Mergers and Acquisitions (“M&A”) are considered one of the fastest ways to help investors expand into new markets, create synergies, and grow revenue. To minimize potential legal and commercial risks, a thorough assessment of the target company must be conducted. Legal due diligence (“LDD”) is one of the most important types of due diligence.
1. When does legal due diligence start?
Normally, after the parties have already signed:
(i) a letter of intent or Memorandum of Understanding (MOU) between the investor and the seller;
(ii) a non-disclosure agreement;
(iii) and, in certain circumstances, after an initial deposit is made to confirm that the deal is serious enough for the company to prepare the initial documents.
2. Legal issues covered in due diligence
2.1. Legal status of target company Enterprise Registration Certificate, Investment Registration Certificate, Business License and other granted certificates
2.2. Financial status of target company
Capital, bank account and financial obligations
Shareholders, contributed capital and contribution status of shareholders
Corporate governance, company charter, recent meeting minutes and decisions issued
Process and feasibility of capital transfer
Labor contracts and human resources policies of the company
Documents related to the ownership or long-term rental of assets: real estate, machines, equipment, etc.
Financial reports, audit reports
Any pending or signed agreements currently in place
Any outstanding loans, debts, or obligations
2.3. Intellectual property
Documents related to the possession of trademarks, trade names, design, etc.
Infringement of intellectual property rights of organizations or individuals
2.4. Disputes and litigation
Disputes in which the target company was/is a party to the dispute
Civil, commercial, administrative lawsuits in which the target company was/is the plaintiff or defendant
3. Advice from our team
Legal due diligence should be conducted by a law firm or registered lawyer in Vietnam.
When selecting a lawyer, it may be helpful to find someone who is conversant in both Vietnamese and the native tongue of the investor.
The investor typically determines the scope of the legal due diligence and may identify key issues to research and review. This will help ensure that the proposal and recommendations generated during this engagement meet the client’s expectations.