Mergers & Acquisitions 2015

In our Mergers & Acquisition 2015 Roundtable we spoke with 12 experts from around the world to discuss a broad range of topics including: a “new era of opportunities” for Greece; the problem with “gun jumping”; and a bold prediction that 2015 could end up being a record year for announced global M&A deals. Featured regions are: Greece, Japan, Belgium, Ukraine, Switzerland, Luxembourg, Vietnam, Pakistan and USA.
  • EVANGELOS LAKATZIS
    A.S. PAPADIMITRIOU & PARTNERS
  • SHIGEKI TATSUNO
    ANDERSON MORI & TOMOTSUNE
  • STEVEN DE SCHRIJVER
    ASTREA
  • LISA WRIGHT
    BUREAU VAN DIJK
  • DMYTRO FEDORUK
    CLIFFORD CHANCE LLP
  • RAPHAEL COLLIN
    COLLIN MARECHAL LAW FIRM
  • ANA SAMANTA
    DELOITTE AG
  • LE NET
    LNT & PARTNERS
  • ED THANEY
    THANEY & ASSOCIATES CPAS PC
  • BADARUDDIN F. VELLANI
    VELLANI & VELLANI
  • VO HA DUYEN
    VILAF
All questions

1) Can you talk us through the current M&A landscape in your jurisdiction?

2) Have there been any recent regulatory changes or interesting developments?

3) Are you noticing any trends in terms of deal size, volume and/or sectors?

4) What are some of the key issues related to integrating finance organisations?

5) What key risks should finance executives consider in the planning of integration?

6) What are the key risk areas in an M&A transaction, and what common mistakes do companies make during a transaction?

7) Can you outline any applicable anti-corruption legislation in your jurisdiction? What are the potential sanctions and how stringently have they been enforced?

8) Royal Dutch Shell’s acquisition of BG Group was the biggest M&A deal announced in the first half of 2015.  Do you share the same concerns as US regulators in regards to monopoly trends?

9) What is the current status of risk reduction and cost synergy in mergers & acquisitions?

10) M&A typically involves a substantial amount of due diligence from the buyer.  Given the current climate what aspects of due diligence should be focused on in relation to technology/intellectual property?

11) What factors can lead to a dilution EPS (Earnings per Share) in an acquisition?

12) What types of issues can impact the marketing and sales organisation during M&A transaction, and what are the current leading practices to address these key issues?

13) What key trends do you expect to see over the coming year and in an ideal world what would you like to see implemented or changed?

You can also read the full Report at: http://www.corporatelivewire.com/round-tables.html?id=international-ma-2015

1) Can You Talk Us Through The Current M&A Landscape In Your Jurisdiction?

2015 is being again an extremely busy year on the M&A side in Luxembourg, with even more activity than the previous year.  One cannot set aside that there was a concern about the Lux Leaks but eventually investors kept faith in Luxembourg.  This combined with the financial crisis exit brought many deals on the table.

For example, in July 2015, KBL European Private Bankers, headquartered in Luxembourg, acquired Brown Shipley, an independent company operating on the financial planning in the UK.  In May 2015, the Swiss group ExecuJet Aviation Group AG was acquired by Luxaviation, the most important business aviation group in Europe, hence becoming the second most important business aviation group in the world.

Vietnam is one of the largest recipients of M&A from Japan, Korea, Singapore and, to a lesser extent, the US and European Union.  After the first wave of investments in 2011 – 2013[1], Vietnam now faces competition from Indonesia, the Philippines and Myanmar.  Meanwhile, China is reforming its Foreign Investment Law and streamlining the procedures for foreign investment.[2]

At the Spring Economic Forum at Nghe An, Vietnam in April 2015, JETRO issued a survey from over 400 Japanese investors in Vietnam, which revealed that the main concern is the lack of transparency within the law, followed by an underdeveloped support industry.[3]  Meanwhile, Bloomberg recently described Vietnam as Asia’s next economic tiger, supported by the potential of its low labour cost, young population and sizable local market.[4]  Vietnam is now the US’s largest trading partner in the ASEAN region.  However, while Vietnam is already among the top 8 trading partners of Korea, it ranked as Japan’s 14th largest, below Malaysia and Thailand.[5]

The question now is what the Vietnamese government can do to address foreign investors’ concerns and how such investors can overcome the difficulties in Vietnam to take advantage of Bloomberg’s aforementioned economic potential.  I would like addresses the recent changes that will have positive impacts in Vietnam, and a strong message that now is the time to accelerate M&A investment to Vietnam.

In line with general market optimism in Japan since the introduction of “Abenomics,” M&A activities in Japan have been on the rise since 2012, both in terms of number of deals and transaction value.  The depreciation of the Japanese yen, a result of “Abenomics,” continues to make Japanese companies attractive acquisition targets for foreign companies and private equity funds.

In terms of outbound transactions (where the acquirer is a Japanese entity and the target is a foreign entity), many Japanese companies, driven by a sense of crisis as a result of the shrinking domestic market, are pursuing growth opportunities by acquiring suitable foreign targets.  As such, the volume of outbound transactions has also remained buoyant despite the depreciation of the Japanese yen.

All in all, the current M&A landscape in Japan remains upbeat.

A clear distinction should be made between 2014 and 2015 in relation to the Greek M&A landscape.  During 2014 the increase in deal volume was a clear marker of the investors’ renewed interest in Greece.  However, since December 2014, the well-known, political and economic developments, including negotiations with the institutions, Grexit risk and the newly announced elections (scheduled for September 2014) have made both foreign and domestic investors extremely reluctant.  We are looking forward and are confident that, once the situation is stabilised, a new era of opportunities will commence.
The M&A activity in Ukraine remains practically dormant.  Given the political instability, there is little interest from foreign investors in acquiring Ukrainian assets.  Also some of those foreign investors who have previously acquired Ukrainian assets are looking to divest them.  This scenario attracts Ukrainian buyers who try to benefit from the situation and often acquire such assets with very significant discounts.  There is also a significant increase of M&A transactions related to distressed assets.  It is expected that aggressive foreign buyers will likely follow the suit and try to enter the market with the purpose of acquiring undervalued assets in Ukraine but this has not yet become a massive trend.

Belgium’s strongest industrial sectors are the food and beverage industry (chocolate, beer, biscuits), manufacturing (automotive, carpet industry), transport and logistics (logistical centre of Europe, highly developed transport network and presence of international hubs of major logistics companies), the services industry (financial institutions, consultancy) and the TMT sector (characterised by a lot of start-up companies and an excellent network infrastructure).

Belgium is a country with a lot of small and medium-sized companies, many of which are family-owned.  These shareholders often prefer to have a majority share, or be at least a ‘reference’ shareholder, in order to be able to keep the control over their company.  When, at a certain point in time, these reference shareholders are no longer able to make the necessary investments to support their company’s growth, they often prefer to sell their participation rather than to see it become diluted in the context of a capital increase, where another shareholder takes over control of the company.  As a result, there are generally a lot of interesting investment opportunities for both industrial and financial investors.

There continues to be increased M&A activity in Switzerland.  Large caps and in particular listed companies have been highly acquisitive, especially in the TMT and Life Sciences industries.  A number of large strategic transactions closed in 2015, e.g. the asset swaps between GlaxoSmithKline and Novartis, the disposal of SIG, the disposal of Kuoni’s travel agency business and the merger of Holcim and Lafarge.  There is higher appetite for outbound transactions, i.e. Swiss companies acquiring abroad, compared to divestments of Swiss businesses.  Key target markets for many Swiss companies are the US, Germany and China.  Outlook in the SME segment is however prudent due to the strong Swiss Franc.

So far global M&A activity has made a phenomenal start to 2015, with the much awaited rush of deals finally starting to happen.  The $2.30 trillion invested represents the highest recorded value of announced deals globally since H1 2007, when a record $2.60 trillion was invested.

Announced private equity deals as a sub-sector of overall M&A activity totalled $267bn.  However this figure is still 57% lower than the record breaking 2007 time period, the biggest difference in 2015 being the amount of “secondaries” taking place compared to previous years, with these deals representing 22% of all PE deals by value.

The current landscape is busy with many larger transactions being completed exceeding $100million.
Cross-border M&A activities are increasing relatively to new direct investment activities.  The Government is also pursuing an aggressive plan to equitise hundreds of State enterprises, which may create opportunities for investors in a number of attractive sectors.  On the other hand, the trend of merger and consolidation of financial institutions continue as they try to cope with the increasingly competitive market.

2) Have There Been Any Recent Regulatory Changes Or Interesting Developments?

No big regulatory changes in New York, this area has already been through it all.

The Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Ordinance 2002 (“2002 Ordinance”), has recently been repealed by the Securities Act 2015.  Under the 2002 Ordinance, a Mandatory Tender Offer was required to be made where the shares being acquired of a listed company exceeded 25% or more.  However under the new Securities Act 2015 the thresholds triggering a Mandatory Tender Offer is the acquisition of more than 30% shares.  Further while the 2002 Ordinance has been repealed, the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations 2008 issued pursuant to the 2002 Ordinance continue to be in force.

The Competition Act 2010 (Competition Act) has introduced certain new concepts for which there are no precedents in Pakistan.  The Competition Act prohibits the abuse of dominant position, prohibits certain agreements, requires approvals for mergers and acquisitions and prohibits deceptive marketing practices.

Under the provisions of section 11 of the Competition Act, no undertaking can enter into a merger or acquire shares or assets of another undertaking whereby competition is substantially lessened and a dominant position is created or strengthened in the relevant market.  Where an undertaking intends to acquire the shares or assets of another undertaking or two or more undertakings intend to merge the whole or part of their businesses, and such acquisition or merger meets the pre-merger notification thresholds stipulated in the regulations prescribed by the Competition Commission of Pakistan (Competition Commission), such undertaking or undertakings are required to apply for clearance from the Competition Commission of the intended merger/acquisition.  Under the Competition (Merger Control) Regulations 2007, a merger is deemed to have occurred if, among other things, one or more persons or other undertakings who or which control one or more undertakings acquire direct or indirect control of the whole or part of one or more other undertakings.

Any agreement containing exclusivity or non-compete provisions would have to be considered under section 4 of the Competition Act which prohibits agreements which have the object or effect of preventing, restricting or reducing or distorting competition within the relevant market.  If the relevant agreement falls under the ambit of section 4 of the Competition Act, it would require exemption from the Competition Commission prior to the agreement being executed or becoming effective.  The Competition Commission normally grants an exemption within 2-4 weeks of an application being made.  Such exemption is normally granted for a specific period and is renewable at the discretion of the Competition Commission.

We are not aware of any recent legal or regulatory change of the Luxembourg takeover bids or, of the squeeze-out law and of the Luxembourg law dated 10 August 1915 concerning commercial companies, as amended from time to time, which would impact M&A transactions in Luxembourg.
The regulatory changes in the financial and especially banking industry (e.g. capital reserve requirements and increasing compliance costs) have triggered significant M&A activities on the sell- and buy-side.  Another area to watch is the restriction on visas and work permits which might have an effect on M&A in Switzerland as the Swiss industry is highly dependent on the supply of qualified immigrants.
In line with the AEC integration schedule, the Government is introducing a number of dramatic changes to the legal framework for investment, securities and real estate.  The changes amongst others simplify investment procedures and M&A processes, reduce the difference in the treatment of foreign investors and local investors in M&A transactions, allow foreigners’ ownership of personal real properties in Vietnam, and lift the 49% foreign equity cap for most companies listed on the stock exchanges.
The recent amendments to the Companies Act of Japan, which introduced, among other things, squeeze-out procedures, have been lauded as a boost to Japanese M&A practice.  Prior to the amendments, squeeze-outs in Japan were required to be conducted through the use of a certain class of shares, resulting in a complicated and time-consuming process.  The amendments, which came into effect on 1 May 2015, allow for a “special controlling shareholder” of a company (i.e., a shareholder that controls 90% or more of the company) to compulsorily acquire the shares of the remaining shareholders in the company for cash consideration.  The new squeeze-out procedure is expected to simplify and accelerate the squeeze-out process in Japan.

In 2013 Vietnam amended its Constitution; and now officially recognises that the private sector has an equal role in the economy as the public sector.  Many laws have been revised or restated to reflect this principle, most notably the LOI and the LOE.  Both laws will become effective from 1 July 2015, and decrees implementing those laws are underway.

As to the LOI, the most important change in the law is the definition of “foreign investor” or what is deemed to be a foreign investor, and the process of approving M&A transactions.  In the past, companies that held directly or indirectly more than 49% of total capital by foreign investors might be deemed foreign investors.  Now only enterprises held directly by foreign investors (F0) with at least 51% of the total capital, or held by company/ies (F1) where foreign investors directly hold at least 51% total capital are deemed to be foreign investors.  In other words, Japanese investors may establish a local holding company of various structures, to hold the majority of a Vietnamese operating company, whilst at the same time avoid being triggered by the conditions of investment that are applicable to foreign investors.  This “form over substance” approach of Vietnam is different from the “substance over form” approach that China utilises to control offshore held companies and offshore M&A transactions.

In the past, foreign investors have had to obtain an Investment Certificate (“IC”) – now referred to as an Investment Registration Certificate (“IRC”), and as a closing condition for an M&A transaction.  The new law stipulates that only registration at the company registrar (normally the local DPI) is required for foreign investors, or those deemed to be foreign investors.  The registrar will issue an approval for the M&A within 15 days from filing.  This reform is to catch up with China’s recent streamlining of the investment procedure.

As for the application process, Vietnam will introduce a national portal, in which information on the IRC application, as well as the conditions under which it can be made online.  Mega projects or projects using public land or natural resources shall have to obtain principle approval (“PA”) before applying for the IRC, meaning the application process can last from 30 days to 90 days.  Other projects however will be issued with the IC within 15 working days.  There are 29 areas that belong to a “restrictive list” of investment where internal approval from the relevant ministries should be sought, including distribution and logistics services, but those restrictions have been subject to criticism from investors and expected to be relaxed before 1 July 2015.  The IRC is now issued by a local industrial zones authority (“IZA”) or the department of planning and investment (DPI) instead of the People’s Committee, significantly reducing the time frame of IC issuance.  The DPI/IZA responsibilities are now only to review the documents, and not the due diligence of the investors.  It is expected that with straightforward conditions in the application dossier, the DPI shall refrain from asking relevant authorities before issuing the IC.

Meanwhile the MPI has issued Official Letter 4326 /BKHĐT-ĐTNN (OL 4326) for ad hoc guidance to implement the new LOI, as well as the forms to be used from 1 July 2015 to obtain the Investment Registration Certificate (IRC) and its amendments; they key points are:

i.) Online application for IRC: investors can file IRC application online at the National Investment Portal [NIP], and submit a paper dossier within 15 days from the online filing.  In the event that the dossier is accepted, the investors will be given a temporary account to check the application status.  Any incorrect or incomplete application must be notified within three days from receipt by the licensing authority.

ii.) Project Code: the project code is a 10 digit code to be issued to the applied project (Project) during its operation.

iii.) Forms issued: among the forms submitted, please noted that CPC Code and VSIC Code (for business line) is still required when submitting to obtain the IRC.  Separate forms are also available for amendments to the project.

iv.) M&A approval: the form for M&A approval is on form I.6 attached to OL 4326.  This form is simplified, and the explanation to satisfy conditions for M&A is rather brief and must strictly follow the WTO Commitment.  It is unclear how other restrictions under local laws could be satisfied or would need to be satisfied (e.g. ENT for distribution companies).

v.) Forms of decisions and IRCs: OL 4326 also provides new forms of IRCs, Principle Approvals and other decisions for authorities to use.

No noticeable regulatory changes occurred in the past few years in relation to M&A.  A number of tax measures, however, may have had a slight impact on the M&A market.  The Act of 29 March 2012 introduced a 25.75% capital gains tax on the sale of shares by a Belgian company if the shares are sold within one year from their acquisition.  The tax does not apply to physical persons selling shares.  In addition, as from 1 January 2013, a tax of 0.412 % is levied on capital gains resulting from share sales, even if the shares were held for more than one year.  These capital gains were previously entirely exempt.  The tax, however, only applies to large companies and not to small or medium-sized enterprises.
During the last years, there have been extensive regulatory changes and reforms in many fields, aiming mostly into creating a more competitive environment in Greece.  Indicatively, the new Investment Law aims to increase liquidity, speed up regulatory procedures for investment projects and ensure transparency; moreover, the laws that have transposed the UCITS/AIFM Directives have also introduced new investment tools in Greece.  In parallel, the new Civil Procedure Code and the introduction of mediation aims to a modernised and more effective dispute resolution mechanism.  Reforms take place continuously on many other fields of law, including, but not limited to, corporate, labour, fiscal etc.
There has been some significant progress with legislative reforms and initiatives in Ukraine.  However, we are yet to see how these reforms will be implemented in practice.
One of the recent developments is the requirement for all Ukrainian companies to disclose information regarding their ultimate beneficial owners.  The law defines ultimate beneficial owners as individuals who, irrespective of formal ownership of Ukrainian company, may influence the management and business activities of the company.  Information about UBOs is publicly available and may be easily accessed online.There are also important developments in the area of transfer pricing.  It has recently been clearly stated that transfer pricing rules do not apply to value added tax and transactions between related Ukrainian tax residents.

3) Are You Noticing Any Trends In Terms Of Deal Size, Volume And/Or Sectors?

In 2014, there were approximately 190 Belgian M&A transactions (both domestic and cross-border).  This represents a slight increase compared to the period 2011-2013, with approximately 170 M&A deals per year.  Whereas in the first years after the 2008 economic and financial crisis, buyers were most often industrial players and private equity deals were hampered by a lack of available cash and the reluctance of financial institutions to provide funding, it appears that in the last 12 months the deal appetite of Belgian companies has somewhat increased and confidence in the private M&A market is starting to grow again.

Whereas auctions previously were quite rare (only half of the transactions with a value over €100m were auctions), currently three out of four such transactions are auctions.  There seems to be a positive correlation between transactional value and the use of auctions.

The top sectors where most private M&A deals are traditionally concluded are those of logistics, life sciences, technology/IT and food.  The most noticeable transaction of 2014-2015 was the acquisition by Perrigo of Omega Pharma, the Belgian leader in OTC cosmetics and pharmaceutical products, for $3.6 billion.

2015 has seen the return of the M&A “Mega” deal.  37 deals greater than $10bn in value have been announced so far this year.  Corporate buyers have finally been prepared to part with significant amounts of cash in order to consolidate their market positions and take advantage of growth opportunities.  All but one of the $10bn+ deals this year have been between two corporate entities.  Based on the location of the target company, North America and Western Europe remain the “powerhouse” regions for deal activity, but in the last 18 months the Far East & Asia Pacific region is getting much closer in terms of its companies being targeted for deals.
As mentioned above, the deal size has been larger, assuming the extensive due diligence and financing costs.
The overall deal size during 2014 amounted to approximately €5.1 bn.  Although there has been an increase in the overall volume, there has also been a significant decrease in the average deal size.  In terms of sectors, real estate has been leading the M&A transactions, followed by some announced privatisation deals like the privatisation of regional airports, which has, however, been put on hold.  Shipping and industry has been active as well.
We have personally witnessed a recent certain attractiveness of companies carrying on their business in the technology and digital sector.

We notice a strong interest from Japan and Korea, as well as Singapore, to invest in Vietnam.  According to Savills, M&A in real estates have gone up by US$7 billion this year.[1]  In retail sector, we have seen the landing of major players such as Aeon, Ministop, Family Mart, Guardian, Seven 7 and more through M&A.  In food, beverage and entertainment, we see the M&A from leading Japanese brands such as Saporo, Suntory, MOF; as well as many Korean brands, Lotte Cinema, CGV, Angel in Us, to name a few.  As Vietnam is among the countries that have “golden population”, which average ages between 25-30, and the middle class will grow by 40% until 2020, there will be many market opportunities for new comers that satisfy the demand of the new middle class, including healthcare, education, real estates, retail and entertainment.

The banking sector has seen a fair share of mergers and acquisitions in recent years, especially with the exit of a number of foreign banks whose Pakistan branches have been merged into Pakistani banks.

In terms of sectors, M&A activity in the medical and life-science sectors have seen an uptrend in recent years.  Due to Japan’s ageing society, which has resulted in increasing demand for health-related services, Japanese companies have over the years developed highly advanced medical and life-science technology.

The IT sector in Japan continues to hold tremendous promise as Japanese companies, from industry leaders to start-ups, are showing increasing interest in IT development.  This has resulted in a recent increase in M&A activity in the IT sector.

As regards deal size, mid-sized inbound M&A transactions have been quite common in recent years, especially deals involving private equity funds as acquirers.  The outbound activities of Japanese companies in recent years are focused mainly on targets in the Asian region, and typically involved mid to small-sized deals, with the exception of a few transactions of considerable size involving U.S. and European targets.

Large caps have strong balance sheets and are willing to make large transactions.  This includes transformational deals.  Key drivers of M&A are the acquisition of technology and closing of products gaps followed by the acquisition of market share.  Another important driver for mature, lower growth businesses is to acquire growth outside of the current core business.
It seems that the deal size somewhat increased over the last two years.  We have even seen interests in acquiring a controlling interest in listed or public companies, types of transactions that didn’t previously exist in Vietnam.  The most active sectors we have seen include real estate, retail, finance, energy, and consumer goods manufacturing.

4) What Are Some Of The Key Issues Related To Integrating Finance Organisations?

The Luxembourg takeover bids law shall neither apply to takeover bids for securities issued by companies, the object of which is the collective investment of capital provided by the public, which operate on the principle of risk-spreading, nor to takeover bids for securities issued by the Member States’ central banks.

Such integration shall further require a deep due diligence process which would be complicated by confidentiality obligations of the target company.  Such integration of finance organisations shall also require a complete preparation from a regulatory perspective to ensure that all required obligations will be satisfied to avoid a “bad start” of the investor with the relevant supervision authorities.

Integration of finance organisations need to consider a range of issues from how to extend required financial controls to the newly acquired entity, how to keep talent in the finance organisation motivated despite increasing uncertainty and higher workloads during an integration.  It is important to ensure financial data flows are being maintained and there are also tax, treasury and legal considerations to be worked through as part of integration planning.

Along with promoting FDI, the government has pushed forward an equitisation program for state owned enterprises (SOEs), with an ambition to sell at least US$3.5 billion of assets in over 180 SOEs within this year.  The attractions of SOEs are the land they control, and due to their status, their market value has not had the opportunity to be fully realised.  Many SOEs are now on the list, including Vietnam Airlines, Vinatex (textile corporation), and the Saigon Beer Company.  In the past, the strategic partners must acquire shares at a discount through the IPO.  Now strategic partners may negotiate directly with the SOEs and their owners to an agreed price.  Moreover, newly equitised SOEs will be listed immediately after an IPO event, instantly providing further market-lead value appreciation opportunities for foreign investors.  It is also widely expected that the 49% ownership capacity for foreign investors with respect to listed and public companies will be relaxed.  The remaining issue will be to obtain transparent information from the Ministry of Finance and the State Capital Investment Corporation (SCIC) to participate in this process.[1] The equitisation process is an alternative approach to Vietnamese SOE’s compared to that of China, which has mainly focused on restructuring in the SOE management.

Following the relaxation of the foreign investment procedure under the new Law on Investment (LOI) and the Law on Enterprise (LOE), the Government has now also relaxed the room for portfolio foreign investment as well as the equitisation of state owned enterprise (SOEs).

Furthermore, the Decree provides for the equitisation of state owned enterprises (SOEs), and this action is expected to attract more share acquisition in stock markets as well as private equity soon.  Currently, a foreign investor may purchase up to 49% of total shares of public joint stock company (JSC) or a listed company.  From 1 September 2015, this general restriction will be removed under Decree 60/2015/NĐ-CP dated 26 June 2015 (Decree 60).

Instead, the new restriction will be subject to the WTO commitments or other specific domestic law (e.g., the 30% cap in the banking sector).  If there is a specific restriction under domestic law that has yet to be specified, then the rule of thumb is 49%.

When there is no restriction under domestic law (e.g., for production companies, or distribution companies), then there is no limit for the foreign shareholding ratio.  This rule also applies to equitised SOEs, with the aim of attracting more foreign investment in the privatisation program.
As for securities companies (or investment banking), those who are eligible to establish 100% foreign owned securities companies are allowed to buy up to 100% equity of local securities companies.  Those who are not eligible can acquire up to 51% total shares.

Decree 60 also lifts all restrictions to foreign investors to invest in bonds.  With respect to share certificates or derivative products of stocks of JSCs, the restriction will be relaxed as mentioned above.  For this purpose, open funds or securities funds that have foreign shareholding more than 51% equity will be deemed as foreign investors.

In addition, Decree 60 addresses the following changes:
i. Private placement of public companies
ii. Share swap of public companies
iii. Public offering of shares in public companies for swapping shares in non-public
companies, or equity in limited liability companies
iv. Private placement filing at the State Securities Commission (SSC) for public companies
v. Public offering process, use of escrow account for public offering proceeds
vi. Public offering of investment certificates or shares abroad
vii. Redeem shares
viii. Tender offers
ix. Sale of treasury shares
x. Listing of merged or amalgamated companies
xi. Upcom transaction registration and listing
xii. Real estate capital valuation and contribution to real estate investment fund

Banks in Pakistan are regulated by the State Bank of Pakistan.  The legislation governing banks includes the Banking Companies Ordinance and the Prudential Regulations issued from time to time by the State Bank of Pakistan.  The key points in transactions involving banks is that the prior approval of the State Bank of Pakistan is required for any proposed acquisition.  Further prior approval of the State Bank of Pakistan must be sought and obtained before prospective acquirers can conduct due diligence on a bank.

In respect of amalgamation, under the provisions of the banking legislation in Pakistan, a scheme setting out transfer arrangements is required to be put in place and approved by resolutions passed by the shareholders of the merging entities (a majority in number representing two thirds in value) respectively.  The scheme, once approved, is required to be submitted to the State Bank of Pakistan for sanction.

A recent hot topic has been the consolidation of regional banks in Japan.  Financial policymakers seem to hold the view that there are too many regional banks in Japan.  Accordingly, some market watchers expect to see a number of Japanese regional banks being consolidated between themselves or with bigger financial groups in Japan, or being acquired by foreign financial institutions in the coming years.  One of the key issues in this regard is how effectively the operational systems of the acquirer and the target company can be effectively integrated.  Since many Japanese regional banks have their own major operational systems, integration of the regional banking system with different operational systems may prove costly and time-consuming.  In addition, depending on the market share of the relevant regional bank, certain anti-trust regulations may also be triggered.
Transitioning IT software and systems is a key issue especially when there is only a segment of a conglomerate being acquired.

5) What Key Risks Should Finance Executives Consider In The Planning Of Integration?

While opening the door to, and creating more options for foreign portfolio investment, the deregulation of various procedures at SSC are certainly attractive to foreign investors, it is unclear how other restrictions under different ministries, such as Ministry of Health, Ministry of Education, Ministry of Industry and Trade may impact on the intention of the Government to open up the market.

Note that Art 74.3 LOI allows for the “non-compliant” restriction of business to be valid until 1 July 2016, suggesting there could be some more grounds of clarification and explanation to come.

Very often, the financing in an M&A transaction is assured partly by an external bank financing which is implemented afterwards closing.

The client very often sees the implementation of such bank financing as a straight forward post-closing transaction.  Actually, the lenders shall always notably require a full package of security documents guaranteeing their loans.  The implication of lawyers for the lenders and of lawyers for the borrower often renders the process difficult.

Hence we always recommend the client set up a clear term sheet with the lenders from the early stages of the M&A transaction and to clearly present to the lenders the structure and envisaged business to ensure a smooth process of the bank financing in due time.

Finance executives should consider three categories of integration risks.  Firstly, there are risks that the integration negatively impacts daily business.  For example, if the finance systems integration is not executed properly, it impacts the quality of the financial information available.  Secondly, there are often risks that the integration is not delivering the promised deal value.  Finance executives are often accountable for achieving the synergy target and it falls to the finance function to track synergies.  The third area of risk is that integration decisions have negative financial consequences.  For example for many companies with a European principal structure, moving headcount incorrectly may have substantial tax implications.
See response to question 4.

6) What Are The Key Risk Areas In An M&A Transaction, And What Common Mistakes Do Companies Make During A Transaction?

A perfect knowledge of the target company is probably the most important point in our view to be considered.  The performance of a due diligence process is very important not only in determining the value for the target company and hence of the purchase price for the latter, but also to identify any potential issues that may arise in the integration.

When certain issues are identified at the stage of the due diligence, this allows the parties to discuss them at an early stage of the negotiations and then to allocate the risks between the parties accordingly, mainly through an adjustment of the purchase price, an extension of the warranty, indemnity protection, escrow arrangements or otherwise.

A common mistake made by parties to a transaction is to sign a letter of intent without duly consulting their legal counsel.  As a result, letters of intent are often not sufficiently binding (from a seller’s perspective) or too detailed and binding (from the buyer’s perspective).  Parties also tend to forget to establish a clear framework for the negotiations, in which certain important elements are already agreed upon (e.g. price adjustment mechanisms, earn out, data room disclosure, etc.).  These elements are often very important to the parties, and if they are not dealt with at the start of the transaction, they may become deal breakers.

In addition, parties sometimes tend to underestimate the time and resources that are required to successfully complete a transaction.  This translates into incomplete data rooms, insufficient manpower to follow up on the Q&A process or lack of appropriate legal and financial counsel.

Deloitte’s research shows that the majority of merger failures are due to poorly executed integrations.  The reasons for failed mergers are 70% due to integration errors and only 30% due to transaction errors.  Common integration errors are, for example, lack of executive alignment on merger rationale, inadequate integration planning, merger synergies not being driven through quickly enough, lack of a formal and fast decision making process and too much time spent on organisational politics.  Other key mistakes are a loss of focus on everyday operations and that customers are forgotten.  On the transaction side errors include inadequate due diligence, weak analysis of the target and lack of strategic, financial or cultural fit.

There is a recent trend among many Japanese companies to set up M&A budgets of a certain amount and to allocate specific resources for M&A purposes.  Some Japanese companies tend to think that full utilisation of their M&A budgets is encouraged.  Accordingly, such “trigger-happy” companies may face the risk of acquiring unsuitable targets or paying for targets that are excessively valued.

Another common mistake that Japanese buyers sometimes make in an acquisition is failure to adequately protect themselves through appropriate representations/warranties and indemnity clauses based on key findings in due diligence reviews of target companies.

Key risk area’s in M&A is the integration of finance and G&A, also trending out projections when new management is coming on board.

M&A deals are considered by many observers and potential participants to be exciting and to bring rich rewards to those involved.  The reality is that many deals do not ultimately provide an increased level of shareholder value.  This is consistently linked to the following factors:

– The reality being that often the perceived synergies between the buyer and the target are not as great as initially thought
– The buyer has ended up paying more for the target than the value of the synergies the target brings to the buyer
– The deal itself can become a major distraction to both parties and take far longer to conclude than originally envisaged.
– Post deal integration of the target is more problematic or fails to happen.

As Vietnam’s increasingly outward looking economy and Competition Law develop, the country’s merger control regulations should not be overlooked – not least because of the hefty penalties that they attract.  A fine of up to 10%of a company’s total revenue in a financial year may be imposed for a breach of merger controls, including requirements on notification.  Other severe penalties include forced demerger or withdrawal of a company’s business certificate.

It is also worth remembering that investors who have just completed transactions are not out of the woods yet.  Competition authorities can still penalise companies up to two years from the date of the breach and prospective or existing investors must be aware of how these merger controls affect them and how to deal with potential non-compliance risks.

The term, “economic concentrations”, under the Competition Law includes company mergers, consolidations and acquisitions, as well creations of joint ventures.  The law imposes certain merger controls on these economic concentrations that investors should be aware of, especially when dealing with larger transactions.

These merger controls focus on the consideration of the economic concentration’s “combined market share”.  The market share of a company is calculated by referencing its percentage of turnover from sales or inwards purchases against total turnover from sales or inwards purchases by all companies in the business of the same type of goods in the relevant market for a month, quarter or year.  The combined market share is defined as the total market share in relevant markets of all companies participating in an economic concentration.  The job of looking at the extent of the combined market share falls to the Vietnam Competition Authority (VCA) when assessing whether an economic concentration will be subject to notification or prohibition under the Competition Law.

This makes it crucial for investors, before entering into an economic concentration, to calculate the resulting combined market share to evaluate potential risks of offending Vietnam’s merger control regime.  This prudence will allow investors to determine whether VCA notification of the transaction is required.

The data necessary to determine market share can be obtained from government agencies, such as the General Statistics Office, the ministries of Finance and Information and Communications or the State Bank, depending on the respective industry.  Reputable market research can also be used.

To prevent an under or overstatement of this market share figure, investors also need to identify the “relevant market”, because market share will be calculated on an assessment of the relevant product market and geographical area.  For example, the market share of a company may be more than 95% for the Ho Chi Minh City area, but only 5% for the whole country.

With respect to notification requirements, there are generally no restrictions against an economic concentration if the resulting combined market share in the relevant market will be below 30%, or if the resulting economic concentration is considered a small or medium-sized enterprise (SME).

If the combined market share falls between 30-50%, the VCA must be notified of the proposed transaction before the parties can execute it.  The parties can only proceed with the transaction once the VCA approves it.

Economic concentrations that result in a combined market share of more than 50% will be prohibited, unless the VCA grants an exemption.  Such an exemption can be granted if one or more companies in the economic concentration will be at risk of dissolution or bankruptcy or if the economic concentration will contribute to the country’s socio-economic development or technical and technological progress.  However, these exemptions are not guaranteed and will be at the authorities’ discretion.

The key risk areas are as follows:

– inadequate due diligence by the buyer and, as a result, acquisitions of unwanted liabilities the buyer did not know about;
– relying on warranties/indemnities provided by an offshore company with no substance which acts as a seller.  In this case these must be supplemented by a parent company guarantee or other adequate security;
– inadequate disclosure of information by the seller which results in a potential liability due to warranty/indemnity claims.  Sellers often start working on preparing a disclosure schedule at the very end of the negotiation process.  In addition, any delay with preparing a disclosure schedule can hold up or even frustrate the deal if the potential buyer sees the issues it was completely unaware of;
– inadequate representation of the parties.  In an attempt to save of legal fees, Ukrainian business owners often prefer to use their existing in-house lawyers in order to negotiate a cross-border M&A deal.  This may complicate and delay the process due to unfamiliarity of in-house lawyers with the concepts used in Western style transaction documents.

When a foreign investor acquires a local company, there can be a gap in deal expectations, culture, management practice and negotiation style, amongst others.  Managing such a gap is critical to the success of a deal.  Sorting out how to deal with a legal due diligence is also key as foreign investors will need to be advised what findings, while not satisfactory, are relatively common in the local market and how to handle such findings.
From the legal advisor’s perspective the key issue during an M&A transaction is to keep the balance between identifying and handling legal risks and assisting in making the transaction.  From the principals’ point of view, the risks differentiate, depending on the side: the Buyer faces the risk of acquiring an asset which has regulatory limitations, as well as, encumbrances and present or potential liabilities – in addition the tax structure must be carefully selected.  The Seller’s risk involves securing payment (either paid upon completion or deferred one) and giving too many reps & warranties.  Both sides also face the commercial risk of the price (paying too much versus not getting paid enough for the asset sold).  A common counterparties mistake is not to have clearly agreed their commercial understanding – this complicates negotiations – after all the devil is in the details!

7) Can You Outline Any Applicable Anti-Corruption Legislation In Your Jurisdiction? What Are The Potential Sanctions And How Stringently Have They Been Enforced?

Switzerland is ranked as one of the countries with the lowest level of corruption in the Corruption Perception Index as published by Transparency International.  Between 2000 and 2006 anti-corruption laws were tightened in Switzerland.  New is, among other things that the bribery of foreign public officials is now regarded as a criminal offence and that not only individuals, but also companies can be prosecuted for corruption.  Typically, most enforcement actions in Switzerland stem from the US DoJ in those instances where government officials were bribed.  This has been the case in a number of recent high profile cases involving some well-known companies.  Recently the Swiss Attorney General initiated a corruption investigation of FIFA.  This could indicate a tougher enforcement regime.

Ukrainian anti-corruption legislation has improved significantly over the last year.  A series of laws and regulations were adopted in addition to the core law “On Fundamentals of Preventing and Combating Corruption”.  There are also specific provisions on the topic in the Criminal Code and the Code of Administrative Offences.  Amended legislation provides for increased sanctions – for example, taking a bribe may be punished with imprisonment of up to 12 years and confiscation of property.

Also, the new government body was established – National Anti-Corruption Bureau of Ukraine.  It is a law enforcement agency with broad authority, which is responsible for fighting corruption in Ukraine.

Vietnam’s anti-corruption legislation applies to persons defined as “public officials” or “persons with position, power.” The current threshold for establishing a criminal bribe is VND 2 million (approximately USD92) when the payment of cash or other material benefit is received or paid to induce the recipient to do or not to do something for the benefit of the payor in connection to the recipient’s official duties.  Enforcement in practice tends to focus on large-value, high profile corruption cases.
The law on anti-corruption is in place since 2001.  The Criminal Code also has the crime of corruption and bribery.  A bribe is considered as an action to take benefits in exchange for exercising power.  This law has been enforced strongly in some areas but less so in other areas.  The two areas that face corruption issues are the judicial and the police system.  In other areas, corruption is rare.
The main anti-corruption legislation in Japan is the Unfair Competition Prevention Act (Act No. 47 of 1993, as amended; the “UCPA”).  Bribery of foreign public officials is criminally punishable under the UCPA.  Violators may be imprisoned for up to five years or fined up to JPY5 million (article 21, paragraph 2 of the UCPA).  Bribery of domestic public officials is criminally punishable under the Penal Code (Act No. 45 of 1907, as amended; the “Penal Code”).  Foreign companies can be prosecuted for foreign bribery because the UCPA does not differentiate between domestic companies and foreign companies.  Based on the Penal Code of Japan, a crime committed in Japan should be punishable.  For this purpose, a crime will generally be deemed to have been committed in Japan if all or part of the relevant act was conducted in Japan or all or part of the consequences of the crime occurred in Japan.
Recent anti-corruption legislative changes provide severe penalties in case of bribery of any governmental, parliament, regional or municipality official (imprisonment for a period of 5-20 years and monetary penalty between €15,000 – €150,000).  Public employee bribery penalties differ (imprisonment for a period of 1-5 years and monetary penalty between €5,000 – €50,000) and in case of repeated acts, or bribes of significant value, the penalty is more strict (imprisonment for a period of 5-15 years and monetary penalty between €15,000 – €150,000).  Although the above changes are recent, monitoring and preventing corruption is a key issue.

Pakistan Penal Code 1860 (PPC 1860) is a general penal code, which prescribes offences and punishments for such offences, and extends to the whole of Pakistan and applies to any offence committed by any citizen of Pakistan or any person in the service of Pakistan and outside Pakistan (public servant as defined therein) and any person on any ship or aircraft registered in Pakistan.

Prevention of Corruption Act 1947 (PCA) which is an Act to more effectively prevent bribery and corruption.  It extends to the whole of Pakistan and applies to all citizens of Pakistan and persons in the service of the Government, wherever they may be.  Under the PCA the expression “public servant” is as defined in section 21 of the PPC 1860 and includes an employee of any corporation or other body or organisation set up, controlled or administered by or under the authority of the Federal Government.

The Government Servants (Conduct) Rules 1964 under which a government servant is prohibited from accepting (without the prior permission of the government) any gift the receipt of which will place him under any form of official obligation to the donor.  If however due to exceptional circumstances such gift cannot be refused, the government servant may accept such gift and inform the Cabinet Division accordingly.  The gift must then be kept for official use by the department or organisation.  A government servant cannot, except with the previous sanction of the government, engage in any trade or undertake any employment or work, other than his official duties.

National Accountability Ordinance 1999 (NAB Ordinance) relates to the prevention of corrupt practices, misuse or abuse of power or authority, misappropriation of property, taking of kickbacks, commissions and for matters connected and ancillary or incidental thereto.  The NAB Ordinance is applicable to persons who are or have been in the service of Pakistan and to any “holder of public office” as defined under the NAB Ordinance, wherever they may be.  The NAB Ordinance also deals with and provides for penalties for offering or paying bribes or making facilitation payments to employees of private or public listed companies.  Under the NAB Ordinance the term ‘person’ includes in the case of a company or corporate body, the sponsors, chairman, chief executive, managing director, elected directors, by whatever name called, and guarantors of the company or corporate body, or anyone exercising direction or control of the affairs of such company or corporate body, and in the case of any firm, partnership or sole proprietorship the partners, proprietor or any person having interest in the said firm, partnership or proprietorship concern or direction or control thereof.  The penalties under the NAB Ordinance include rigorous imprisonment for a term which may extend to 14 years and fine.  The amount of fine shall in no case be less than the gain derived by the accused.

Civil Servants Act 1973 provides for the appointment of persons to, and conditions of persons in, the service of Pakistan and is applicable to all civil servants wherever they may be.

Under the Government Servants (Efficiency and Discipline) Rules, 1973 “misconduct” is defined as conduct prejudicial to good order or service discipline or contrary to Government Servants (Conduct) Rules, 1964 or unbecoming of an officer and includes any act on the part of a Government servant to bring for attempt to bring political or other outside influence directly or indirectly to bear on the Government or any Government officer in respect of any matter relating to the appointment, promotion, transfer, punishment, retirement or other conditions of service of a Government servant.  A government servant may be penalised by demotion or withholding for a specific period promotion or increment or by recovery from pay of the Government servant of the whole or any part of any pecuniary loss caused to Government by negligence or breach of orders or compulsory retirement or removal/dismissal from service.

Federal Investigation Agency Act 1974 (FIA Act) is applicable to all citizens of Pakistan and public servants, wherever they may be.  A public servant under the FIA Act is as defined in Section 21 of the PPC 1860, and includes an employee of any corporation or other body or organization set up controlled or administered by or under the authority of the Federal Government.  The FIA Act makes references to other anti-corruption legislations (wherein punishments and penalties for corrupt practices are provided for) and does not specifically provide for punishment and penalty in the case of corrupt practices.

In the context of takeover bids, the Luxembourg law provides the general rules and principles applicable with respect to a takeover bid and aims at ensuring an adequate level of protection for the holders of securities.  As a general principle, the law provides that all holders of the securities of an offeree company of the same class shall be afforded equivalent treatment.  In that respect, the offer document shall include certain mandatory mentions including notably in case of mandatory bid the method employed for determining the consideration.  Shares may be bought outside of the takeover bid process, but subject to certain notification obligations that are imposed notably by the applicable transparency regulations and the Luxembourg squeeze-out law.

General anti-corruption legal provisions shall also remain applicable.  Criminal and civil liabilities shall be applicable on such matters.

8) Royal Dutch Shell’s Acquisition Of BG Group Was The Biggest M&A Deal Announced In The First Half Of 2015.  Do You Share The Same Concerns As US Regulators In Regards To Monopoly Trends?

Of the Top 50 deals by value that have been announced in H1 2015, 29 are effectively “horizontal mergers”.  This figure remains the same as H1 2014, but represents a 52% increase on those announced in H1 2013.

Therefore it is understandable that regulators in particular countries may have concerns that consumer choice may become more limited as a result of such deals and would thereby enable the newly enlarged entity to potentially abuse its position in terms of pricing of goods and services offered.

Taken at face value such deals should theoretically enable larger companies to maximise their economies of scale.  Whilst regulators are right to scrutinise such deals, in order to protect the consumers, careful thought should be applied to those that are allowed and those that are rejected.

Anti-trust concern in Vietnam is plausible, but Competition Law is not very active so far.  While it is cautious to make an anti-trust notice to the Competition Administration of Vietnam (CAV).
We indeed acknowledge certain concerns in this respect though as regards the Luxembourg jurisdiction, applicable legal provisions notably stemming from the EU should avoid such monopolies.

9) What Is The Current Status Of Risk Reduction And Cost Synergy In Mergers & Acquisitions?

There is increased scrutiny by Boards on whether or not management achieves the promised synergies.  Many recent Swiss deals are focused on growth synergies rather than cost synergies.  Where cost synergies are important, there is heightened awareness of the need for thorough synergy planning and tracking.  Similarly strong risk management processes are being adopted to identify and mitigate key integration risks.
An interesting example of M&A about risk reduction and cost synergy is in the retail sector.  The restriction of foreigners to participate in retail sector was removed in 2009.  However, foreigners are still keen to find and work with a local partner.  This is rather the knowledge of the local market that needs to be explored and worked by cooperation.  On the course of cooperation, difference in vision and culture may negatively impact on the risk reduction and cost synergy.  Eventually however, if both parties respect each other, these difficulties can be overcome.
We would raise in this respect that cross-border mergers inside the EU have been largely facilitated by European Regulation and Directive allowing a reconciliation of multi-jurisdictional legal environments.  Such regulations have created a unified legal framework ensuring a cross-border universal transfer of the assets of the merged company and the implementation of the merger according to common principles with the EU Member States.  This ascertained the mergers within the EU and rendered them less costly.

As a result of the economic crisis, potential buyers tend to start with a high-level due diligence to ascertain whether the target meets the acquisition requirements and to reduce the initial costs.  If the results of the high-level due diligence are satisfactory, a more extensive confirmatory due diligence is conducted.

Whereas financial experts used to look at the past track record of a company to determine its value and decide whether or not to proceed with the transaction, most buyers are interested in the future potential of the target and the synergies that can be created following the acquisition.  This results often in a more thorough due diligence, that does not only focus on financial and legal aspects, but also on the business, HR and ICT of the company.  Although this is a more expensive and time-consuming effort, it allows the potential buyer to get a clear and realistic view of potential synergies and make an early start with the post-acquisition integration process.

10) M&A Typically Involves A Substantial Amount Of Due Diligence From The Buyer.  Given The Current Climate What Aspects Of Due Diligence Should Be Focused On In Relation To Technology/Intellectual Property?

With respect to technology/intellectual property, the first thing to focus is whether the trademark or patents are properly registered and still valid, whether any license has been registered with the National Office of Intellectual Property.  Furthermore, it is necessary to see if the royalty under each license agreement is under arm’s length price, as the current regulation on anti-transfer pricing is now on the rise.
One of the noticeable trends is an increased focus of potential buyers on data privacy compliance, in particular in the technology sector.  As more and more technologies involve the collection, processing and use of (large amounts of) personal data, it is important to carry out a thorough and detailed due diligence of the target’s data processing practices (data flows, purposes of processing and use, access to data, cross-border transfers, privacy policies, information practices, security measures, etc.).  In relation to intellectual property, the use of open source or third party software in technology of the target should be subject to careful analysis, in order to avoid any third party claims.

Due diligence in relation to technology/IP issues requires particular thoroughness and accuracy.  Special attention should be paid to the documents confirming seller’s ownership of technology/IP and previous underlying documents for IP rights acquisition.  It may be also necessary to carry out the analysis of legal risks related to the use of copyright works or industrial property as these rights have complicated nature.  A properly conducted due diligence will help to determine possible risks and commercial value of the transaction in order to avoid acquisition of worthless technology/IP.

In addition, this will help to avoid a situation where, after acquiring shares of a Ukrainian financial institution operating under a well-known name, a foreign buyer discovered that the name of that institution was registered as a trademark and was still owned by the previous shareholder – this situation illustrates very well the need for a detailed and highly professional due diligence.

Due diligence should be a systematic and integral part of any M&A transaction.  It is especially important when looking at a target company that has patents or intellectual property that is behind the buyer’s core motivation for doing the deal.  Key areas that should be ascertained in relation to the IP at a very early stage in the Due diligence include;

Ownership – does the target actually own the technology / IP it purports to own?

Limitations of use – are there any pre-existing agreements that prevent the use of the company’s IP in other markets or business areas?

Infringement claims – are there any outstanding or pending claims that might bring rise to a law suit?

IT due diligence can incorporate many different areas of focus, however these options should be narrowed during the scoping phase to ensure that the due diligence effort is relevant to the deal context and delivers most benefit for the deal value and business model.  Questions for diligence to address can be grouped into three areas:

– Confirming if IT contains risks to the current cost base and whether it can support the planned business model
– Identifying opportunities to improve IT performance and reduce IT and business operational costs
– Confirming the need and impact of data migration

In our view, though there is no particular impediment for a hostile bid in Luxembourg, we always recommend the bidder to co-operate with the management board of the target company, to authorise a smooth and complete due diligence process.

Review of licensing issues typically form an important part of legal due diligence.  Specifically, the identities of licensor and licensee, royalty amount and conditions of license (such as the conditions under which a license may be terminated) are key issues.  Where a license has been granted to the target company by its parent (which is often the seller) or affiliate, it is also important to determine how such license will be treated after the target is acquired.  Issues relating to cross licenses should also be carefully considered.  In particular, buyers should look into whether the target company will still be legally entitled to the benefit of material cross licenses once they exit the seller group.

Additionally, a buyer should make sure to review joint research agreements entered into between the target and third parties to determine the target’s right in respect of research results.

Further, due diligence should focus on whether the target has had disputes with its employees or former employees in relation to such employees’ inventions created in the course of the employees’ work (Shokumu-Hatsumei).  Under the Patent Act of Japan (Act No. 121 of April 1959, as amended), such an invention belongs to the relevant employee, and can only be transferred to the employer based on an agreement between them, under which the employer pays an appropriate amount of compensation to the employee for the invention.

11) What Factors Can Lead To A Dilution EPS (Earnings Per Share) In An Acquisition?

Dilution EPS in acquisition can occurred because of the following factors:

i.         Related party transaction: if a subsidiary of a shareholder being supplier to the company, and charge excessively high fee, there is a risk that benefit from the company has been retrieved by the related party subsidiary.
ii.       Unprofitable assets: some assets cost a lot of funds to support and maintained.
iii.      Potential liability, especially tax liability.

The dilution or accretion of a buyer’s EPS as a result of an acquisition is one way in which the buyer can define the potential risk / rewards to its shareholders for pursuing the acquisition.  Logically it might well be argued that if a dilution of the buyers EPS is going to happen as a result of the deal then the deal should not proceed, but this should not be the only measure upon which the acquisition strategy should be determined.  EPS should be looked at in the “round” when considering the long term strategic benefits of the deal for the purchaser.

Dilution of the buyers EPS could occur as a result of the target company in the deal having negative net incomes or a higher PE ratio than the acquiring company.  How the acquiror chooses to finance the deal could also impact negatively on its EPS.  So if, for example, it were to finance the deal by bringing in new debt or by raising its existing debt levels then higher interest expenses would be reflected in the profits of the combined entity.  If the acquiror were to satisfy the deal using its own cash reserves, this too could impact profits as lower levels of interest would be generated.  Also if the perceived synergies between the two companies could not be achieved, this would impact upon the EPS in the longer term.

The acquisition costs and applicable taxes are mainly the factors that could lead to a dilution EPS.  This shall be controlled through a complete preparation of the transaction and a complete due diligence of the target company.

12) What Types Of Issues Can Impact The Marketing And Sales Organisation During M&A Transaction, And What Are The Current Leading Practices To Address These Key Issues?

A common issue is that of “gun-jumping,” – such as when the potential buyer and target exchange competitively-sensitive information such as pricing or product plans, customer information and the like before completion of the transaction – which could trigger certain anti-trust regulations.  One way to avoid such risks is to refrain from any exchange of sensitive information at least until the clearance of merger filing.  An additional way to address gun-jumping concerns is the setting up of “clean rooms” to store competitively-sensitive and ensuring that such information is handled only by personnel who are not part of the transacting parties’ business teams.
Marketing and sales should be predetermined along with an iron clad plan for the transition, many times on an acquisition the acquired companies marketing department would be eliminated.
Competitors can take advantage of the uncertainty an M&A transaction brings, which may lead to loss of customers.  This risk can be mitigated by clearly communicating the deal rationale and integration roadmap from a customer perspective.  Identifying key personnel and putting a retention plan into action will mitigate the loss of talent.  Distributors may delay ordering anticipating a distributor rationalisation.  Again a clear communication plan will alleviate this risk.  Another risk to be addressed as a priority is customer facing staff not giving the right message or inconsistent messages to customers.  Customer facing staff needs to be informed and provided with detailed guidance for what they can and can’t say to customers.  Many deals are built on significant growth synergies; however adjusting incentive schemes, systems integration and back office consolidation may be required and can impact timelines of achieving revenue synergies.
During the M&A transactions, the seller is bound by an exclusivity period until the Share Purchase Agreement is signed by the parties.  Moreover the parties are bound by confidentiality agreement and therefore leakage of information that may impact the marketing and sale of shares may be minimised.  From the time the Share Purchase Agreement was signed until the completion of the conditions precedent stated in the Share Purchase Agreement.

13) What Key Trends Do You Expect To See Over The Coming Year And In An Ideal World What Would You Like To See Implemented Or Changed?

There will most likely be continued high level of M&A activity for a little while longer.  Companies having undergone transformational deals will however need to pause and digest what has been acquired.  They may well conduct smaller acquisitions but are less likely to engage in further transformational ones.  Another trend that is likely to continue is the heightened focus on proper integration.  I have seen a great interest by corporates in building and upskilling their teams’ integration capabilities.  It is good news for the success of a deal if integration efforts are taken more seriously.

We expect the M&A activities level to increase significantly once (a) there is more certainty regarding the conflict in the Eastern part of Ukraine and (b) Ukrainian government negotiates a deal with its creditors.  Obviously there are other important factors such as structural reforms moving ahead, evidence of success in fighting corruption, etc.

Most economists agree that Ukrainian assets are currently significantly undervalued, and this is likely to result in a mini M&A boom once the fundamental risks stated above are addressed.

Referring to the reconciliation of the legal environments within the EU, such a reconciliation at the level of the world would render the M&A deals more attractive and less frightening in our view, especially for “non-big” companies.
M&A activities and direct investment will very likely increase significantly in Vietnam, especially after the sub-law regulations implementing the new investment law, enterprise law and real estate business law have been fully issued and AEC integration takes shape.  From 2016, corporate and investment procedures are anticipated to be drastically simplified and the difference in the treatment of foreign investors and local investors to be significantly reduced.  Nevertheless, the approval requirements and procedures for sizable investment projects in infrastructure, real estate and energy probably will remain complex and burdensome.  Many of our clients wish that the Government would take more aggressive steps to simplify the procedures for those sizable projects.

The Japanese government has in recent years introduced several policies targeted at developing a start-up culture in Japan, in hopes of encouraging innovation.  Additionally, the government is also expected to roll out more policy initiatives to encourage big companies to move to, as well as encourage the establishment of start-ups in, the regional areas of Japan.  Hopefully, this will result in more M&A activities involving regional companies in the near future.

In addition, Stewardship and Corporate Governance Codes were recently introduced in Japan, to encourage more communication between Japanese companies and their shareholders, and more responsibility taken by Japanese companies toward shareholders.  Some high-profile hostile takeovers in Japan about a decade ago had led to the institution of takeover defence mechanisms by many Japanese companies, and engendered wariness toward foreign shareholders.  The introduction of the Stewardship and Corporate Governance Codes in Japan have gone some way in dispelling unwarranted scepticism that some Japanese companies held toward foreign shareholders, and hopefully, this trend will continue.

I believe the financing arena will change along with the characterisation of the deal due to anticipated interest rate volatility.
Despite the ongoing Greek debt saga and the revision of global growth forecasts, the appetite for M&A deals remains strong and appears to be unsated at this time.  Corporate buyers have shown increased levels of activity over the last 12 months, reflecting the need for them to increase shareholder value.  Whilst Private Equity buyers have been active compared to previous years it is common knowledge that the industry as a whole is sitting on a reported $1.3trillion of “Dry Powder” which has to be invested.  This inevitably means that deal values are rising as there is strong competition for the best performing companies from both corporate and private equity buyers.  Add in to this mix the rise of secondaries by private equity firms and it’s no surprise to find that the average value of globally announced deals per month in the first seven months of 2015 is greater than the average monthly value seen in 2007.  On this basis 2015 could end up being a record year for announced global M&A deals.
I strongly believe that, upon stabilisation of the political situation, right after the elections to be held on 20 September, Greece will enter into a new era, full of opportunities.  I expect that investors will start to monitor more actively potential acquisition targets, and once they feel that Greece offers again a stable and effective business environment, there will be a boost in the M&A activities in comparison to the previous months.  In order for this to happen, all Greek market players (institutional or not) should put their best effort so that an attractive and competitive business environment is created and sustained.
We hope M&A in “conditional projects” to be removed.  There are more than 250 business areas where the M&A are subject to approval from relevant ministries.  The LOI stated that any restriction to business must be presented in the National Portal of Foreign Investment or otherwise rendered invalid.  However, please note that Art 74.3 LOI allows for the “non-compliant” restriction of business to be valid until 1 July 2016, suggesting there could be some more grounds of clarification and explanation to come.

Satisfy Demand for Securities Investment by Foreign Investors

Content of the new Law

On 26 June 2015 the Government issued Decree No. 60/2015/ND-CP (“Decree 60”) amending and supplementing certain provisions of Decree No. 58/2012/ND-CP, on the detailing and guiding the implementation of selected provisions of this, and the Law on Securities, which is considered as good news to foreign investors, since the long-awaited provisions will allow for majority ownership and control of public companies by foreign investors.

In this Decree, the foreign ownership ratio is extended to the Vietnamese securities market. Currently, a foreign investor may purchase up to 49% of total shares of a public joint stock company (JSC) or a listed company.  Beginning on the 1st of September 2015, this general restriction will be removed and instead, the new restriction will be subject to the WTO commitments or other specific domestic laws (e.g., the 30% cap in the banking sector). If there is a specific restriction under domestic law that has yet to be specified, then the rule of thumb is 49%.

When there is no restriction under domestic law (e.g., for production companies, or distribution companies), then there is no limit for the foreign shareholding ratio. This rule also applies to equitized SOEs, with the aim of attracting more foreign investment in the privatization program.

As for securities companies (or investment banks), those who are eligible to establish 100% foreign owned securities companies are allowed to buy up to 100% equity of local securities companies. Those who are not eligible can acquire up to 51% total shares.

Decree 60 also lifts all restrictions to foreign investors to purchase bonds. With respect to share certificates or derivative products of stocks of JSCs, the restriction will be relaxed as mentioned above. For this purpose, open funds or securities funds that have foreign shareholding more than 51% equity will be deemed as foreign investors. Decree 60 also addresses many other functions of foreign investment in public companies, along with other key aspects related to securities investment for foreigners.

Implications for Foreign Investors

The Decree is expected to act as a catalyst for more foreign investment in the private and State-owned sectors in Vietnam. It is intended to add vitality to the Vietnam securities markets and an extra boost to the equitization of State enterprises, as part of a plan to upgrade Vietnam from “frontier” market classification to “emerging” market classification at MSCI. It is reported that the shares with strongest liquidity on the Vietnamese stock exchanges are shares of issuers for which the 49% foreign equity quota has been used up. As such, the Decree is expected to act as an impetus to further foreign investment in Vietnam’s capital markets, both in equity and in debt markets

The Decree takes effect on September 1, 2015, and replaces Prime Minister Decision No. 55/2009/QD-TTg (15 April 2009) on the ratio of foreign investor’s participating on the Viet Nam securities market.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Corporate Income Tax Provides Boost High Tech Sector

Circular No.96/2015/TT-BTC dated 22 June 2015 guiding changes prescribed in Decree 12/2015/ND-CP and amending three circulars of corporate income tax (“CIT”) including 78/2014/TT-BTC, 119/2014/TT-BTC and 151/2014/TT-BTC.

 

Content of the new Law

This Circular provides considerable changes in CIT incentives, and tax deductible expenses which could bring more advantages to corporations in general and companies in the high technology sector.

The method to apply and extend CIT incentives is amended in order to be aligned with the new Law on Investment. Accordingly, new investment project stated in the list of industrial support products prioritized for development are subject to 15 years of 10% CIT rate, 4 years of CIT exemption and 9 years of CIT reduction, provided that such products support the sectors of either high technology as stated in the Law on Technology, or garment, textile footwear, information technology automobile production, and are not able to be produced in Vietnam as at 01 Januray 2015 or meet the EU quality standards if these products are domestically produced.

In addition, investment projects which were not, in general, entitled to any CIT incentives previously or located in areas where such are not encouraged in the past, will be allowed to apply for the  new and favourable CIT incentives regime in the remainder of phases from the tax year 2015.

The circular also modifies regulations of tax deductible expenses. Consequently, the caps on business trip per-diems are abolished; documents to prove expenses arising from renting individual’s assets is now simpler; certain expenses related to staff training are fully deductible for tax declaration; and the calculation method applied to non-deductible interests on debt corresponding to the portion of charter capital not yet contributed is regulated in detail.

Some other changes and supplements related to losses carried forward to the next year of real easte conveyance, tax-exempted income and dossier of CIT declaration and payment are prescribed in detail in this circular.

Implications for Business

From the aforementioned points, the circular is expected to support corporations in circumstances of new investment law. In order to assist companies in applying such circular, the Ministry of Finance issued dispatch 2512/TCT-CS to briefly summarize the new contents in this Circular.

The simpler application to calculate the CIT and the lifting of caps on trip expenses for tax are to bring a business-friendly environment for corporations when it comes to tax expense management. As a result, this is expected to lead to more active investment in Vietnam, and contribute to the country’s investment climate.

The Circular 96/2015/TT-BTC will come into effect from 6 August 2015.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

New Legal Framework to Streamline Licensing and Set up of Commercial Banks

The Content of the new Framework

On June 30th, 2015 the Government issued Circular No. 08/2015/TT-NHNN (Circular 08) in lieu of Circular No. 40/2011/TT-NHNN (Circular 40) for the issuance of licenses and the organization and operation of commercial banks, foreign bank’s branches, representative offices of foreign credit institutions, other foreign organizations that have banking activities (Commercial Banks)  in Vietnam.

This Circular 08 has formulated a full and basic legal framework on procedures for, and dossiers on amendments, supplementation regarding operation contents of Commercial Banks. Furthermore, the formality of proposal dossiers for operational licensing and new establishment license template of Commercial Banks are also regulated in such a new circular.

Besides the new licensing issuance procedure in Circular 40, Circular 08 is expected to add three more new licensing procedures for Commercial Banks, including license replacement issuance, supplementation issuance of operation content to present license and supplementation issuance of operation content associated with license replacement issuance. With respect to the principle of building licensing dossiers, the non-notarized counterpart of documents are duly accepted, provided that those are obtained along with original copy for reference; while the referring person shall sign for confirmation and shall be responsible for the documents’ accuracy. The new establishment license template has the operation content part specifically noting that all banking functions which Commercial Banks are entitled to conduct are in accordance with Law on Credit Institutions and others activities approved by the State Bank.

Business implications

With respect to changes in the State Bank’s licensing activities applied to Commercial Banks in Vietnam, the impact on business will specifically be in banking sector. Accordingly, all approval for changes in registration for the operation of credit institution shall be noted in the Operation License by license replacement issuance. In the event of an amendment or supplementation in the operational content without need for a replacement license, Commercial Banks shall still conduct the proposal procedure on supplementing operation content via the approval instruments of the State Bank. Approval for non-notarized documents in the application dossier shall benefit from a more prompt and efficiently implemented licensing procedure. The more detailed and obvious the licensing procedures is, the more conveniently credit institutions can implement their business.

Our Recommendation

In light of this, we would recommend that commercial banks, branches and representative offices of foreign banks should update their Operation License by implementing the license replacement issuance procedure. The above-mentioned action shall result in owning a kind of detailed and unique valid instrument as a basis of banking operation. With efforts to comply with such new provisions, Commercial Banks shall benefit from good, efficient performance that will positively develop their business.

The Circular No. 08/2015/TT-NHNN will come into effect on August 13th, 2015.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Vietnam M&A Forum 2015

Ending the first phase 2008 – 2013, Vietnam has witnessed a wave of M&A, recognized as the first wave. The first wave took place in the context of fluctuations in the stock market, the efforts of enterprises to restructure and survive the global crisis. During this period, M&A in Vietnam grew five-fold from US $ 1 billion to $ 5 billion.

Starting in 2014, the market began to pick up the new wave, known as the second wave occurred in 5 years from 2014 to 2018: the commitment of equitization of large state-owned enterprises; the rise of the private sector companies, the interest of foreign capital flows for investment opportunities and M&A activities in Vietnam.

In 2015, after a year starting in the new wave, the business began to have specific strategies. For domestic enterprises namely “Countdown to the next market boom”. Analysts pointed out that if we do not attract foreign investment, the equitization plans of state enterprises in Vietnam will face many difficulties. Therefore, finding funds are particularly important problem. Within each business, attracting capital and gathering resources for M&A are also very important, only a handful of businesses have performed well such as Masan, Pan Pacific. Besides finding the capital, choose the opportunity to now the focus will be discussed in the forum of this M&A in 2015. In this stage, potential M&A opportunities in Vietnam are huge: Opportunities from the company are in demand selling to restructure; program opportunities from equitization of State Enterprises. However, among the number of potential opportunities, only a few of them that can bring great value to the business.

Forum M&A Vietnam 2015 will take the time to assess the trend of M&A in the vibrant sector today such as banks – financial, food and FMCG, technology and commerce, ecommerce. Besides, the issues of strategy and M&A techniques will also be discussed and shared like boom growth strategy Breakthrough, valuation in M&A.

In the framework of the Vietnam M&A Forum 2015 will be held with key activities include: Exhibition and Promotion of Investment, voting typical M&A deals and Banquet-Gala Dinner in GEM Center, HCMC 06/08/2015.

For Ticket, please click HERE

Speakers

Speakers and Panel at this year Vietnam M&A forum are Policy Makers, M&A Experts from all areas related to M&A. Especially, Mr. Hong Bui, Co-head of M&A practice from LNT & Partners will join the Panel in session 1: Policy Dialogue. With his intensive experience in handling legal side of M&A deals, he’ll definitely bring interesting points of view to the discussion.

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Agenda | VIETNAM M&A FORUM 2015

 MORNING SESSION DEALMAKERS PRIVATE MEETING

Time: 9h00 – 12h00

AFTERNOON SESSION

13:00- 14:00             Register

14:00- 14:30             Opening session –      Welcome Speech: Dr. Nguyen Anh Tuan – Vietnam Investment’s Editor-in-Chief, Head of the Organizing Committee of the Vietnam M&A Forum 2015. –      Speech by Vice Minister, Ministry of Planning & Investment.  

14:30- 15:30             TOPIC 1: POLICY DIALOGUE

–      Policy changes in recent time: New Amendment to the Investment Law and Law on Enterprise which will come into effect soon on 1 July 2015; and the Government’s policy to open room for foreign investors in many sectors. These issues will hold great interest from investment companies in Vietnam and at abroad and will be raised on the Forum this year.

Panelist:

  • Mr. Vu Bang – President, The State Securities Commission Of Vietnam (or Mr. Nguyen Thanh Long – Vice President)
  • Mr Nguyen Huu Nghia, Chief Supervisor of the SBV
  • Mr Dang Quyet Tien,Deputy Head of Corporate Finance – Ministry of Finance
  • Mr Phan Duc Hieu, Head of Business Environment and Competitiveness Department, CIEM
  • Mr. Seck Yee Chung, Partner, Baker & Mckenzie
  • Representative from Deloitte Vietnam
  • Mr. Bui Ngoc Hong, Partner, LNT & Partners
  • Dr. Nguyen Anh Tuan (Vietnam Investment Review’s Editor-in-chief, Moderator)

 15:30 – 16:00           Networking Break  

16:00 – 17:15:         TOPIC 2: PROSPECT OF NEW CAPITAL FLOW AND OPPORTUNITIES FOR THE M&A MARKET BOOM

–      Looking back on the movement of M&A capital flows into Vietnam for the last time and assess future prospect.  –      Regarding the recent policy changes (opening room, relaxing business conditions in the New Investment Law and the Lawon Enterprise…), is there a possibility for M&A market boom  in Vietnam in the following time? Evaluation of the M&A capital inflows from Japan, South Korea, Thailand, other ASEAN countries, the US and Europe?

–      Assessment of opportunities of the equitization progress when the Vietnamese government decided to open room andstrongly promote the divestment in new sectors such as seaports, airports, large-scale state-owned enterprises. What are the quality deals for international investors?  

Panelist:

  • Mr. John Ditty, Chairman, KPMG Vietnam
  • Mr.Masataka SamYoshida, Senior Managing Director, RECOF Corporation
  • Mr. Paul DiGiacomo, Managing Director, BDA Partner HongKong
  • Mr. Nguyen Vinh Tran, General Director of Jen Capital
  • Mr. Nhu Đinh Hoa, General Director, BVSC
  • Ms.Dang Pham Minh Loan, Deputy Managing Director, VinaCapital (Coordinator).

17:15– 18:30             TOPIC3: M&A EXPERIENCES AND STRATEGIES IN VIETNAM

–      Sharing experience from successful deals in Vietnam.

–      What is strategy to develop the company and expand market in Vietnam. 

–      Experience on how to optimize the selling and buying business

–      Experience on negotiating with foreign partners

–      Build and Develop business for sale, a new trend and business opportunity for Vietnamese enterprises.

Panelist:

  • Mr. Stephane Gripon, Director of Mondelez Kinh Do
  • Mr. Chu Chee Kwang, General Manager of Nam Long Ltd, Co
  • Mr. Katsumi Mizuno, Director, General Manager, Overseas Business Division, Business Planning Dept., Credit Saison
  • Mr Johan Nyvene, CEO HSC
  • Mr Le Kim Hoa, Vice CEO, BIDV
  • Representative from the company which has been involved in the M&A deal in Vietnam
  • Dr. Nguyen Cong Ai, Deputy General Manager of KPMG Vietnam (Moderator)

18:30- 19:00             Cocktail & Networking

19:00 – 21.00           Gala Dinner & Deal Awards  

 

For Ticket, please click HERE

Source: http://mavietnamforum.com/sukien/chuong-trinh-hoi-thao.html

Để xác lập quyền sở hữu đối với nhãn hiệu

Gần đây, dư luận chú ý nhiều đến vụ việc một công ty sản xuất mì gói tuyên bố đang hoàn thành các thủ tục pháp lý để khởi kiện đối thủ về hành vi xâm phạm quyền sở hữu nhãn hiệu (trademark) vì cho rằng đối thủ đã sử dụng bao bì gần giống sản phẩm của mình. Trong một vụ việc khác, hai công ty sữa đang tranh cãi chưa ngã ngũ về việc cùng phát triển các dòng sản phẩm cho trẻ em có chung tên gọi.

Mặc dù các bên đang chờ cơ quan có thẩm quyền phân xử để có kết quả cuối cùng, các vụ việc này cho thấy một thực tế là việc bảo hộ nhãn hiệu, một trong những tài sản quan trọng nhất của bất kỳ tổ chức, cá nhân nào tham gia sản xuất hàng hóa, cung ứng dịch vụ, vẫn chưa được các doanh nghiệp chú trọng đúng mức dẫn đến các tranh chấp không cần thiết, thậm chí là bị cáo buộc vi phạm hoặc “mất” nhãn hiệu vào tay của doanh nghiệp khác.

Trong phạm vi bài này, người viết nêu một số điểm quan trọng doanh nghiệp cần lưu ý để có thể thực hiện những bước cần thiết xác lập quyền sở hữu đối với nhãn hiệu, giúp doanh nghiệp giảm thiểu được chi phí pháp lý, và chi phí rủi ro trong quá trình kinh doanh của mình.

Cần có nhận thức đầy đủ về nhãn hiệu

Nếu tên thương mại được dùng để phân biệt các doanh nghiệp với nhau, thì nhãn hiệu được dùng để phân biệt sản phẩm của các doanh nghiệp; do vậy, người ta thường hiểu nhãn hiệu là tên gọi của sản phẩm.

Tuy nhiên, trên phương diện pháp lý nhãn hiệu là dấu hiệu dùng để phân biệt hàng hóa, dịch vụ của các tổ chức, cá nhân khác nhau (khoản 16 điều 4 Luật Sở hữu trí tuệ (SHTT)). Như vậy, nhãn hiệu không chỉ bao gồm chữ cái (tên gọi của sản phẩm), mà còn có thể bao gồm những dấu hiệu có thể nhìn thấy được dưới dạng chữ cái, từ ngữ, hình vẽ, hình ảnh, kể cả hình ba chiều hoặc sự kết hợp các yếu tố đó, được thể hiện bằng một hoặc nhiều màu sắc (khoản 1 điều 72 Luật SHTT). Với ý nghĩa là tài sản trí tuệ của doanh nghiệp, để được bảo hộ, nhãn hiệu phải có khả năng phân biệt hàng hóa, dịch vụ của chủ sở hữu với hàng hóa, dịch vụ của doanh nghiệp khác, hay nói cách khác nhãn hiệu đó phải có tính đặc trưng giúp cho người tiêu dùng có thể dễ nhận biết và ghi nhớ hàng hóa, dịch của chủ sở hữu đó.

Nguyên tắc bảo hộ nhãn hiệu là bảo hộ tổng thể

Chính vì vậy, khi xây dựng nhãn hiệu, các doanh nghiệp cần chú ý không chỉ các yếu tố cấu thành của nhãn hiệu mà cả ý nghĩa tổng thể của nhãn hiệu đó. Ví dụ trong trường hợp tranh chấp giữa hai công ty sản xuất mì gói, tên gọi của sản phẩm mà bên bị khiếu nại sử dụng tuy khác với tên gọi trong nhãn hiệu đã được đăng ký bảo hộ của bên khiếu nại, nhưng bên khiếu nại cho rằng mẫu bao bì của bên bị khiếu nại có cách trình bày, kiểu chữ, tổ hợp màu sắc tạo thành một tổng thể tương tự gây nhầm lẫn với nhãn hiệu được bảo hộ nên đã xâm phạm quyền sở hữu nhãn hiệu của mình. Quan điểm này của bên khiếu nại đã được cục SHTT ủng hộ.

Để hạn chế trường hợp một bên thứ ba sử dụng một phần nhãn hiệu của mình dẫn đến gây nhầm lẫn cho người tiêu dùng, khi đăng ký bảo hộ cho một nhãn hiệu, các doanh nghiệp cũng có thể tiến hành đăng ký bảo hộ riêng rẽ cho từng dấu hiệu trong nhãn hiệu nếu chúng đáp ứng các điều kiện về khả năng phân biệt thì mới có thể được bảo hộ.

Trường hợp của nhãn hiệu mỹ phẩm Sắc Ngọc Khang là một ví dụ điển hình. Công ty Hoa Thiên Phú đã đăng ký bảo hộ phần chữ Sắc Ngọc Khang như một nhãn hiệu riêng biệt và được cơ quan có thẩm quyền chấp nhận từ năm 2013. Nhờ vậy, Công ty Hoa Thiên Phú đã có thể yêu cầu Thanh tra Bộ Khoa học Công nghệ tuýt còi Công ty Tân Đại Dương vì sử dụng cụm từ này trên sản phẩm của mình gây ra nhầm lẫn cho người tiêu dùng.

Nộp đơn xin bảo hộ càng sớm càng tốt

Quyền sở hữu đối với nhãn hiệu có thể được xác lập thông qua hai cơ chế là đăng ký với cơ quan có thẩm quyền hoặc tự động xác lập khi đáp ứng một số điều kiện nhất định. Hiện nay, cơ chế tự động chỉ được áp dụng đối với nhãn hiệu nổi tiếng là nhãn hiệu được người tiêu dùng biết đến rộng rãi trên toàn lãnh thổ Việt Nam. Các nhãn hiệu nổi tiếng thường là các nhãn hiệu đã tồn tại lâu đời, được sử dụng rộng rãi trên nhiều quốc gia và được nhiều người biết đến. Chủ sở hữu nhãn hiệu nổi tiếng không cần phải tiến hành đăng ký bảo hộ đối với nhãn hiệu của mình và có quyền yêu cầu tòa án hoặc cục sở hữu trí tuệ xem xét và công nhận nhãn hiệu nổi tiếng trong từng vụ việc cụ thể, ví dụ như khi phát hiện có doanh nghiệp khác sử dụng nhãn hiệu trùng hoặc tương tự với nhãn hiệu của mình.

Đối với các nhãn hiệu thông thường, quyền sở hữu chỉ được xác lập khi tiến hành đăng ký nhãn hiệu với cục SHTT. Các quy định pháp luật hiện nay về bảo hộ nhãn hiệu áp dụng nguyên tắc nộp đơn đầu tiên, để chấp nhận bảo hộ nhãn hiệu của người đăng ký trước dựa vào ngày nộp đơn. Hay nói cách khác, trong trường hợp có nhiều người nộp đơn khác nhau cùng đăng ký các nhãn hiệu trùng hoặc tương tự đến mức gây nhầm lẫn, người đăng ký trước sẽ được xem xét cấp văn bằng bảo hộ nếu đáp ứng đầy đủ điều kiện quy định của pháp luật.

Tại Việt Nam, quá trình đăng ký xác lập quyền sở hữu đối với một nhãn hiệu có thể kéo dài từ 13-18 tháng, trải qua hai giai đoạn chính là xét nghiệm hình thức và xét nghiệm nội dung, trong khi các doanh nghiệp thường không thể đợi cho đến khi xác lập được quyền sở hữu này rồi mới đưa sản phẩm ra thị trường. Do vậy, các doanh nghiệp có thể vận dụng nguyên tắc nộp đơn đầu tiên để đảm bảo việc xác lập quyền của mình bằng cách nộp đơn xin bảo hộ nhãn hiệu vào thời điểm sớm nhất có thể.

Ngoài ra, do Việt Nam là thành viên của Công ước Madrid, pháp luật SHTT Việt Nam cũng áp dụng nguyên tắc quyền ưu tiên. Theo đó, nếu một người đã nộp đơn hợp lệ lần đầu tiên tại một quốc gia thành viên khác của Công ước Madrid về đăng ký nhãn hiệu Quốc tế (CU Madrid) có thể nộp đơn yêu cầu bảo hộ nhãn hiệu đó tại Việt Nam và đơn nộp sau đó được coi như nộp cùng ngày với đơn đầu tiên. Nguyên tắc này cũng được áp dụng trong trường hợp doanh nghiệp Việt Nam muốn đăng ký nhãn hiệu tại một quốc gia khác là thành viên của Nghị định thư Madrid.

Tra cứu sơ bộ trước khi quyết định nộp đơn

Quá trình 18 tháng kể từ lúc nộp tờ khai đăng ký nhãn hiệu đến khi có quyết định dự định cấp văn bằng bảo hộ từ Cục SHTT, doanh nghiệp vẫn phải đối mặt với nguy cơ không xác lập được quyền sở hữu nhãn hiệu do không đáp ứng yêu cầu về nội dung (đối tượng nêu trong đơn không đáp ứng các tiêu chuẩn bảo hộ mà luật SHTT quy định). Hồ sơ xin bảo hộ có thể bị từ chối vì nhiều lý do khác nhau (như ký tự không có nghĩa, sử dụng địa danh, tên riêng,…), tuy nhiên nguyên nhân bị từ chối phổ biến là trùng với một nhãn hiệu đã được cấp bảo hộ hoặc được người khác đăng ký.

Công việc tra cứu sơ bộ cần được tiến hành song song với quá trình phát triển sản phẩm, bởi lẽ nó sẽ giúp doanh nghiệp có chiến lược marketing đúng đắn, rút ngắn thời gian đăng ký và tiết kiệm chi phí. Quan trọng hơn hết, việc tra cứu sơ bộ giúp cho doanh nghiệp có thể kịp thời tiến hành đăng ký với cơ quan có thẩm quyền để xác lập quyền của mình theo nguyên tắc nộp đơn đầu tiên.

Lưu ý rằng, nhãn hiệu có thể gồm chữ và hình, doanh nghiệp có thể đăng ký bảo hộ chữ và hình cùng nhau hoặc riêng lẻ, do đó, khi tra cứu, cần phải tra cứu cả phần chữ, phần hình, nhóm sản phẩm sử dụng nhãn hiệu để từ đó có thể xác định được nhãn hiệu đối ứng một cách chính xác.

Bảo hộ nhãn hiệu tại nước ngoài

Quyền sở hữu nhãn hiệu sẽ chỉ được thừa nhận trong phạm vi lãnh thổ quốc gia đăng ký. Nghĩa là nhãn hiệu được bảo hộ tại Việt Nam không đương nhiên được bảo hộ tại thị trường Hoa Kỳ. Trong thời gian qua đã có một số nhãn hiệu Việt Nam bị đăng ký tại nước ngoài khiến cho doanh nghiệp tốn kém không ít chi phí khi muốn mở rộng thị trường. Chi phí đăng ký và duy trì một nhãn hiệu thường không nhiều, do vậy, các doanh nghiệp chủ động lên kế hoạch kinh doanh để đăng ký tại quốc gia nơi dự định xuất khẩu hàng hóa dịch vụ trong tương lai gần.

Hiệu lực của văn bằng bảo hộ

Giấy chứng nhận đăng ký nhãn hiệu có hiệu lực từ ngày cấp đến hết mười năm kể từ ngày nộp đơn. Chủ sở hữu có thể gia hạn nhiều lần liên tiếp, mỗi lần mười năm. Kể từ thời điểm văn bằng bảo hộ nhãn hiệu được cấp, chủ thể có quyền độc quyền khai thác, sử dụng, định đoạt và ngăn cản bất kỳ bên thứ ba nào sử dụng nhãn hiệu hoặc các dấu hiệu tương tự với nhãn hiệu đã được đăng ký.

Tuy nhiên, cũng cần lưu ý rằng, theo quy định hiện hành nhãn hiệu không được sử dụng trong thời hạn năm năm liên tục sẽ có thể bị yêu cầu chấm dứt hiệu lực, trừ trường hợp được sử dụng hoặc sử dụng lại trước ít nhất ba tháng tính đến ngày có yêu cầu chấm dứt hiệu lực. Do vậy, doanh nghiệp cần có kế hoạch khai thác nhãn hiệu phù hợp để tránh bị hủy bỏ văn bằng bảo hộ.

Bài viết được đăng bởi Thời báo kinh tế Sài Gòn, người viết: Tiến sĩ Luật Nguyễn Anh Tuấn, luật sư công ty luật LNT & Partners. (Tuan.Nguyen@LNTpartners.com)
Bài viết này chỉ nhằm mục dích cung cấp thông tin. Nội dung nó không mang tính tư vấn pháp lý cho bất kì trường hợp cụ thể nào. Để biết thêm thông tin chi tiết, vui lòng truy cập website: Http://LNTpartners.com.

Người lao động có đang thờ ơ với quyền lợi của mình?

Bảo vệ quyền và lợi ích hợp pháp của người lao động là vấn đề cơ bản và xuyên suốt của Bộ Luật Lao Động. Nhiều nước trên thế giới kể cả Việt Nam đang đặt mục tiêu thúc đẩy bình đẳng trên thị trường lao động, đặc biệt là thúc đẩy sự tham gia của nữ giới trong thành phần lãnh đạo. Tuy nhiên, bình đẳng ở đây liệu có nhất thiết là tuyệt đối quân bình về số lượng? Trong tất cả ngành nghề, liệu có phải ngành nào cũng có cơ hội cho nữ giới?

Chương trình được thực hiện bởi Smart Money, Smart Life – FBNC với sự tham gia trả lời phỏng vấn của ông Trần Thái Bình, luật sư thành viên công ty luật LNT & Partners.

FBNC _ Thúc đẩy bình đẳng giới trong lao động như thế nào là bình đẳng? LNT & Partners

Để tìm hiểu thêm về chương trình xin vui lòng truy cập website http://fbnc.vn/ và http://LNTpartners.com

South Korea – Vietnam: Bilateral Free Trade Agreement

South Korea and Vietnam have recently engaged in developing their political and economic ties; the zenith of which was reached with the signing of a bilateral Free Trade Agreement  (“FTA”) between the two countries on May 5th, 2015 in Hanoi.  The FTA is expected to bring exponential surges in the bilateral trade between the two countries, in which the Vietnamese government has agreed to remove tariffs on 89.9% of products imported from South Korea over a period of 15 years. Likewise, South Korea is planning to revoke tariffs on 95.4% of all products imported from Vietnam. The two partners are currently ratifying the agreement before it is due to take effect late this year.

The both countries anticipate further growth in the volume of bilateral trade, which has reached a record high of US$30 billion in 2014. Additionally, with the agreement in place, Vietnam foresees substantial inward investment growth from South Korea which stood at approximately US$5.8 billion in November 2014.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

New Law on Investment Effective on 1st July

The new Law on Investment (LOI) has become effective as of 1st July. The final draft Governmental Decree implementing the LOI, as well as the draft Circular implementing the Decree is now being prepared by the Ministry of Planning and Investment (MPI) for issuance.

CV 4326 BKHDT-DTNN huong dan tam thoi 30-6-2015

Meanwhile the MPI has issued Official Letter 4326 /BKHĐT-ĐTNN (OL 4326) for ad hoc guidance to implement the new LOI, as well as the forms to be used from 1 July 2015 to obtain the Investment Registration Certificate (IRC) and its amendments; they key points are:

  1. Online application for IRC: investors can file IRC application online at the National Investment Portal [NIP], and submit a paper dossier within 15 days from the online filing. In the event that the dossier is accepted, the investors will be given a temporary account to check the application status. Any incorrect or incomplete application must be notified within 3 days from receipt by the licensing authority.
  2. Project Code: the project code is a 10 digit code to be issued to the applied project (Project) during its operation.
  3. Forms issued: among the forms submitted, please noted that CPC Code and VSIC Code (for business line) is still required when submitting to obtain the IRC. Separate forms are also available for amendments to the project.
  4. M&A approval: the form for M&A approval is on form I.6 attached to OL 4326. This form is simplified, and the explanation to satisfy conditions for M&A is rather brief and must strictly follow the WTO Commitment. It is unclear how other restrictions under local laws could be satisfied or would need to be satisfied (e.g. ENT for distribution companies).
  5. Forms of decisions and IRCs: OL 4326 also provides new forms of IRCs, Principle Approvals and other decisions for authorities to use.

While it is a progressive move forward, there are issues still to be clarified (as noted in our previous alert on OL 4211). Any questions are encouraged to be addressed to the Foreign Investment Agency (FIA) for guidance.

By Vietnam Law Insight (LNT & Partners)

For more information about this article, please contact the author: Dr. Le Net, LNT & Partners, at the email: Net.le@LNTpartners.com

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Vietnam Opening the Doors for Portfolio Foreign Investment

Following the relaxation of the foreign investment procedure under the new Law on Investment (LOI) and the Law on Enterprise (LOE), the Government has now also relaxed the room for portfolio foreign investment as well as the equitization of state owned enterprise (SOEs).

Furthermore, the Decree provides for the equitization of state owned enterprises (SOEs), and this action is expected to attract more share acquisition in stock markets as well as private equity soon. Currently, a foreign investor may purchase up to 49% of total shares of public joint stock company (JSC) or a listed company.  From 1 September 2015, this general restriction will be removed under Decree 60/2015/NĐ-CP dated 26 June 2015 (Decree 60).

Click here to downloa Decree 60 – Open Doors for Portfolio Foreign Investment

Instead, the new restriction will be subject to the WTO commitments or other specific domestic law (e.g., the 30% cap in the banking sector). If there is a specific restriction under domestic law that has yet to be specified, then the rule of thumb is 49%.

When there is no restriction under domestic law (e.g., for production companies, or distribution companies), then there is no limit for the foreign shareholding ratio. This rule also applies to equitized SOEs, with the aim of attracting more foreign investment in the privatization program.

As for securities companies (or investment banking), those who are eligible to establish 100% foreign owned securities companies are allowed to buy up to 100% equity of local securities companies. Those who are not eligible can acquire up to 51% total shares.

Decree 60 also lifts all restrictions to foreign investors to invest in bonds. With respect to share certificates or derivative products of stocks of JSCs, the restriction will be relaxed as mentioned above. For this purpose, open funds or securities funds that have foreign shareholding more than 51% equity will be deemed as foreign investors.

In addition, Decree 60 addresses the following changes:

  1. Private placement of public companies
  2. Share swap of public companies
  3. Public offering of shares in public companies for swapping shares in non-public companies, or equity in limited liability companies
  4. Private placement filing at the State Securities Commission (SSC) for public companies
  5. Public offering process, use of escrow account for public offering proceeds
  6. Public offering of investment certificates or shares abroad
  7. Redeem shares
  8. Tender offers
  9. Sale of treasury shares
  10. Listing of merged or amalgamated companies
  11. Upcom transaction registration and listing
  12. Real estate capital valuation and contribution to real estate investment fund

While opening the door to, and creating more options for foreign portfolio investment, as along with the deregulation of various procedures at SSC are certainly attractive to foreign investors, it is unclear how other restrictions under different ministries, such as Ministry of Health, Ministry of Education, Ministry of Industry and Trade may impact on the intention of the Government to open up the market.

Note that Art 74.3 LOI allows for the “non-compliant” restriction of business to be valid until 1 July 2016, suggesting there could be some more grounds of clarification and explanation to come.

By Vietnam Law Insight (LNT & Partners)

For more information about this article, please contact the author: Dr. Le Net, LNT & Partners, at the email: Net.le@LNTpartners.com

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Conditional Acceptance of the Construction Works for Commissioning

The Law

On 15 May 2015 the Government issued Decree No. 46/2015/ND-CP (Decree 46) to provide further guidance on the Law on Construction 2015 with respect to quality management and maintenance of construction works, pointing out:

“The responsibility for the quality of the works remains with the survey construction contractors, design contractors, and supply contractors, even after their work has been inspected and accepted by the employer, or after the defect liability period has expired. This means that these contractors may be held liable for damages evidenced to be caused by the quality of their works.”

What does it mean for businesses?

Under Decree 15/2013/ND-CP, acceptance of construction works for commissioning into use when they have not satisfied all requirements of the design, of national technical regulations, of standards applicable to the construction works, and the technical specifications and other requirements of the employers specified in the agreements is generally not allowed.

However, Decree 46 entitles the employer to conditionally accept the construction works for commissioning into use, if the issues with respect to quality of construction works do not affect the weight-bearing capacity, the life cycle and the functions of the works and if the construction works conform to the safety requirements.

Decree 15/2013/ND-CP allows the employer and contractor to freely agree on the minimum amount of the warranty fee retained by the employer. However, to the extent of State owned works, this has been restricted by Decree 46. Accordingly, the warranty fee for State owned works must not be less than 3% of the contract value for works of grade 1 or special grade, and 5% of contract value for the works of other grades.

Decree 46 stipulates that survey contractors should pay significant attention to the quality of their works. Therefore, we suggest that survey contractors to provide sufficient and eligible resources to ensure their works are compliant with the technical plan, as this is required by Decree 46. We would also warn that the Decree also entitles the employer to completely suspend the construction survey works upon finding them not compliant with the technical plan, or the construction survey agreement.

Decree 46 will take effect from 01 July 2015

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Construction Master Planning: More Defined Procedures

Decree No. 44/2015/ND-CP Clarifies Construction Master Planning

What does the law say?

On 6 May 2015, Government issued Decree No. 44/2015/ND-CP, providing guidance for a number of regulations on construction master planning (“Decree 44”). This Decree provides detailed regulations on a number of articles in the Law on Construction No. 50/2014/QH13, including the formulation, evaluation and approval of construction master planning, as well as master planning implementation and planning permits.

What does this mean for businesses?

More defined procedures for construction industry and investors

Firstly, specific functional areas with the scale over 500 ha shall be put under the general planning category, to ensure the suitability for provincial planning, urban planning, and to form a basis for zoning, and detailed planning.

Secondly, areas (over and below 500 ha) inside specific functional areas shall be put under the general planning category, ensuring its suitability for provincial planning, urban planning, and again to form a basis for zoning planning and detailed planning.

Thirdly, Areas inside specific functional areas upon instruction shall be placed under the detailed planning category, in order to ensure that the general planning framework, and zoning planning is more rigid, and to form a basis for issuance of the construction permit.

Fourthly, in the event that a single investor undertakes a construction project of less than 5 ha, (or under 2 ha if it is an apartment building project), the project must be created without the formulation of a detailed construction planning. Drawings of the general site plan, architectural plan, solutions to technical infrastructure in the fundamental design must comply with zoning plans or planning permits, ensuring the connection with technical infrastructure and compliance with architectural space in the area.

Finally, the planning permit shall be issued to investors who are qualified for implementing the investment in the construction project. The maximum period of a planning permit with respect to a concentrated construction project is 24 months from the date of issuance, until the detailed planning is approved. The maximum period for a planning permit with respect to a separate construction project is 12 months from the date of issuance until the construction project is approved.

Streamlined instruction on planning permits

The following functional areas directly related to the issuance of the planning permit are detailed in Decree 44: (i) procedures for the issuance of planning permit; (ii) application for obtaining planning permit; and (iii) contents of the planning permit. For any construction planning project with the planning tasks being approved before the effective date of this Decree, the formulation, evaluation and approval shall be conducted under the Government’s Decree No. 08/2005/NĐ-CP dated 24 January 2005 on construction planning.

Decree 44 shall take effect from 30 June 2015.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Expands Customs Priority Policy to Brokers and Key Investment Projects

New Circular from the Ministry of Finance Expands Customs Priority Policy to Brokers and Key Investment Projects

The law

On 12th May 2015, Ministry of Finance issued Circular No. 72/2015/TT-BTC that will regulate on the application of priority policies in customs procedures, customs inspection and supervision for exported and imported goods of enterprises (hereinafter referred to as “Circular 72”). Circular 72 will replace Circular No. 86/2013/TT-BTC dated June 27, 2013 (hereinafter referred as “Circular 86”) and Circular No. 133/2013/TT-BTC dated September 24, 2013 of the Ministry of Finance.

Under the new circular, the priority policy has had its subject and scope broadened and expanded, with the conditions for application of priority now less strict, and the procedures simplified in comparison with the previous Circular 86.

The customs priority regime will be expanded to include eligible customs brokers and projects, rather than only for enterprises, as noted in the previous Circular 86. The scope of privileges has expanded beyond just businesses to include various subjects including enterprises, customs brokers and key investment projects agreed by the Prime Minister. The conditions stated for the amount of import or export turnover for enterprises has been reduced from US$200 million annually to US$100 million annually.

What does this mean for businesses?

In terms of procedures, Circular 72 waives the stage of undertaking the Memorandum of Understanding (“MOU”) in the verification process. Instead of separating the appraisal procedure into two stages which are generating the MOU and issuance of the Decision on recognition of prioritized enterprises as stipulated in Circular 86. Circular 72 streamlines the process as the Decision will be signed by the Director of the General Department of Customs within 10 working days since the completion of inspection process, without making the memorandum if enterprises meet the conditions for application of priority policy. Moreover, enterprises will submit the dossiers to the Customs Department of the province where the headquarters of the enterprise is located, instead of the General Department of Customs. Furthermore, the right to customs clearance with incomplete declarations will be granted to enterprises more generally, instead of only applying this in the event that the database system of the customs offices meet malfunction or temporarily stop operation.

Businesses should also note that the time schedule for the processing of dossiers is not clearly stated in this Circular, while Circular 86 explicitly specifies that the time limit for consideration to recognize the prioritized business shall not exceed 45 working days.

Circular 72 will take effect on 26th June 2015.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

New Legal Framework for Vietnam’s Nascent Derivative Securities Market

The Law

On 5 May 2015, the Government issued Decree No. 42/2015/ND-CP on derivative securities and the derivative securities market, which is considered as the very first legal framework for the derivative securities market of Vietnam to come into operation in 2016.

This Decree recognizes futures contracts, options and forward contracts of which objects are underlying assets being securities and/or other assets used as the basis for fixing the value of the derivative securities as derivative securities. There will also be other kinds of derivative securities as recognized in accordance with guidelines of the Ministry of Finance. These newly recognized derivative securities may be traded on the derivative securities market as provided by the laws.

In principle, any organization or individual may invest in derivative securities on the derivatives market, except for certain organizations, such as securities companies, fund management companies, credit institutions and State-owned companies, which must satisfy certain requirements before investing in the market.

Furthermore, for the purpose of conducting derivative securities trading and/or providing derivative securities clearance and payment services, an organization will need to obtain a certificate of satisfaction of conditions for the respective activities issued by the State Securities Commission. To obtain this certificate, in general and subject to activities registered to be conducted, the organization must satisfy a number of conditions, such as financial conditions, i.e. minimum charter capital; conditions on business results, ratios of available capital, professional rules and/or relevant requirements to be provided by the Ministry of Finance; and other conditions as provided.

What does this mean for businesses?

Through there has been a legal framework for securities trading in Vietnam since the introduction of the Law on Securities (70/2006-QH11), Decree 42/2015/ND-CP allows for more diversified securities products in the Stock Exchange, thus boosting liquidity in the securities market which will be great news for businesses that are increasingly using the Stock Market as a capital channel. Accordingly, Decree 42/2015/ND-CP is expected to support the securities market of Vietnam, increase competitiveness and help to narrow the gap between securities market of Vietnam and of other countries all over the world.

Decree 42 will take effect on 1 July 2015.

 

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

ASEAN Tax/Thai Tax Summit 2015

ASEAN Tax/Thai Tax Summit 2015
Opportunities & Challenges from Tax Changes for Outbound & Inbound Investment

 

Keep abreast of the latest tax issues and policies in Thailand & key AEC countries to enhance competitiveness and managing tax risks for AEC integration

As a result of the establishment of the ASEAN Economic Community (AEC), the ASEAN region is set to see a freer movement of goods, services, investment, skilled labor and capital among its member countries. We will need to make sure that all relevant regional regulatory frameworks, including the area of regional tax integration arrangements, will be sufficiently suitable and appropriate for facilitating the single market and other regional economic goals.

This year’s conference on ASEAN Tax/Thai Tax Summit 2015 will highlight all the key potential implications to explore the challenges and opportunities including latest government policy & scenarios on tax restructuring to enhance competitiveness and preparation for AEC, effective tax planning strategies for AEC 2015 and their impact on businesses.  In addition, this ASEAN Tax/Thai Tax Summit 2015 will update on customs & international trade & FTA, cross-border tax dispute settlement, cross-border transactions and tax risk management, corporate taxation, Board of Investment (BOI) tax holidays, recent changes in transfer pricing, indirect tax, anti-tax avoidance, VAT, CLMV key tax updates and much more.

We are delighted to announce that Dr Net Le from LNT & Partners will join the panel speaker of ASEAN Tax/Thai Tax Summit 2015 and give a presentation on the session: “Insights into the Workings of the General Anti-Avoidance Rule”, on following main points:

  • New anti-avoidance rules around ASEAN and how they affect tax planning
  • Anti-avoidance principles – Evolution
  • Assessing and comparing the recent trends in the area of GAARs
  • Key lesson learned and case examples

Attendees will get the most comprehensive updates on key tax updates for both AEC and Thailand.

EVENT DETAILS:

  • Date: 25-26 June 2015
  • Time: 8:00am – 5:30pm
  • Venue: The Landmark Hotel Bangkok, 138 Sukhumvit Rd, Khlong Toei, Bangkok 10110

For more information and registration, please Go to the event’s website

Pleas click here for the eBrochure_Conference on ASEAN Tax-Thai Tax Summit 2015.

CONFERENCE HIGHLIGHTS

  • Hear outstanding case study on “Cross-border transactions & tax risk management”
  • Tax updates/discussions toward AEC integration in 2015
  • Gathering Thailand’s tax authorities and top tax experts
  • Find out the latest tax developments in countries such as Cambodia, Laos, Myanmar, Vietnam and Indonesia
  • Executive roundtable discussion “Emerging taxation issues for ASEAN countries and impacts of regional integration on taxation”
  • Insights into the workings of the general anti-avoidance rule
  • Case Study: Cross Border Transactions and Investment in Cambodia

For online registration: http://www.asiabusiness-connect.com/On-line-Registration.html 

Regular Dialogues with Vietnamese Citizens

Vietnamese Prime Minister, Nguyen Tan Dung, has opined a simplification of administrative procedures and issued a new decree to allow ministers, heads of ministerial-level agencies and the chairmen of cities’ and provinces’ People’s Committee to hold regular dialogues with Vietnamese citizens. This dialogue is to take place every 6 months and through it, Vietnamese government and its citizens will be able to communicate on a regular basis. The dialogues will serve as a means to streamline and simplify the administrative procedures, which, in turn, will lead to easier entries into Vietnamese market for foreign invested enterprises.

Government to hold regular public discussions: http://vietnamnews.vn/politics-laws/271746/govt-to-hold-regular-public-discussions.html

베트남 수상 Nguyen Tan Dung은 행정절차의 간소화를 주창하며 모든 정부부서의 장관, 시, 구의 People’s Committee회장이 정기적으로 베트남 시민들과 대화를 나눌 수 있도록 새로운 법령을 냈다. 이러한 대화는 6개월마다 정기적으로 열릴 예정이며 이를 통해 시민과 정부부처의 소통이 원활하게 이루어 질 것으로 기대된다. 이 대화를 통해 행정절차의 어려움을 해소하고 절차의 간소화를 이루어 낼 것으로 전망되어 이후 외투기업의 베트남진출이 보다 쉬워질 것으로 예상된다.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Midterm Vietnam Business Forum 2015

On June 9, the Vietnam Business Forum Consortium, in collaboration with the Ministry of Planning and Investment and the World Bank Group, held the Midterm Vietnam Business Forum 2015 in Hanoi with theme “Enhancing Enterprise Competitiveness for Global Integration” and the presence of Prime Minister H.E. Mr. NGUYEN TAN DUNG. This Forum was a valued opportunity for a structured dialogue between the Vietnamese Government, local and foreign businesses and the donor community to improve the business environment in Vietnam.

Beside sponsoring for the forum, LNT & Partners attended and raised insightful comments on the new Law on Investment and Law on Enterprise. The forum started with the Review of Business Climate by Chamber of Commerce from Vietnam, Korean, European, and American. On this midterm gathering, they focused on 3 main issues followed:

  1. The Issues of implementation of new Laws on Investments, Enterprises, Housing, Real Estate Business and Immigration on Trade, Tourism and Investment;
  2. Needs for positive growth on Banking and Capital Markets; and
  3. Infrastructure – Requirements for PPP implementations, port strengthening and power generation needs in Master Plan VII.

Please click the link to download the relevant documents from VBF:

Midterm VBF 2015 – VBF Co-Chair Speech

Midterm VBF 2015 – Short Report – ENG

Midterm VBF 2015 – Full Report – ENG

 Reported by: Vietnam Law Insight

Vietnam, FDI and the TPP ISDS: a Tentative Look

The Trans-Pacific Partnership Agreement (“TPP”) is a multilateral agreement currently being negotiated that, when finally agreed, will encompass approximately 40% of the worlds GDP under a new generation of multilateral economic governance that is focusing on competition policy, labour rights, international investment law and the harmonization of other areas of law and aimed at boosting trade, investment and economic growth between members, who at the advanced negotiation stage include Japan, the USA, Vietnam, Australia, Singapore, Brunei, Malaysia, New Zealand, Chile and Peru, with Canada and Mexico interested in joining. One of the most controversial aspects of the negotiations is that they are largely being held behind closed doors – with only limited information on draft chapters being released through memorandums, or via the medium of Wikileaks, hence why this short article is a tentative look – a detailed analysis at this stage is not possible until the final draft is released or leaked, which will not be for some time yet. This lack of transparency has helped foster strong opposition to the agreement before even considering the provisions contained within. This article considers some implications of the TPP’s Investor-State Dispute Settlement (“ISDS”) for investors of inward and outward FDI in Vietnam.

Opposing views mean uncertainty for ISDS in TPP

The ISDS provisions of the TPP have both strong support, and strong disapproval. The strong support comes primarily from the Japanese and US governments and firms that see the ISDS as crucial to the success of the TPP, and the need to protect their investment interests particularly in the SE Asian parties to the agreement. On the opposing side, with a particularly vitriol response is Australia, which has undergone a unique policy shift among developed countries and chosen to accommodate anti-ISDS voices, arguing that it ISDS is a threat to domestic rule of law and has an undermining effect on national judiciary systems. In light of this, Australia has become a proponent to abandoning the ISDS mechanism in the TPP. While the inclusion of an ISDS is still highly likely to be included as part of the agreement – with the USA pressuring opponent parties to endorse the ISDS – and arguing that there won’t be a TPP without it, there is still uncertainty around how the final draft of the TPP will be structured.

ISDS could bring new forms of investment to Vietnam

The inclusion of ISDS into the TPP agreement could have the effect further reducing the risk associated with foreign investment, which could encourage companies from developed countries party to the TPP such as those in the US, to engage in “discretionary” outsourcing, this refers to foreign investment that does not require a foreign presence to be successful (while “non-discretionary” investment outsourcing refers to investment that requires outsourcing to a foreign jurisdiction to be financially viable) , and to ensure performance, would usually be kept in the home country jurisdiction where investment is less risk averse. Such investment can include high quality manufacturing, research and development and others. This discretionary investment could further raise investor confidence in Vietnam as a destination for high tech, R&D and other forms of investment.

Vietnamese outward investment could be boosted

2014 was regarded as a bumper year for Vietnamese outward FDI, with approximately US$1 billion going to 129 projects around the world. While the biggest recipients of Vietnamese FDI have been Myanmar and Cambodia, the US and Singapore were also destinations, both of whom are parties to the TPP negotiations. This suggests that Vietnamese firms would be able to benefit from the ISDS mechanisms. While the US and Singapore have highly developed legal frameworks for the enforcement of foreign arbitral awards; both countries and Vietnam are indeed party to the New York Convention, this could seek to enhance Vietnamese enterprises’ access to a neutral ISDS mechanism. The wide scope of the Japanese and American positions on ISDS covering all major contracts between foreign investors and the host state, if agreed, could protect many forms of Vietnamese FDI to the US and Singapore.

A potential Appellate structure could enhance ISDS for investors

Although not confirmed as yet, the US has taken a leading role in the TPP negotiations in calling for an Appellate structure to the TPP ISDS. Such a mechanism has been widely promoted in US-led international investment agreements, and is included in the US model BIT as a review mechanism. Furthermore, the International Centre for Settlement of Investment Disputes (“ICSID”) secretariat has also considered reform to include an Appellate structure for reviewing arbitral awards. Such a mechanism in the TPP ISDS could have two implications for investors. Firstly, such a structure could harmonize the interpretation of the TPP treaty text, and allow for the correction of awards from the many private commercial arbitration institutions from different jurisdictions that contain different rules of interpretation, and provide a more legitimate investment framework for investors. Indeed, the basis behind the ICSID Appellate structure was to achieve the aforementioned.

Summation

This short look at some of the potential implications on both inward and outward investors in Vietnam suggests that there will be benefits to the international framework for investment in the region that will have the effect of boosting investor confidence between TPP members, on the back of a re-energized ISDS mechanism. With suggests that such negotiations are at an “advanced stage”, it is likely that more aspects of the agreement will be made public in the months to follow.

Bibliography

  • Sappideen, R. Ling Ling, He. ‘Investor-state Arbitration: The Roadmap from the Multilateral Agreement on Investment to the Trans-Pacific Partnership Agreement’, 40 Fed. L. Rev. 207 2012
  • Cai, Congyan. ‘Trans-Pacific Partnership and the Multilateralization of International Investment Law’, 6 J. E. Asia & Int’l. L. 385 2013
  • Ikenson, D. ‘A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute Settlement’, 57 Free Trade Bulletin 2014
  • Mayer Brown JSM ‘A Guide to doing business in Vietnam’ 2015
  • Mayer Brown JSM ‘Will Vietnam Sink or Swim Amid a Proliferation of FTA?’ International Trade Asia, 2015
  • http://www.talkvietnam.com/2015/02/vietnams-outward-fdi-is-the-tide-turning/ Accessed 7/4/15
  • http://kluwerarbitrationblog.com/blog/2011/05/11/reconsidering-icsid-awards/ Accessed 7/4/15

By Joseph McDonnell – Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Regulations of Construction Contracts

Decree 37/2015/ND-CP dated 22 April 2015 on detailed regulations of construction contracts (“Decree 37”)

The Government issued Decree 37/2015/ND-CP dated 22 April 2015 on detailed regulations of construction contract (“Decree 37”). Decree 37 replaces Decree 48/2010/ND-CP dated 7 May 2010 on contracts in construction activities (as amended by Decree 207/2013/ND-CP dated 11 December 2013). Decree 37 will take effect on 15 June 2015.

Under Decree 37, there are many substantial changes that have been stipulated, these key changes include:

  • Supplementing some types of contracts in accordance with the nature of these contracts, and the subsequent relationships between parties and the contracts. Accordingly, with respect to their nature, contracts for supplying human resources, work machinery and equipment have been added. Depending on the relationship of the parties to the contracts, Decree 37 stipulates that construction contracts with four main contracts including a main contract, sub-contract, fixed rate contract and foreign construction contract.
  • Stipulating clearly the principles of signing contracts. The most important principle is that at the time of signing, the contractors must meet conditions for practice and performance qualification, as prescribed in the Law on Construction. This principle is aimed at making sure that the contracts are suitable for providing construction services and to limit risks associated with the quality of building construction undertaken by disqualified contractors.
  • Amendments to the rate of advances for construction contracts as follows: With respect to the consultancy contract, rates are divided in two levels, namely 20% of the contract value for a contract valued up to VND 10 billion and 15% of the contract value for a contract valued over VND 10 billion (instead of 25% of the contract value for every contract as stipulated in the previous decree).
  • Decree 37 requires the employers under construction contracts to provide payment guarantee in order to protect the rights and interests of contractors. Accordingly, the employers are responsible for proving their capabilities to perform payment obligations under the signed contract via such forms as approved by the capital arrangement plan, bank or credit organization guarantee and credit supply contract, or loan agreement with financial institutions.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com