In the context that Vietnam's economy is deeply integrated into the regional and global markets, businesses face many pressures from both internal and external such as market fluctuations, economic recession, changes in legal policies, technological changes and modern governance requirements. These factors drive the need to restructure the business – an overall process to adjust and reorganize strategic, financial, operational and human resources elements to improve operational efficiency and competitiveness.
Restructuring can take many forms, from financial restructuring (debt restructuring), capital restructuring (conversion of shareholders, issuance of new shares), ownership restructuring (merger, separation), to restructuring of management or production and business activities. This is a complex process that requires a deep understanding of business strategy, finance, governance, legal, and even the market.
In this complex and risky process, the role of law firms has become increasingly essential, especially in the context of the legal environment in Vietnam which is constantly changing and developing rapidly in recent times.
Law firm's activities in the restructuring process
Overall legal advice and shaping the appropriate structure
One of the core roles of a law firm is to support businesses in shaping a restructuring model in accordance with the law and the strategy of the business. Lawyers are responsible for evaluating feasible options, identifying legal risks, and formulating proposed structures such as mergers, consolidations, capital transfers, partial dissolution, and the formation of new legal entities,... which option is most suitable and useful in each customer's unique context.
It is easy to see that determining a legal restructuring model is a vital factor, because the wrong choice can lead to internal conflicts, problems with tax obligations, responsibilities with partners or the risk of disputes with investors. Because in some restructuring deals in Vietnam, the choice of merger instead of consolidation can help businesses maintain their tax codes and business licenses, thereby avoiding the procedures for re-registering labor contracts, assets or sub-licenses.
Legal review and handling of outstanding obligations
Before restructuring, law firms will often conduct legal due diligence to check the legal status of the business from charters, contracts, assets, labor, liabilities, sub-licenses, existing disputes, to unfulfilled tax obligations, etc.
Through the legal due diligence activities of law firms, it will help businesses have a complete picture of outstanding legal issues, thereby developing a plan to handle obligations before entering the restructuring stage. This is an important stage to avoid arising legal liabilities later or obstructing and complicating the implementation of the restructuring plan.
Developing and renegotiating contracts
Corporate restructuring often entails the change or termination of contracts signed with partners, customers, suppliers, and senior personnel. Lawyers from the law firm will assist in reviewing the binding of the terms of the contract, proposing plans to amend, terminate, or re-sign the contract in accordance with the new structure.
In many cases, with the consent of the enterprise, the lawyer can represent the enterprise to renegotiate loan contracts with banks, long-term asset lease contracts, cooperation contracts with strategic investors,....
Drafting dossiers and representatives working with state agencies
Administrative procedures related to enterprise restructuring in Vietnam are quite diverse and complicated: from registering changes to the content of the Enterprise Registration Certificate, notifying changes in contributed capital, transferring shares, to procedures with the Department of Planning and Investment, etc the Department of Taxation, the Department of Industry and Trade, the State Bank, the Department of Construction...
With practical experience and deep understanding of administrative procedures, law firms can draft all documents on behalf of businesses and work directly with state agencies, helping to save time and ensure legality for the entire process.
Labor consulting and handling of HR issues
One of the major challenges in restructuring is handling labor issues from changing employers, transferring personnel, terminating labor contracts, to developing job reassignment policies... This is a sensitive field of consultancy and is prone to disputes if it is not handled in accordance with the provisions of labor law and is "deliberate and reasonable" in each specific case of each employee.
In this field, law firms often advise on a harmonious personnel restructuring plan, ensuring the interests of employees at least in accordance with the law, and at the same time helping businesses limit legal risks that may arise from complaints or lawsuits due to disagreement in the restructuring plan proposed by the company.
Protecting businesses in arising disputes
In many cases, restructuring activities entail disputes with retail shareholders, cooperative partners, investors or even the affected employees themselves. The law firm will play a role in protecting the legitimate interests of the business through representation in mediation, arbitration or litigation proceedings at the Court.
Some good examples of these disputes are disputes arising from the termination of a business partnership agreement during a restructuring or when a shareholder is excluded from the company due to a restructuring of ownership.
Restructuring practices in Vietnam
Restructuring after a financial crisis or business downturn
Many large enterprises in the fields of real estate, retail, and logistics in Vietnam have had to restructure strongly after facing a cash flow crisis and bad debts. In this process, law firms are invited to: (1) Advise on the structure of issuance of convertible bonds to raise capital; (2) Negotiate with banks and foreign investors to extend and restructure loans; (3) Drafting and handling new contracts in accordance with the adjusted business strategy; (4) Support the completion of new internal charters and regulations to reflect the change in strategy.
Ownership restructuring to prepare for listing
For many businesses before IPO or offering shares to foreign strategic investors, it is often necessary to restructure internal ownership to consider from the consolidation of related legal entities to a focal point; transformation from a limited liability company to a joint-stock company; to the handling of retail shareholders or unclear capital contribution contracts.
Law firms play a key role in reviewing and perfecting ownership structures, ensuring businesses are ready for audit, valuation and listing.
Restructuring for business transfer
In order to be able to transfer the entire company, a business segment of the company or a subsidiary in a group of many companies to another investor, many businesses must immediately think about restructuring the business to suit their wishes and the needs of investors when they want to invest in the business. At that time, the restructuring of the enterprise to be the most suitable is to force the enterprise to implement and implement it in a standardized way. In addition to the requirements of investors and the wishes of the business, the restructuring in this case also facilitates the transfer process and can especially increase the value of the company, the business segment that the business wants to sell to other investors.
Therefore, before carrying out the procedures for transferring the enterprise to another investor, the enterprise must conduct a comprehensive restructuring of the enterprise.
Benefits when a law firm accompanies the restructuring process
It can be seen that the very important and necessary role of law firms in the process of carrying out restructuring activities of a company. Many times, for some reason, businesses have not seen all the great benefits when conducting this activity with the professional companionship and support of law firms.
|
Benefit |
The role of law firms |
|---|---|
|
Optimize time and costs |
Shortening the time to handle procedures, limiting errors leading to rework or fines |
|
Mitigate legal risks |
Identify and handle potential conflicts, disputes, and obligations in advance |
|
Increase transparency |
Completing legal documents, increasing readiness for auditors and investors |
|
Enhancing business value |
Helping businesses have a more sustainable structure, ready to raise capital or M&A |
In general, corporate restructuring is not just a financial or strategic activity, but also a legal process with many risks and long-term consequences if not properly consulted and implemented. With an increasingly complex and strictly enforced legal landscape in Vietnam, the involvement of law firms is an indispensable factor to ensure the legality, efficiency and sustainability of the restructuring process.
Restructuring can be risky, but with the right strategy and professional companionship from the law firm, it is also an opportunity for the business to enter a new stage of development that is more stable and effective.
