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Conversion of Short-Term Foreign Loans into Equity Contribution: Implementation Procedures and Key Considerations

As discussed in the article  “ Short-term Loans from Foreign Parent Companies: Options for Handling Outstanding Loans ” , where a short-term foreign loan reaches its maturity (i.e., one (01) year from the first drawdown) and the company is unable to repay or may become subject to loan registration requirements with the State Bank of Vietnam, selecting an appropriate solution is critical to mitigate potential legal risks.   Among the legally permissible options, the conversion of a short-term foreign loan into equity contribution held by the foreign investor in the Vietnamese company is a commonly adopted approach. However, in practice, many enterprises have yet to fully understand the legal procedures required to implement such conversion in a compliant manner.   This article analyzes the legal nature of such transactions and provides a detailed guide on the procedures that enterprises need to prepare when converting a foreign loan into equity in accordance with applicable laws.   In...
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Obligation to provide information in employment relationships: A legal perspective under the Labour Code 2019

In the context of increasingly complex employment relationships, the obligation of the employee to provide information under the  Labour Code 2019 has become an important legal issue that has not yet received adequate attention. In practice, providing truthful information when entering into a labour contract is not only an ethical requirement but also a mandatory legal obligation that may directly affect the validity of the contract and the rights and interests of the parties. This article analyzes the legal provisions on the employee’s obligation to provide information, specifically clarifying the scope of information to be provided, the form and timing of such provision, the management and use of employee information, as well as providing several notes on employee information records from tax and accounting perspectives.   1. Scope of the employee’s obligation to provide information under legal regulations First of all, the Labour Code 2019 does not provide detailed regulations on...
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When power is no longer anonymous: Shareholders’ agreements and new paradigms of corporate control

In modern corporate governance, a Shareholders’ Agreement (“SHA”) has traditionally been likened to a “secret drawer”—a private repository where investors establish layers of de facto control distinct from the publicly filed Charter (Articles of Association). However, under the pressure of global transparency trends and the tightening of Beneficial Owner (“BO”) regulations pursuant to the Law on Anti-Money Laundering 2022 and its guiding instruments (such as Decree 19/2023/ND-CP, Decree 168/2025/ND-CP, and draft amendments to the Law on Enterprises), the SHA is emerging from the “gray zone” to become a subject of direct regulatory scrutiny. 1. A shift in paradigm: From “Freedom of Contract” to “Transparency Accountability” In essence, the Vietnamese legal system has consistently prioritized contractual autonomy. The principle of Pacta sunt servanda (agreements must be kept) serves as the core foundation allowing investors to design bespoke governance structures. This flexibility, co...
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Legal Framework For Business Transfer In Vietnam

Part 1: Transfer of Commercial Contracts In the context where enterprises are increasingly undertaking restructuring to optimize their operational models and management efficiency, the business transfer model is gradually becoming a commonly used approach alongside traditional M&A transactions. As a matter of principle, business transfer refers to the transfer by an enterprise of certain rights, obligations, and assets from one legal entity to another through a series of independent transactions. In practice, particularly within corporate groups and holding company structures, business transfer is often utilized as a mechanism to streamline organizational structures, reallocate functions among affiliated entities, and enhance both governance efficiency and tax optimization. It should be clarified that this does not constitute a form of corporate reorganization as prescribed under Clause 31 Article 4 of the Law on Enterprises 2020 (including division, separation, consolidation,...
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Risks for enterprises to note when converting loans into contributed capital

The conversion of loans into equity – commonly referred to as a Debt/Equity Swap (“ DES ”) – is increasingly prevalent in the internal financial structuring of companies, particularly where shareholders or capital contributors seek to legitimize funds previously injected into the company. However, this mechanism also represents a financial arrangement that entails significant legal risks, especially where it is implemented in an ad hoc manner without a clear legal basis. This article highlights the key legal risks that companies should carefully consider prior to undertaking such a transaction.   1. Legal nature of DES   In essence, a loan and an equity contribution represent two entirely distinct legal relationships. A loan arises from a loan agreement, under which the borrower is obliged to repay both principal and interest in accordance with the agreed terms . 1 In contrast, an equity contribution refers to an asset contributed by a member or shareholder to the company...
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Options for handling inactive companies: Dissolution, Bankruptcy or Transfer?

In the structure of many Vietnamese conglomerates today, it is not difficult to identify the existence of subsidiary companies that have ceased operations long ago  –  perhaps remnants of failed investment projects, business lines that have been phased out, or simply the result of incomplete restructuring processes. These legal entities continue to exist on paper, consuming annual maintenance costs, and in many cases, accumulating tax or social insurance debts that go unnoticed until the problem becomes serious.   The question arises: how should these legal ‘zombies’ be handled? Vietnamese law provides three main pathways  –  voluntary dissolution, recovery/bankruptcy proceedings, and transfer of capital contributions or shares. Each option has different conditions for application, implementation procedures, and legal consequences. Choosing the wrong option not only wastes resources but may also lead to legal liability for the legal representative. This article ...
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