STEPS FOR TRANSFERRING A MANUFACTURING FACTORY IN AN INDUSTRIAL ZONE IN VIETNAM - OTIS LAWYERS

The industrial real estate market in Vietnam has become increasingly vibrant due to the surge in manufacturing relocations from China to neighboring countries. To expedite business operations, many investors opt to purchase existing manufacturing factories instead of building new ones from scratch. Investors can either acquire the entire manufacturing company (Equity M&A) or purchase assets including land use rights, buildings, machinery, equipment, product trademarks, and other assets (Asset M&A).

For an Asset M&A transaction, the typical steps for transferring a manufacturing Factory in an industrial zone ("Manufacturing Factory") are as follows:

Step 1: Identify Transferable Assets

The parties need to clearly determine whether the assets to be transferred are registered or non-registered, tangible or intangible. The assets of the Manufacturing Factory may include land use rights and attached assets (buildings), machinery, production formulas, trade names, product trademarks, etc.

In many cases, the buyer only acquires land use rights and attached assets (buildings) to manufacture a different product than the seller.

Step 2: Sign Initial Agreements

To express their intent to engage in the transaction, the parties may sign initial agreements such as Confidentiality Agreements, Letters of Intent (LOI), Memorandums of Understanding (MOU), and Deposit Agreements (DA). If the seller requires the buyer to make a deposit to secure the transaction, the parties will sign a Deposit Agreement.

Step 3: Conduct Due Diligence

Depending on the buyer's requirements and the type of transferable assets, the buyer may perform legal, financial, and technical due diligence, as well as inspect the quality and quantity of each type of asset. This due diligence may occur before or after Step 2 (signing initial agreements), depending on the parties' agreement.

Step 4: Obtain Transfer Approvals

- Approval from the Infrastructure Development Company: To transfer the Manufacturing Factory, including land use rights and attached assets in the Industrial Zone, the seller typically needs approval from the Infrastructure Development Company.

- Internal Approval: Both the buyer and the seller need to obtain their own internal approvals for the transfer and acquisition of the Manufacturing Factory. The authority to decide may depend on the company's charter, internal regulations, and the value of the Manufacturing Factory.

Step 5: Sign the Transfer Agreement

The parties will sign a Transfer Agreement for transferring all the transferable assets.

If the transferable assets only include land use rights and attached assets, the parties might consider not signing a Transfer Agreement at this step but instead signing a contract at a notary office as outlined in Step 6 below.

Step 6: Notarize the Land Use Rights and Attached Assets Transfer Agreement

According to legal regulations, the Land Use Rights and Attached Assets Transfer Agreement must be notarized at a notary office or an authorized agency ("Notary Office").

Therefore, the parties need to sign an additional contract, which must be notarized by the Notary Office, to register changes in land use rights and attached assets. This agreement is usually drafted according to the Notary Office's template, located in the same province or city where the Manufacturing Factory is situated.

Step 7: Register Ownership of the Assets

For assets that require ownership registration, such as land use rights and attached assets, automobiles, product trademarks, etc., the parties must complete the registration to transfer ownership according to legal regulations.

Step 8: Re-sign Agreements with the Infrastructure Development Company

Typically, the seller will have to terminate the land lease contract and utility contracts in the Industrial Zone with the Infrastructure Development Company. Simultaneously, the buyer will sign new land lease contracts and utility contracts with the Infrastructure Development Company.

Step 9: Apply for Licenses and Certificates

Before operating the Manufacturing Factory, the buyer must apply for the necessary licenses/certificates as required by law. Depending on the buyer's manufacturing activities, the required licenses/certificates may vary in conditions and procedures.

The steps above outline the usual process for transferring a manufacturing Factory in an industrial zone. Based on the transferable assets, transaction structure, and parties' agreements, these steps may be adjusted accordingly.

For any questions or comments, please contact:
OTIS AND PARTNERS LAW FIRM
Office address: 2nd Floor, CT3 Building, Yen Hoa Park View Urban Area, No. 3 Vu Pham Ham Street, Yen Hoa Ward, Cau Giay District, Hanoi
Email: [email protected]
Hotline: 0987748111