From both legal and practical perspectives, mergers and acquisitions (M&A) in Vietnam carry significant risks, especially when choosing between acquiring shares or acquiring assets.

Buying shares and buying assets: two seemingly interchangeable methods but lead to very different legal consequences.

1. Shares or Assets – A complex decision

In a typical M&A transaction, investors are faced with two main options: acquiring shares to become an owner of the target company, or acquiring assets to directly own specific business components. Both approaches are legally recognized under Vietnamese law. In practice, however, parties often switch between these methods depending on complexity, processing time, and strategic benefits.

Yet this flexibility is not always welcomed by regulatory authorities. Although share deals are more common, judicial bodies, particularly the courts, can be cautious when faced with transaction structures that creatively use share acquisitions to achieve asset ownership.

2. A landmark case: When courts reject the deal structure

A 2020 case at the High Court of Ho Chi Minh City illustrates this issue. A capital contribution agreement between two parties aimed at increasing the company’s charter capital was declared invalid by the court, which ruled that the agreement was a disguised transaction intended to conceal a project transfer. Despite the defendant having contributed capital and expected to control the project, the court deemed the arrangement as an unlawful circumvention and ordered the return of all contributed funds.

What’s striking is that the defendant’s approach, contributing capital to gain project control is a common practice in M&A. However, in this case, the court viewed it as a legal violation, setting a risky precedent for similar future transactions.

3. When the state disagrees with your valuation

Another risk arises in deals involving state-owned enterprises. These companies often hold valuable land-use rights, and share transfers are sometimes seen as an indirect way to acquire “golden land.” If the transfer price is deemed lower than the land’s actual value, parties may be accused of causing financial loss to the state, and could even face criminal charges.

This creates a stark imbalance: while private-to-private transactions are not criminalized for low transfer prices, deals involving state-owned entities can lead to severe legal consequences.

4. Lessons for investors

The reality is clear, Vietnam’s M&A landscape demands extreme caution, especially when public assets or land are involved. Thorough legal due diligence, transparent transaction structuring, and expert legal consultation are essential. Investors should be particularly vigilant when the target company is state-owned or holds projects tied to public assets.