Legal Due Diligence (LDD) Report Services in Vietnam

Understanding a business’s legal status is extremely important in an increasingly developing and challenging business environment. Legal due diligence not only helps investors, partners, or business owners have an accurate view of their unit’s legal status but also contributes to ensuring transparency and protecting legal rights, especially in merger and acquisition transactions. In this article, Viet An Law will introduce legal due diligence (LDD) report services in Vietnam for your reference.

What is corporate legal due diligence?

Legal Due Diligence (LDD) is a term that is no longer strange to most Vietnamese enterprises in particular and in the world in general, due to the nature of LDD playing a vital role in major transactions such as Mergers and Acquisitions (M&A), investors contributing capital, purchasing shares, capital contributions, franchising deals or simply when enterprises want to sign investment cooperation contracts, business cooperation contracts, etc.

Corporate legal due diligence involves reviewing all legal elements constituting and maintaining a business’s presence and existence.

The result of an enterprise’s legal due diligence is a Report presented scientifically and logically, reflecting all the legal due diligence information of the appraised enterprise, constituting and maintaining long with the annotations of legal experts to help investors gain a comprehensive insight and accurately assess the legal status of the target company.

Why is it necessary to conduct a legal due diligence of a business?

• Ensure legal compliance: Assess whether the business complies with legal regulations on business operations, labor contracts, taxes, protection of workers’ rights, environmental protection, etc.
• Detect and mitigate legal risks: Helps detect potential issues in contracts, licenses, intellectual property rights, or current or potential legal disputes that may affect the business.
• Protecting the legal rights of related parties: Ensuring that the interests of shareholders, investors, partners, and employees are protected and not violated.
• Supporting mergers and acquisitions (M&A) transactions: In mergers and acquisitions transactions, legal due diligence services help parties evaluate the legal factors of potential partners, thereby making accurate decisions.
• Accurate investment decisions: For investors, legal due diligence helps them understand the legal situation of the business, thereby making accurate and safe investment decisions.
• Cost savings: Early detection of legal issues helps businesses avoid costs associated with dispute resolution, litigation, or contract amendments.

What are some types of corporate legal due diligence today?

Currently, there are several types of corporate legal due diligence including:

• Legal due diligence of the buyer;
• Legal due diligence of the seller;
• Legal Compliance Due Diligence;
• Legal due diligence of finance, operations, clients, taxes, etc.

Depending on the size of the company and the industry in which the business operates, there will be different areas that require legal due diligence. Normally, when conducting legal due diligence, the business will conduct due diligence on the company’s organization, company size, company products, the market the company is targeting, commercial contracts, information systems, intellectual property rights, and issues related to competitors.

What does corporate legal due diligence service include?

Legal due diligence services typically include a range of factors that need to be examined and evaluated, including:

Legal status of the business

• Check establishment licenses, business registrations, and operating licenses in specific industries to ensure businesses operate legally and comply with current regulations.
• Information about the enterprise from the time of establishment; type of enterprise; duration of operation; head office and branches, representative offices, stores as well as business lines will also be legally reviewed, synthesized, analyzed, and evaluated by Viet An Law.

Capital and capital structure

The registered capital level, the actual contributed capital level, the type of assets registered for capital contribution the type of assets contributed, and the capital structure will be checked and assessed so that investors can clearly understand.

Contracts and agreements

• Evaluate contracts signed by the business, including labor contracts, service contracts, lease contracts, asset purchase contracts, etc.
• Viet An Law will report the main contents of important and valuable contracts that the enterprise has signed. Accordingly, it will point out unclear issues and risks that the enterprise may encounter based on the terms of the contract/agreement. That will help investors identify their legal rights and obligations and avoid legal risks that may arise.

Property and ownership

• Check ownership of assets, including land, buildings, equipment, intellectual property (trademarks, copyrights, patents), and contracts related to ownership.
• This is to assess whether the business legally owns these assets and whether these assets are subject to disputes or rights violations.

Dispute and litigation records

Check for current or potential litigation or legal disputes that the business may face. This helps identify legal issues that could impact the business’s reputation and operations.

Taxes and financial obligations

Assess compliance with business tax and financial obligations, including corporate income tax, value-added tax (VAT), personal income tax, and payables.

Labor and social insurance

Ensure that businesses fully perform their obligations to employees, from labor contracts, salary and bonus regimes, social insurance to other benefits.

In addition to the main areas above, depending on the needs of the business, Viet An Law will examine other areas and issues as needed.

The result of the legal due diligence will be a legal due diligence report, which provides the business with the legal status of each relevant field, the risks that the business is or will face, an assessment of the level of risk and notes on issues that need to be considered when conducting legal transactions.

Note the documents required when using the business legal due diligence service

Business organization profile

• Decision to establish a business, charter capital.
• Certificate of business registration.
• Certificate of investment registration.
• Tax identification number certificate.
• Minutes of capital contribution.
• Certificate of eligibility for business (if doing business in a conditional industry).

Business asset profile

• Land use rights certificate and related documents.
• Construction project documents (construction permit, acceptance report, completion drawing).
• Certificate of intellectual property protection
• Documents relating to vehicles and other assets.

Financial and tax records

• Audited financial statements.
• Balance sheet, cash flow, and income statement for the last 5 years.
• Tax declarations, invoices, receipts, etc.
• Inspection records, tax settlement of enterprises,…

Transaction Contract Profile

• Contract for lease/cooperation in using premises/lending/transferring premises/other contracts related to land use rights and assets attached to land in business operations.
• Business cooperation contract.
• Contract in the form of service provision.
• Contract for the sale of goods.
• Other economic contracts/transactions (if any)

Labor profile

• Sample employment contract of the enterprise
• Labor regulations
• Collective labor agreement
• List when declaring/reporting labor use.
• List of employees who are covered by social insurance and have their personal income tax deducted, accompanied by confirmation from the competent authority.
• Registered salary scale.

Procedure for conducting legal due diligence services of enterprises

• Step 1: Customer provides relevant legal information
• Step 2: Viet An Law makes a due diligence plan
• Step 3: Viet An Law conducts due diligence
• Step 4: Draft legal due diligence report. Complete and deliver results.

Factors to consider when choosing a legal due diligence lawyer service

When choosing a legal due diligence service, businesses need to pay attention to the following factors:

• Expertise and experience: Make sure that the service provider has a team of experienced lawyers and legal experts who have a good understanding of the legal regulations in the field in which the business is operating.
• Reporting quality: The due diligence report must be detailed, clear and easy to understand, with specific recommendations for addressing legal issues.
• Ensure confidentiality: Business information and documents must be kept absolutely confidential throughout the due diligence process.
• Post-audit support services: In addition to due diligence, some services also provide legal advice, helping businesses resolve issues arising after due diligence.

Legal Due Diligence (LDD) report services in Vietnam of Viet An Law

• Consulting on the legal status of enterprises in terms of type, license, industry, etc.
• Capital due diligence and capital structure consulting;
• Assessing legal risks in important, high-value contracts;
• Due diligence of assets and ownership rights such as land use rights, intellectual property rights, etc.
• Due diligence of dispute and litigation records;
• Financial, tax, labor, due diligence;
• Profound legal due diligence consulting in M&A transactions;…

Legal due diligence is an important step, especially in M&A transactions, to help identify and minimize legal risks. If you need legal due diligence for your business, please contact Viet An Law for the best advice and support!