(Vietnam) Due diligence (DD) is an extensive process of M&A deal undertaken by an acquiring firm in order to thoroughly and completely assess the target company's business, assets, capabilities, and financial performance. One of the most important and complex types of due diligence process is Legal Due Diligence (Hereinafter referred as "LDD").

1. What is the purpose of legal due diligence in Vietnam?

A legal analysis on the target company is very important. As with any component of the DD process, the main aim of LDD is to "check under the hood" and ensure that everything is in order. Buyers, or rather buyers' legal team, needs to understand which legal risks exist in the company it acquires.

In fact, few target company are likely to have a completely clean state when it comes to their legal history. By buying the company, the new owner will be responsible for the legal situation going forward. Hence, it is extremely important that all possible legal issues are fully disclosed and a way to deal with them has been agreed.

2. What does legal due diligence cost?

Legal due diligence is quite expensive, but it's a lot cheaper than solving the legal matter after the deal has closed. It's a necessary expense. To enhance the effective of this process, it is better if you create an agenda with the legal experts you hire, establishing where and when the costs will arrive so that everyone knows what to expect.

3. Legal due diligence on the Seller

It is a good practice for seller to have conducted at least part of the legal due diligence. It is a courteous way to treat buyer if the seller has an external attorney sign off on some of the internal legal workings of your company. It also speeds up the process and better prepares your business for a frictionless and timely sale. Furthermore, if both parties have in-house legal teams, it also provides a useful opportunity for an icebreaker between the two teams.

4. Ensuring a smooth process

Using a virtual data room which will be shared among two parties as well as the legal teams on both sides is the most efficient way to conduct the legal due diligence. The buyer and their lawyers should agree to a checklist of legal documents that will be requested from the seller before proceeding. Begin processes which inevitably take longer first, allowing the typically faster items till last. Your lawyers will know the general rule of timeline to provide the necessary documents but it might be longer depends on the timeline of retrieving in-house.

5. Obtaining a legal opinion on the target firm in Vietnam

In the legal due diligence procedure, there will be always be some element of risk which you must ask questions about what might be, not what has been. Therefore, Your lawyers with their experience should be the manager of this complex process so they could scrub the information and ensuring its accuracy. They'll provide you with an expert legal opinion on whether you should acquire the company from a legal perspective. The answer will rarely be a straight 'yes' or 'no,' but at least you'll be making a far more informed decision on the back of their advice.

6. Legal due diligence checklist in Vietnam

Having a checklist in place helps to keep everyone organized and on-task during due diligence. The following are some examples of what you can expect to see in a checklist during legal due diligence.


· Copies of agreements or instruments that place restrictions or encumbrances on assets.

· Contracts that restrict the target's right to conduct its business.

· Contracts with obligations such as covenants and indemnification.

· Summary of the target's compliance program and copies of all policies, procedures and other related documentation.

· Confirm that the firm is not restricted from doing business in accordance with Law

· Confirm whether the target has any direct or indirect presence and/or other engagements.

· Summary of regulations applicable and/or its business, and anticipated changes

· Copies of any letters with any regulatory agencies or authorities.

· List of provinces and countries in which the target has operations.


· List of current shareholders detailing the amount of shares each owns.

· List of stock transfer records.

· List of stock broker contracts and agreements.

· Evidence that outstanding stock is paid in full.

· Identify issues associated with transfering equity.


· List of all litigations and arbitration which are threatened, pending, current, and closed)

· Summaries of current and closed governmental investigations and proceedings on the target, directors, and executives from the past five years.

· Responses from the company regarding audit inquires.

· List of all statutory orders, decrees, and rulings to which the company be subject.


· Detailed list of all products and services.

· Verify compliance with the regulations for products, services, and operations under Law.

· Copies of all product warranties.

· Summary of all material warranty claims brought.

· Summary of all product recalls.

· Identify potential liabilities associated with products/services.


· Copies of service contracts.

· Copies of vendor contacts.

· Copies of customer contracts and obligations.

· Copies of outstanding contracts to purchase machinery or real estate.

· Copies of contracts for construction, architectural or engineering services for any buildings or improvements.

· Copies of operating contracts.

· Copies of employee contracts and retirement agreements.

· Change of control regulations.

· Copies of material contracts that are terminable upon a change of control or other corporate transaction.

· Copies of all joint venture, partnership, and franchise agreements.

· Identify any contracts or provisions that may be out of the ordinary course of business.


· Summary of permits, licenses, and other authorizations including any required export control and pertinent governmental licenses.

· Summary of license, sublicense, royalty and franchise agreements.

· Schedule of permit and license renewals and associated fees.

· Copies of automobile registrations.


· List of all patentstrademarks, and copyrights... which are pending and/or protected.

· List of the creator(s) for each IP component.

· List of all patents, trademarks, and copyrights held by an employee, shareholder, director or any other affliated that are used by the target.

· Summary of material trade secrets, know-how.


· List of equipment

· List of real estate of a company

· Summary of inventory stock

· Technology summary


· List of all employees including those covered by any disability legislature in the company.

· History of all sexual harassments accusations, charges, and convictions from the past five years.

· Copies of all current employment applications, interview guides, and hiring procedures.

· Verify compliance with equal employment opportunity and anti-discrimination legislature.

· Summaries of disciplinary and termination procedures and all involuntary employee terminations from the past five years.

· History of Unemployment and Worker's Compensation claims.

· Verify compliance with Labour Law.

· Ensure employee personnel files are in compliance with legal standards.

· Copies of all union and labor contracts.

· History of labor-related disputes, grievance procedings, and arbitrations.

Legal due diligence in a foreign country

Because of the diffence in law, M&A procedure in foreign coutries might bring new risks. Accordingly, they require proper assessment in the importance of conducting legal due diligence when acquiring a foreign company.

When looking into acquiring a company in a foreign jurisdiction, you should shop around among the local legal firms to seeking a law firm which fits your requirements in terms of professional service and cost. If the transaction is completed, the relationship with this law firm may become long-term, so it's worth putting extra time in at the outset to make sure it's a fit for your firm.


As you know, the universe of legal issues is too complex to leave to chance after the transaction has finished. Therefore, to minimized the unwanted legal liabilities, the high-quality legal due diligence plays an importance role in the M&A procedure. By conducting a thorough LDD, you give your acquisition every chance to create long-term shareholder value.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.