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LEGAL DUE DILIGENCE: TOP 10 Red Flags (Uncovered Risks) in Vietnam M&A | LTS Law Firm

Legal Due Diligence (LDD) is your primary defense tool, designed to uncover hidden legal risks that could undermine your entire transaction. In Vietnam, where documentation may be inconsistent and regulations are evolving, LDD must go beyond surface-level checks.

This video by LTS Law Firm explores the TOP 10 COMMON RED FLAGS our legal team encounters in Vietnamese M&A deals, and what they mean for your investment.

🚨 TOP 10 RED FLAGS YOU MUST AVOID:

✅ 1. Unpaid or Incomplete Capital Contributions: Shareholder failure to fully pay registered capital can void shareholder rights and affect corporate decisions. Payment evidence (bank records) is critical, not just registry records.
✅ 2. Gaps between Business Activities and Licenses: Operating outside the licensed scope can lead to fines, license suspension, or contract invalidation. This risk is common and must be corrected before acquisition.
✅ 3. Missing or Outdated Internal Corporate Documents: Common flaws like outdated charters or missing resolutions create ambiguity over legal authority and complicate share transfer registration.
✅ 4. Lack of Proper Labor Contracts and Social Insurance Compliance: Labor issues are often hidden until post-closing. Violations expose the Buyer to back-pay liability and penalties.
✅ 5. Informal Commercial Agreements: Major customer/supplier relations based on verbal agreements or simple invoices may not be legally enforceable in court.
✅ 6. Intellectual Property (IP) Registered under Individual's Name: This is a major M&A risk because the business may not legally own its most valuable assets. IP transfer must be formally documented and recorded.
✅ 7. Pending or Undisclosed Litigation: Companies sometimes fail to disclose ongoing disputes (tax audits, labor claims), handled informally or at an early stage. LDD requires direct interviews and court database review.
✅ 8. Tax Irregularities or Non-Compliance: Tax compliance is often opaque for SMEs. Issues include under-reporting income or using fake invoices, carrying substantial penalties for the Buyer.
✅ 9. Restrictions on Share Transfer or Foreign Ownership: Ignoring rules in conditional sectors (e.g., Advertising, Education) can result in the deal being blocked or voided.
✅ 10. Hidden Liabilities or Guarantees: Off-balance sheet liabilities (loan guarantees, asset pledges) may not be disclosed unless directly requested. Legal recovery is difficult post-closing.

⚖️ LTS LAW FIRM: YOUR RISK-FOCUSED LDD PARTNER
We conduct risk-focused legal due diligence. We do not just list documents—we investigate deeply, question inconsistencies, and flag legal and commercial risks early. Our report highlights red flags, explains legal consequences, and recommends solutions.

Discovery is the key to mitigation.

📞 CONTACT LTS LAW FIRM TODAY
Contact LTS Law or visit lts.com.vn to schedule a legal due diligence consultation and enter your deal with confidence.

Website: 🌐 www.lts.com.vn
Email: ✉ [email protected]
Hotline (Zalo / WhatsApp): 📱 +84 90 927 9066

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