About us

MATTER: 

Restructuring investment structure in Vietnam market to benefit from changes of laws (2006-2007)

CLIENT:

A Vietnam-based subsidiary of a Japanese globally recognized producer of consumer, industrial electric and electronic products.

BACKGROUND:

Our Client, as one of our most long-standing clients since 2006, is a Japanese-invested company duly incorporated under laws of Vietnam whose parent company is a Japanese multinational conglomerate headquartered in  Tokyo, Japan. Its diversified products and services include power, industrial and social infrastructure systems, elevators and escalators, personal computers, consumer electronics, home appliances, and medical equipment… (“Japanese Producer”).

In the middle of the 1990s, not long after the United States lifted the trade embargo against Vietnam, the Japanese Producer invested in Vietnam market under a joint venture (“JVC”) with a Vietnamese-owned company who was then an electronic producer as well (“Vietnamese Partner”).

In 2006, a Japanese Producer came to meet Mr. Trinh Hong Quang who was the leader of a Hochiminh-based lawyer team, the precursor of ATIM LAW FIRM now, to seek legal advice for the renewal of the JVC’s operational time in Vietnam and negotiation with their Vietnamese Partner toward an agreement by which aimed to solve the gaps between them on their voting proportion and corporate governance over the JVC.

CHALLENGES AND SOLLUTIONS:

As of the date when Vietnam was an early opening market for foreign investment under the reform policy (in 1986) up to 2005 when Vietnam was preparing for WTO accession, laws of Vietnam required that foreign investors who invested in Vietnam market had to engage a joint venture agreement with a Vietnamese partner. With that policy, the Government of Vietnam was looking forward to promoting and improving local resources via doing business with foreign investors who own advanced technology and are well-experienced and well-established in market entrance, production and supply chain management. However, this policy also created various difficulties in how to adapt and bridge the gaps between Vietnamese investors and foreign investors in terms of corporate governance, management and culture. The facts showed that most of the joint ventures in Vietnam were facing with internal disputes between the local and foreign parties.

As one of stepping-up in Vietnam’s WTO accession program, in 2005, Vietnam introduced the Law on Investment which was effective as of July 1st 2006. This new law removed the join-venture requirement for investing in electronics and allowed foreign investors to hold 100% ownership of an electronic company in Vietnam. Meanwhile, the operational duration of the JVC between the Japanese Producer and the Vietnamese Partner was about to expire around 2006.  

Because of that, ATIM LAW FIRM advised the Japanese Producer to stick to a choice of either termination of the JVC or shares acquisition of the Vietnamese Partner and turn the JVC into a 100% foreign-owned enterprise (“FOE”). To go with these procedures, one of the most important things we emphasized to draw Client’s attention was how to maintain the operation without interruption and with the least impact on the company during these processes. Accordingly, we proposed a program to support Client to keep the processes smoothly and minimize the impact on the company's operation.

SERVICES AND RESULTS:

ATIM LAW FIRM successfully supported the Client to move the transition with the following acts:

• negotiated with the Vietnamese Partner to acquire the shares in the JVC at the net book value;
• converted the JVC into the FOE and extended the investment term;
• liquidated the redundant employees without any legal impact;
• renewed the land lease contract to maintain factory operation;
• renovated all supply chain contracts;
• updated all IP rights for the new company.