring UBO structures, and settling transfer taxes.

Foreign corporate clients and institutional buyers are invited to forward their transaction frameworks, target charters, shareholder registers, or draft SPAs via Email (info@longphanpmt.com) or Zalo/WhatsApp (+84 906 735 386) for an expert preliminary evaluation by the legal team at Long Phan Consulting Company.

Conclusion

Successfully executing a strategy to buy shares in a Vietnamese company requires comprehensive control over every regulatory stage from initial transaction structuring and legal due diligence to securing formal M&A approvals, implementing UBO registrations, and validating entries in the Shareholder Register. Within cross-border M&A, the primary risk is not the commercial valuation, but rather the statutory capability to enforce legal ownership, meet tight foreign shareholder notification deadlines, and clear national security reviews.

Corporate buyers must thoroughly audit the target Charter, draft SPAs, FOL caps, land records, and capital account flows before releasing any funds. To systematically eliminate compliance defects and secure your inbound capital, contact the corporate Long Phan Consulting Company immediately via Hotline  1900636389 for an elite pre-execution transactional review.