After conducting the overall assessment of the potential business for acquisition, it might look like a promising investment which prompts you to proceed with the purchase. The subsequent phase involves preparing all necessities for the transition via the process of Due Diligence. This step is fundamental to establish the legal readiness of the company for transfer.
Once the appropriate company for acquisition has been identified, it’s recommended to authenticate its legal status and responsibilities by inspecting its pertinent certificates and documents.
What Documents Of The Company Are There That You Need To Check About?
1/ Business Registration Certificate (BRC)
The Business Registration Certificate, also known as the BRC, is an entity’s legitimate document. Issued in either paper or electronic form, this document validates business registration details, approved by the Business Registration Authority.
This document acts as a formal certification of business establishment in Vietnam, applicable to both local and foreign-owned companies.
The BRC essentially contains all pertinent company details in Vietnam.
By scrutinizing this document, you can confirm the company’s existing situation and its tax code. Such verification substantiates the information’s correctness, enabling a smooth transition to further steps.
Moreover, knowing the shareholders’ identities along with their total capital contribution to a company, as mentioned in the BRC, becomes vital when examining the organization’s ownership setup before any acquisition.
2/ Certificate of Investment Registration (IRC) for Foreign Direct Investment (FDI) Companies
When considering the acquisition of a foreign-owned business, you may encounter a crucial document known as the Certificate of Investment Registration (IRC).
The IRC is instrumental in establishing the exact business parameters within Vietnam for companies owned by foreign entities.
Defined as an official log in either written or digital format, the Certificate of Investment Registration notes down an investor’s register information for potential investment ventures. It entails a comprehensive set of propositions detailing the application of medium to long-term capital for participation in business investment activities within designated regions, during a specified timeframe.
The IRC provides a statement of the business scope along with corresponding business codes applicable to the company. This gives you an insight into your permitted operational remit and paves the way for you to decide on the expansion or reduction of business verticals in the future.
3/ Understanding Sub-license Validity and Expiration
In Vietnam, different business sectors are categorized by unique identifiers and must adhere to specific guidelines for official operations to commence.
Take, for example, a recruitment firm that sources prospective employees for domestic clients in Vietnam, or works remotely for international corporations.
After successfully finalizing the company formation process, a necessary step for the agency is to acquire the Recruitment sub-license, qualifying them to offer the aforementioned services. This particular license maintains its validity for a period of 60 months from the date it was signed.
Similarly, in the food service industry, businesses must secure a number of sub-licenses, like fire safety and food hygiene certifications, during the establishment process. These licenses are essential in ensuring adherence to vital regulations and standards, thus guaranteeing a safe, high-quality environment for both consumers and workers.
Thus, it’s of utmost importance to carefully examine these licenses. This will help to evade potential complications or extra workload in the future, most importantly before the company purchase.
4/ Audited Financial Statements and Performance Of The Past Financial Year
It is mandatory for operational companies in Vietnam to maintain records of their financial performance and audited financial statements for the preceding 12 months. This exercise safeguards financial transparency and proper fiscal management.
When considering a company acquisition, it’s essential to thoroughly scrutinize their financial records. Delving deeper into the company’s performance and investigating its liabilities, surplus finances, and comprehensive fiscal health can provide crucial insights. This knowledge greatly contributes to formulating future strategies, ensuring a thoroughly planned financial strategy is in place.
Furthermore, a detailed analysis of the cash flow can ensure steady and uninterrupted operations during the transition period and when the newly acquired company merges with the current business structure.
5/ Evidence of Tax Compliance and Social Security Completion Certificate
Companies operating within Vietnam are mandated to submit compliance reports on a monthly, quarterly, and yearly basis to relevant authorities, in addition to punctual tax submissions.
Employers bear the responsibility of contributing a certain portion of social security to their workforce. Incidences such as overdue report submissions, delayed tax payments, or social security can result in subsequent penalties.
Further to this, business owners are required to meet all compliance obligations prior to receiving official approval from the government for a change of ownership.
To assure this, it is recommended to have the owners provide verification through a government-issued signature and stamp, affirming the completion of all tax, compliance, and social security duties.
6/ Check the Credit Information of the company
Obtaining the Credit Information Certification (CIC) allows individuals to assess whether the company under scrutiny has any unsettled monetary obligations with Vietnamese banks. This certificate offers invaluable perspectives about the company’s financial health and its interactions with domestic financial establishments.
How Can Iris International Aid You In Acquiring A Business In Vietnam?
Iris International, your comprehensive solution for businesses in Vietnam, offers support to examine all the documents of the operational business, ensuring the company’s adherence to local laws and regulations.
Additionally, we deliver an in-depth due diligence service so you are fully informed of any potential risks or obligations linked with the business before making a purchase. This encompasses an analysis of financial documents, contracts, licenses, and any other crucial data.
Moreover, our skilled professional team can act as your representatives, negotiating a reasonable price for the business and managing all the compulsory legal procedures involved in the acquisition.
To sum up, procuring a business in Vietnam demands meticulous due diligence and understanding of local regulations. With Iris International on your side, you can rest assured knowing every facet of the acquisition procedure is handled with competence and efficacy. Reach out to us for a free consultation on purchasing an operational business and embark on your Vietnamese venture today!
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