When conducting M&A activities, businesses need to pay attention to some basic terms in the contract such as transfer price, method and time of payment, implementation period, etc. to minimize risks for businesses. .
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For a business purchase and sale contract, because the buyer is usually the subject of drafting, the content of the contract is often of a more favorable nature in favor of the buyer. To ensure their rights and interests, and to ensure that transactions can be performed, businesses should note the following terms:
(1) Subject : It is necessary to specify the information of the parties such as: business name, head office address, name and position of the legal representative, ID number (or passport number) of the representative according to the law, corporate tax code, etc. according to the Certificate of Business Registration or the Certificate of Investment. When entering into a contract, the parties can contact and ask the partner to provide a copy of the Certificate of Business Registration or the Certificate of Investment to ensure the correct information and signing authority.
(2) Transfer price : It is necessary to specify the total value of the contract. Enterprises should note that the payment currency is Vietnam dong, except for some cases where the State allows the use of foreign exchange in the Vietnamese territory according to the provisions of Circular 32/2013/TT-NHNN.
(3) Payment method and time : The parties need to specify the payment method (transfer or cash) and specific payment time with the payment amount of each installment. To ensure safety, the parties should ask a reputable organization that has the authority to perform financial intermediary services. This third party will stand in place to ensure that the parties to the contract comply with the agreement and legally.
(4) Conditions and time limit for asset transfer : For the buyer, it is necessary to clearly specify the accompanying conditions and specific time in the M&A process for the seller to perform the obligation in the transfer of assets, shares, shares as stipulated in the contract.
(5) Legal rights and obligations of the parties : The parties need to detail the obligations in the period before, during and after the performance of the contract as well as the specific termination time.
(6) Terms of binding liability : The parties can anticipate situations that the other party can use to not perform the contract but draft appropriate terms, such as the buyer’s liability for non-payment. , or the seller’s liability for failure to deliver the subject matter of the contract.
(7) Contract performance term : The contract should clearly specify the time of entry into force and termination, or the arising grounds leading to the termination of the contract.
(8) Dispute settlement clause : Disputes can be brought to competent Court or Commercial Arbitration for settlement.
(9) Declaration and commitment of both parties on the status of the business : The contract should contain a clause that stipulates that the seller must confirm and commit to the debts of the enterprise. This is to limit disputes and risks for the buyer.
In addition to the above basic terms, enterprises also need to pay attention to some more issues as follows: principles of cooperation; labor use plan; Note for some phrases such as “except for insignificant deficiencies without causing loss or liability for”, “the contract terminates when the parties complete the specified works and obligations in the contract”, …
Above are some important terms in the business purchase contract that MVA Vietnam wants investors who intend to buy a business in Vietnam to note.
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