Legal due diligence is the process whereby the buyer examines the legal affairs of the target company to find out any past business secrets that the Target party does not wish to reveal. out or not. Problems discovered during appraisal are often used by the buyer as a bargaining tool to reduce the previously negotiated purchase price.

Thorough due diligence is vital to a successful deal, and it’s often only possible for attorneys with the knowledge and experience to determine the full range of issues. Therefore, it is common for legal due diligence to be carried out by relatively senior legal experts in several areas such as intellectual property, labor law, tax law and environmental law. When assessing legal status, a number of documents in the following areas need to be carefully reviewed:

Verification of documents related to the legal status of the company

• Reviewing licenses and approvals of state agencies for the acquired enterprise or its dependent units such as the Certificate of Business Registration, Investment Certificate, Certificate of Investment, etc. receive operations, business licenses, etc.
• Review documents on organization and management of the enterprise such as charter, internal agreements, regulations, documents issued by the General Meeting of Shareholders, Board of Members, Board of Directors related to organize and manage the business
• Review business lines of business;
• Review the fulfillment of capital contribution obligations by reviewing the register of shareholders and the Certificate of capital contribution issued to shareholders and members.

Property appraisal

• Appraisal of tangible assets

Firstly, with assets being land and assets on land: the buyer requires to provide a certificate of land use right, ownership of assets attached to land, information and documents related to the actual reality. rights to use/own property and disputes over the right to use/own property.

Second, with the property being a means of transport: the buyer needs to request to provide ownership registration papers of the means of transport, technical documents, papers on registration, inspection and certificates. Get compulsory vehicle liability insurance.

Third, with assets being machinery and equipment: the buyer needs to request a list of assets that are machinery and equipment, technical documents and documents proving the origin and quality of the machinery, device.

Fourthly, with assets being raw materials and goods in use: the buyer needs to request to provide a list of assets that are raw materials and goods, including inventory and in-use goods, and certificates. from proving the origin of raw materials and goods in use.

• Intangible property appraisal

Firstly, for intangible assets that are intellectual property rights: Buyers need to request to provide certificates/protection titles of assets that are intellectual property rights and/or other information and documents. demonstrate the ownership/use of intangible assets that are the intellectual property rights of enterprises and legal documents related to the registration of intellectual property rights.

Second, for other intangible assets: The Buyer needs to request a list of employees and key employees of the enterprise, a list of customers and partners to whom the business is providing services and/or conduct business activities and some related documents.

Labor appraisal

• Current legal documents related to labor need to be reviewed: Collective labor agreement, internal labor regulations, labor contract, trade union, documents showing labor disputes (if any).
• Current regimes employees are entitled to: Salary, bonus, overtime, annual leave, other leave regimes, insurance contributions, trade unions, etc.
• Number of employees of the acquired enterprise: Number of employees working by department, number of employees taking leave by month and year.
• Labor structure: This is also an issue that is clearly appraised to help the buyer best visualize the operating structure of the business. Normally, the buyer will ask the seller to provide an organizational chart of the business.
• Termination cases and settlement of payables should also be assessed.

Contract appraisal with a third party

• Based on the object of the contract, the buyer can divide the contract into groups. These include: Service supply contract, goods/property purchase and sale contract, contract related to internal transactions, etc.
• Based on the characteristics of the parties to the contract, the buyer can be divided into: Contracts with regular customers, contracts with current customers, contracts with distributors, contracts with agents, etc.
• Based on the business process of the acquired enterprise, contracts can be classified into two main groups: input contracts and output contracts. In which, input contracts include: loan contract, labor contract, warehouse/factory/office/equipment lease contract, construction contract, purchase contract of goods, property, raw materials Output contracts include: Service supply contract or consulting contract or goods sale contract, technology transfer contract, business cooperation contract, etc.

Check the terms to note in the contract:

• Commercial terms: 

Include the price/fee terms of the contract, payment method, payment term. From these terms, the buyer will determine the financial obligations or financial advantages of the business.

• The terms of commitments or rights and obligations of the parties are the core content of a contract: 

Determining the obligations and interests of the acquired business towards partners and customers will help the buyer further consider whether to continue to perform those obligations or adjust the contractual obligations. this coin in the future.

• Specific terms related to branded products: 

Some businesses have advantages related to branded products, having commercial advantages over partners. Buyers need to pay attention to terms related to intellectual property rights, technology transfer, or even an agreement on employees responsible for image design and marketing for the brand. The value of the product bearing the brand identity will improve the effectiveness of future communication or marketing campaigns as well as create a competitive advantage in the market for the buyer.

Examination of files of disputes, complaints and lawsuits: 

The examination and review of files of disputes, complaints and claims of enterprises to identify disputes within the enterprise, disputes between enterprises and enterprises. employees and issues arising between enterprises and customers, partners and competent authorities.

Financial due diligence: 

Buyer should use financial appraisal methods (asset method, discounted cash flow method, comparative ratio method, etc.) based on audited financial statements and records Financial and accounting records provided by the seller.

Our M&A Legal Advisory Services: 

• Consulting on Vietnamese policies and laws related to M&A;
• Advising on legal issues related to M&A transactions, conducting legal due diligence for clients;
• Assist and/or represent clients in negotiations with partners in M&A transactions;
• Advising and/or drafting various types of agreements and arrangements related to M&A transactions;
• Consulting and/or representing clients to make necessary registrations with competent state agencies;

If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the toll free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com

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