Vietnam is actively implementing various incentive policies and legal reforms to attract foreign direct investment (FDI). As a result, the market now presents numerous attractive investment opportunities for foreign-invested enterprises (FDI enterprises). To capitalize on these opportunities, investors must understand the essential agreements governing FDI activities in Vietnam. Therefore, DNP Viet Nam Law Firm introduces four essential types of agreements that every investor should grasp — from memoranda of understanding to share purchase agreements. Ultimately, these agreements help optimize benefits while minimizing investment risks..
1. Memorandum of Understanding (MOU)
An MOU records the basic terms and initial commitments between parties. Investors often use it during negotiations related to capital contribution or share acquisition. The MOU outlines objectives, responsibilities, and mutual commitments. While it does not carry the same legal weight as a formal contract, it still reflects the parties’ preliminary consensus. Common contents include transaction value, number of shares, and implementation timeline. This type of agreement is one of the essential agreements for FDI enterprises to clarify expectations before formal legal commitments.
2. Non-Disclosure Agreement (NDA)
An NDA outlines the obligations of parties to maintain confidentiality. The buyer must protect sensitive information related to the transaction. This agreement plays a crucial role in preventing data leaks to third parties.
2.1 Purpose
An NDA imposes binding confidentiality obligations on the parties involved. It prohibits the disclosure of transaction-related details to unrelated third parties and clearly defines each party’s rights and responsibilities.
2.2 Key Considerations
- The seller should disclose information early so that the buyer can assess it properly. If the parties fail to reach a preliminary agreement, they should sign the NDA as a standalone contract.
- Avoid incorporating the NDA into other contractual clauses. The NDA must clearly define the scope of confidential information, including financial, technical, and legal data. Communication can occur through documents, emails, or face-to-face meetings.
- The agreement should specify how to handle confidential information once the cooperation ends. Parties may return or destroy the received documents as appropriate.
This agreement is particularly important among the key legal documents for FDI enterprises in Vietnam during the negotiation and due diligence process.
3. Share Purchase Agreement (SPA) or Capital Transfer Contract (TCCA)
3.1 Share Purchase Agreement (SPA)
An SPA is a legal document used in share transactions involving joint-stock companies. It governs price, payment methods, and the rights of each party.
The main objectives of an SPA include:
- Clearly defining the rights and obligations of all parties.
- Ensuring legal validity and protecting lawful interests.
- Enhancing transparency and confidentiality in investment transactions.
3.2 Capital Transfer Contract (TCCA)
The TCCA applies to limited liability companies (LLCs) and governs capital transfers between members. It specifies the conditions, value, and timing of the transfer.
The main objectives of a TCCA include:
- Defining the rights and responsibilities of all involved parties.
- Providing clarity on transfer timelines and pricing.
- Establishing a dispute resolution mechanism to protect stakeholders’ interests.
These two documents are foundational FDI investment agreements that define ownership changes and protect transaction security.
4. Shareholders’ Agreement (SA)
An SA is a legal contract entered into by some or all shareholders of a company. Specifically, it sets the rules for management and decision-making processes. In some cases, the SA may even override certain provisions of the company’s charter or statutory regulations. Moreover, shareholders may choose to add or waive specific terms as needed. Ultimately, the goal is to harmonize shareholder interests and safeguard the company’s operations.
4.1 Purpose
An SA provides a unified legal framework for governance and operation. Moreover, it stabilizes shareholder relationships and helps prevent internal conflicts. As a result, through mutual agreement, shareholders can focus on the company’s long-term growth.
4.2 Content
An SA typically covers shareholding structure, voting rights, profit distribution, and dispute resolution mechanisms. When investors understand the SA thoroughly, they will find it easier to invest in Vietnamese companies. This facilitates increased charter capital and sustainable development. Moreover, the agreement helps balance the interests of domestic and foreign shareholders.
The SA is a strategic agreement and one of the essential agreements for FDI enterprises focused on internal governance and long-term business stability.
Conclusion
Drafting and executing agreements such as MOU, NDA, SPA, TCCA, and SA is crucial for any foreign-invested enterprise. These essential agreements for FDI enterprises in Vietnam clarify each party’s rights and obligations while forming a solid legal foundation for commercial transactions. They ensure effective cooperation and help mitigate business risks. DNP Viet Nam Law Firm is committed to supporting FDI investors throughout their business journey in Vietnam.
DNP VIET NAM LAW FIRM
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