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, merger, or conversion of enterprise type), under which the surviving company automatically inherits all lawful rights, obligations, and interests of the dissolved entities. Instead, business transfer is structured as a series of discrete transfer transactions between independent legal entities, tailored to each specific legal relationship. This mechanism enables the relevant enterprises to continue their independent existence while maintaining flexibility in the implementation timeline, without being subject to procedures such as tax finalization or enterprise registration adjustments, which are often time-consuming and may involve legal risks.
Within this article series, this article focuses on the legal aspects of transferring commercial contracts under a business transfer structure.
1. Legal nature of contract transfer
In a business transfer structure, the transfer of commercial contracts constitutes one of the most critical and complex components, as these relationships involve third parties and are directly governed by the Civil Code and/or the Commercial Law.
From a legal perspective, commercial contracts arising from business operations between the transferring entity (the “Transferor”) and its clients, partners, or suppliers are independent contractual relationships. When such contracts are transferred to the receiving entity (the “Transferee”), the transaction involves a change of contracting party, which encompasses the transfer of rights and/or obligations arising under such contracts.
Legally, this change of contracting party does not constitute an automatic succession but rather results from the application of the legal mechanisms governing assignment of rights and transfer of obligations in civil transactions.
2. Legal conditions for contract transfer
The Civil Code 2015 provides for such transfer as follows:
- Assignment of rights: the consent of the obligor is not required; however, the assignor must notify the obligor in writing, unless otherwise agreed. If failure to notify results in additional costs for the obligor, the assignor shall bear such costs.1
- Transfer of obligations: may only be effected with the consent of the obligee, except where otherwise provided by law.2
Accordingly, only in cases where the contract no longer contains outstanding obligations and only residual rights remain (e.g., the right to receive payment) may the transfer be effected by way of notification. In all other cases, the transfer, as a matter of principle, requires the consent of the remaining party to the contract.
In practice, commercial contracts often provide that any amendment or supplement must be agreed upon in writing by all parties. In such cases, a change of contracting party is deemed a contractual amendment and therefore requires the prior written consent of the remaining party.
Based on the above, in most cases, the transfer of commercial contracts from the Transferor to the Transferee requires the written consent of the remaining party to the contract. Failure to satisfy this requirement may render the transfer ineffective, in which case the Transferor remains responsible for performance of the contract and may be subject to contractual remedies, including damages payable to the remaining party.
3. Considerations for credit agreements and special contracts
In addition to standard commercial contracts, attention should be given to credit agreements and other contracts with specific requirements (“Special Contracts”), including but not limited to lease agreements, business cooperation contracts, joint venture agreements, or other contracts of a similar nature.
Such Special Contracts typically impose notification obligations and/or prior consent requirements in relation to significant changes concerning ownership, control (change of control), or decisions that materially affect the business operations of the enterprise.
In this context, the implementation of a business transfer may be regarded as a material change, thereby triggering obligations to notify or obtain prior written consent from the relevant counterparties (including, without limitation, banks, credit institutions, partners, or lessors). These obligations are often accompanied by contractual remedies for breach.
Accordingly, prior to implementing the transfer, the Transferor should carefully review such contracts and ensure compliance with the relevant obligations in order to mitigate potential legal risks.
Under a business transfer structure, the transfer of contracts is not merely an internal legal matter but is significantly dependent on the consent of third parties. This constitutes a key factor in determining the feasibility of the overall transfer plan. Accordingly, prior to implementing the transfer, enterprises should conduct a comprehensive review of existing contracts, assess the scope of rights and obligations, and develop an appropriate implementation strategy for each group of counterparties in order to ensure legal validity and mitigate potential risks.
[1] Article 365.2 of the Civil Code 2015.
[2] Article 370.1 of the Civil Code 2015.
Submission date: 20 April 2026
Disclaimers:
This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.
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Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to M&A Consulting and contact our team of lawyers in Vietnam via email info@apolatlegal.com.
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