New Circular on Revised Application and Reporting Templates for Investment Activities

On December 31, 2023, the Ministry of Planning and Investment introduced a significant legislative update with the issuance of Circular 25/2023/TT-BKHDT (“Circular 25“), which revises Circular 03/2021/TT-BKHDT (“Circular 03“). Circular 25, effective from February 15, 2024, brings amendments to the regulatory framework governing application forms for investment activities in Vietnam. This series of posts is designed to explore Circular 25 and its significant effects on the investment environment.
For the first part, we will update about form A.1.7 – the Application to register for capital contribution/ purchase of shares/contributed capital by foreign investors (M&A Approval Application).

1. The fixed transaction price in M&A Approval
1.1. Previously, Circular 03 only required investors to indicate a “proposed transaction price” (giá trị giao dịch dự kiến) on their application. However, Circular 25 now mandates that applicants specify the “actual transaction price (giá trị giao dịch thực tế).
1.2. The new requirement appears to present logical and practical concerns because:
(a) The essence of M&A Approval is to act as a preliminary clearance for transactions that are inherently uncertain and may not ultimately proceed. Conversely, specifying an “actual” transaction price assumes the deal’s completion, a contradiction given the approval’s anticipatory nature.
(b) Legally, it’s supposed to take 15 days to get M&A approval, but in practice, it often takes much longer. Considering this, it seems unreasonable to lock in a transaction price early on, given that numerous factors could affect the price in the meantime.
(c) There are no legal requirements specifically for foreign investors regarding the transaction price, making it unnecessary for the Department of Planning and Investment (DPI) to evaluate it. Instead, the focus on transaction price should belong to the tax authorities, who are responsible for assessing financial aspects of transactions for tax calculation purposes.

2. The attachments to M&A Approval Application
2.1. The previous version of the form provided a detailed list of documents required for M&A Approval Application, aligning with the specifics of Clause 2, Article 66 of Decree 31/2021/ND-CP. The new form under Circular 25 only refer to such clause without detailing the exact documents required. However, it provides an ambiguous additional requirement for applicants to submit “other relevant documents (if any)”.
2.2. It’s not clear which documents are considered “relevant” in this context. The ambiguity of the regulation could broaden the authority of licensing authority to ask for documents that might not be needed, possibly causing delays as applicants try to provide these extra documents. Specifically, it has become commonplace for the Hanoi DPI to request financial statements of the target company. This practice persists even in situations where such documents may not seem directly applicable to the matter at hand.