💡 Key Notes on Internal Restructuring Before an M&A Deal
Internal restructuring is a crucial preparatory step that facilitates many M&A transactions. Here are some key considerations to ensure that restructuring aligns with the broader transaction timeline and regulatory requirements
LEGAL SHARING
Nguyễn Thị Lan Giang
12/7/20241 min read
📋 1. Planning and Regulatory Compliance
Internal restructuring, such as transferring assets or ownership within a corporate group, often triggers regulatory requirements. For example, in Vietnam, certain transactions may require merger filing clearance under the Competition Law if the conditions are met with no applicable exemptions for the internal restructuring. Additionally, changes in company form or name may necessitate updates to licenses and permits, potentially delaying timelines and impacting operations or financial models.
💰 2. Tax and Finance-Related Issues
Restructuring may trigger tax obligations, such as CIT, VAT, or PIT on transfers, and risks of tax arrears or penalties may surface and impact the targets after closing. On the financial side, prior lender consent may be required if the entity holds outstanding loans or encumbered assets, and challenges in consolidating financial reports under VAS or IFRS can complicate the process.
✅ 3. Legal Due Diligence and SPA Protections
Post-restructuring legal due diligence ensures compliance and confirms clear ownership of assets or entities. The SPA should include representations and warranties that the restructuring complies with applicable laws and ownership is undisputed.
⏳ 4. Transaction Timeline and Stakeholder Engagement
Aligning restructuring activities with the M&A timeline and maintaining proactive communication with regulators, lenders, and advisors is critical for smooth execution.
🔑 Conclusion
Internal restructuring is a complex but essential step in M&A transactions. By addressing regulatory, tax, and financial requirements early, conducting due diligence, and implementing robust contractual protections, businesses can ensure a seamless and compliant process.
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