Summary: A factory acquisition in Vietnam is rarely undone by the headline terms of the deal — it is undone, or made far more expensive, by liabilities that surface after closing because diligence did not look in the right places. This article sets out ten liability categories that recur in Vietnamese manufacturing acquisitions, so buyers can price and allocate them before signing rather than discover them afterward.
By ECOVIS Vietnam Law | Last reviewed: 17 July 2026
“Every acquisition I have advised on eventually comes down to the same question: what did the seller’s team not think to disclose, because it looked routine to them? Uncompleted construction works, machinery bought without clean title, an environmental non-conformity nobody escalated — none of these show up in a financial data room. They show up in a proper legal and technical review.” — Attorney Vu Manh Quynh, Founder & Managing Partner, ECOVIS Vietnam Law
Why This Matters for Foreign Investors / Foreign Companies
Financial due diligence in an acquisition typically covers revenue, margins, and balance sheet items well. Legal and technical due diligence on a Vietnamese manufacturing target requires a different lens — land rights, environmental and fire-safety compliance, machinery ownership, and licence scope are not always visible in financial statements, and a seller’s own management may genuinely not flag them as issues because the facility has been operating without apparent problems for years. Absence of a known problem is not the same as absence of a real one, and the gap between the two is where post-closing disputes and remediation costs originate.
Ten Liability Categories to Check
- Land use rights status. Confirm the target’s land use rights basis, remaining term, and whether the land was ever used for a different licensed purpose than its current activity — a mismatch here can affect the transaction’s core asset.
- Uncompleted or unapproved construction works. Facilities often expand informally over years — mezzanines, extensions, storage structures — without matching construction permits or completion acceptance. Administrative liability for the original violation generally stays with the entity that committed it; in a share deal, that entity is the target itself and does not change hands, so the buyer inherits the exposure through continued ownership rather than being made personally liable. In an asset deal, the buyer does not automatically inherit the seller’s historical penalty exposure, but buying or continuing to use a non-compliant structure can still bring operational consequences — an order to stop use, remediate, or forgo completion acceptance for that portion of the facility — even where the buyer is not liable for the original historical penalty. In either deal structure, continued use of a non-compliant structure creates forward-looking enforcement risk — regulators can act on an existing non-conformity regardless of who currently owns the entity, and remediation or removal costs land on whoever operates the facility going forward.
- Environmental approval scope and violations. Check whether the facility’s environmental licence matches its actual current activity and scale, and whether any unresolved violations or remediation orders exist, even ones the seller considers minor or historical.
- Fire safety (PCCC) compliance gaps. Confirm the facility’s fire-safety approval basis matches its current layout, equipment density and storage profile — informal changes over time are a common source of gaps.
- Machinery and equipment ownership. Verify that key production machinery is owned outright, not subject to unpaid financing or leasing arrangements. Treat import-duty exemption conditions as a distinct check from title: machinery imported duty-free to serve an eligible investment project is typically tied to the purpose and conditions of that project, and a change of use, sale, or transfer outside those conditions can trigger retroactive duty assessment, related tax, and penalties — the applicable duration and conditions should be confirmed against the specific exemption dossier and project rather than assumed, and this risk attaches to the equipment itself, separate from whether title is otherwise clean.
- Licence and permit transferability. Some approvals do not automatically follow a change of ownership or legal representative and may require formal amendment — treat this as a checklist item, not an assumption.
- Workforce liabilities. Unpaid or underpaid social insurance contributions, unresolved labor disputes, and undocumented overtime practices are common and can transfer with the business depending on deal structure.
- Tax and customs exposure. Historical related-party transactions, transfer pricing positions, and customs declarations may carry latent assessment risk that a tax authority could pursue after closing. Under the Tax Administration Law, the statute of limitations for tax penalties generally runs 2 years for procedural violations and 5 years for tax evasion or understatement that does not reach criminal level, while back-tax collection can reach back up to 10 years — and a change of ownership does not pause or reset this clock, so exposure for pre-closing periods continues to run against the target entity regardless of who now owns it.
- Related-party contracts and off-market terms. Supply, service and financing agreements with parties related to the seller that are priced off-market are not automatically void or unenforceable after a change of ownership — renegotiating out of an uneconomic contract is generally a commercial matter, unless the contract also involves illegality, a corporate approval defect, sham pricing, tax abuse, or a breach of fiduciary or charter obligations, in which case a stronger legal basis to unwind or challenge it may exist. The more immediate risks are transfer pricing exposure (off-market related-party pricing can draw tax authority scrutiny, both for historical periods and for any related-party dealings that continue after closing, which carry their own disclosure obligations), corporate approval gaps (related-party contracts often carry approval requirements the seller may not have followed correctly), and commercial leakage (the buyer may be locked into uneconomic terms until the contract can be renegotiated or terminated) — all of which should be priced and planned for rather than assumed to disappear at closing.
- Undisclosed disputes and enforcement actions. Check court, arbitration and administrative enforcement records for the target entity and, where relevant, its directors — a dispute in early stages may not yet appear in the seller’s own disclosure schedule.
Practical Risks for Management
- M&A/Corporate Development leads risk under-pricing a deal if legal and technical diligence is scoped like a standard corporate acquisition rather than a manufacturing-specific one.
- General Counsel risk inheriting liabilities that could have been priced, excluded, or indemnified against if diligence surfaced them before signing rather than after.
- Boards risk approving a transaction on an incomplete risk picture, creating accountability exposure if a significant liability surfaces post-closing.
- CFOs risk unbudgeted remediation costs that a proper pre-signing review would have quantified and reflected in the purchase price.
Practical Action — Pre-Signing Diligence Checklist
- Commission a dedicated legal and technical review of land rights, construction records, environmental licensing and fire-safety compliance — do not rely on the seller’s own compliance summary alone.
- Verify machinery ownership and any financing, leasing, or duty-exemption restrictions on key equipment.
- Map which licences require re-application or amendment on change of ownership, and build the resulting timeline into the closing plan.
- Review workforce records for unpaid social insurance, unresolved disputes, and undocumented overtime.
- Quantify historical tax and customs exposure, including any open or informal audit activity.
- Review related-party contracts for off-market terms that may create transfer pricing exposure or require renegotiation.
- Search court, arbitration and administrative enforcement records independently of the seller’s disclosure schedule.
- Price identified gaps into the transaction — through purchase price adjustment, escrow, or specific indemnities — rather than treating diligence as a pass/fail gate only.
How Ecovis Vietnam Law Can Support
Ecovis Vietnam Law conducts legal and technical due diligence on Vietnamese manufacturing acquisitions — reviewing land rights, environmental and fire-safety compliance, licensing, labor and tax exposure, and helping structure indemnities and price adjustments for the liabilities identified.
FAQ
Does financial due diligence usually catch these liability categories?
Not reliably. Land rights, environmental compliance, fire-safety gaps and machinery ownership issues are legal and technical matters that typically require a dedicated review distinct from financial diligence.
If the seller says the facility has operated without problems for years, does that mean there are no compliance gaps?
Not necessarily. Long operating history without an incident is not the same as documented compliance — informal expansions, layout changes and equipment additions can accumulate gaps that only surface on formal review or during a future inspection.
Do all ten liability categories apply to every acquisition?
Relevance varies by target, but all ten are common enough in Vietnamese manufacturing acquisitions to warrant a specific check in every deal, even where the seller’s own materials do not flag them.
Can identified liabilities be addressed after signing rather than before?
Some can be addressed through post-closing remediation, but pricing and risk allocation are far easier to negotiate before signing — waiting until after closing generally weakens the buyer’s negotiating position.
Who should lead this kind of diligence — the buyer’s regular corporate counsel or a Vietnam-specific advisor?
Both roles matter, but land rights, environmental, fire-safety and licensing specifics are jurisdiction-specific and benefit from local counsel experienced in Vietnamese manufacturing compliance, working alongside the buyer’s own deal team.
Call to Action
Request a Factory Acquisition Legal Due Diligence. Ecovis Vietnam Law reviews land rights, environmental, fire-safety, licensing, labor and tax exposure for Vietnamese manufacturing acquisitions before you sign. Contact us before finalizing your offer.
Disclaimer
This article is for general information only and should not be treated as legal, tax or accounting advice. Specific due diligence should be conducted for each transaction.
See our Manufacturing Investment guide for the full factory-acquisition compliance picture, or contact our team before finalizing an offer.