Global Vietnam Lawyers would like to introduce our valued readers to an article by Lawyer Ngo Thi Diem titled “Making share swap a tool to connect Vietnam’s capital market with the global market” published in The Saigon Times, 19-2026 (1.847) on May 7, 2026.
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Share swaps have become a common transaction in mergers and acquisitions (M&A) deals and are no longer an unfamiliar concept in Vietnam’s dealmaking landscape. From a legal perspective, however, this transaction structure remains somewhat in a “gray area” and is in need of further consideration.
Share swaps are increasingly being used in M&A transactions, particularly in large-scale deals, cross-border transactions, or transactions conducted for internal restructuring purposes. Instead of relying entirely on cash payments, the parties use shares or equity interests as a means of “exchanging value”, thereby reshaping ownership structures among enterprises.
Under Vietnam’s legal framework, the share swap structure still exists in a “gray area”: while it has been acknowledged in certain sectors, it has yet to be fully recognized as an independent legal concept — especially in the context of outbound investment activities. This raises an important question: is the current legal framework truly ready for share swaps, or is it still struggling to keep pace with market practice?
Common share swap structures
Under international practice, share swaps are not limited to shares in joint stock companies but are also widely applied to equity interests in other types of enterprises. At the core of this structure is the exchange of ownership rights rather than cash consideration.
Vietnamese laws on securities and investment — including outbound investment regulations — have gradually moved in this direction by recognizing the exchange of both shares and equity interests, regardless of the legal form of the enterprise involved. In practice, however, determining swap ratios is often tied to par value — a concept that exists only for shares. As a result, the involved parties in many cases are required to undertake intermediate restructuring steps (such as converting equity interests into shares) in order to facilitate the transaction.
In practice, share swaps typically take one of the two forms:
First, in M&A transactions. A company (referred to as Company A) seeks to acquire control of another company (referred to as Company B), not through cash payment but by using its own shares in exchange for the shares of Company B. Following the transaction, Company A becomes the controlling shareholder of Company B, while Company B’s shareholders become shareholders of Company A. This structure helps preserve cash flow while also aligning the parties’ long-term interests.
Second, in capital contribution transactions. An investor uses the shares he holds in one company as capital contribution into another company. As a result, a cross-ownership is established, under which the parties not only contribute capital but also participate in each other’s future growth.
Regardless of the form, the common feature of share swaps is the absence of cash flow. This is both the structure’s greatest advantage and the origin of many legal complications during implementation.
Share swap: a “natural fit” for the securities sector
Under Vietnam’s current legal framework, share swaps are most clearly recognized in the securities sector. The 2019 Securities Law and Decree No. 155/2020/NĐ-CP allow public companies (including listed companies) to issue shares in exchange for shares of another enterprise and to carry out M&A transactions through swap mechanisms.
Notably, the application scope of this arrangement is not limited to public companies. It may also extend to non-public companies, multi-member limited liability companies and, in certain cases, even the conversion of debt obligations into equity. It can be said that, within the securities sector, share swaps have been relatively well codified, with fairly clear procedures, conditions and implementation requirements. This has provided an important legal foundation for enterprises to carry out swap transactions in practice.
A step forward in outbound investment regulations
A significant development came with the issuance of Decree No. 103/2026/NĐ-CP guiding the 2025 Law on Investment in relation to outbound investment. Building upon Decree No. 31/2021/NĐ-CP, Decree No. 103/2026/NĐ-CP reaffirms that shares and equity interests are among the lawful assets permitted for outbound investment purposes. Also, it takes a further step by recognizing share swaps as a permissible payment structure and by establishing fundamental principles for implementing transactions under this structure.
This marks an important advancement, partially eliminating the previous “gray area” in which share swaps existed in practice without a clear legal basis.
However, the issue remains that share swaps have yet to be formally defined as an independent legal concept, and are instead recognized only as a “payment method.” This leads to a lack of consistency when compared with the securities and corporate law framework.
“No cash flow” — An advantage or a legal gap?
The biggest bottleneck of share swaps in outbound investment today lies precisely in their defining feature: the absence of cash flow.
By nature, a share swap is effectively a “barter-style” transaction (shares exchanged for shares or equity interests), meaning that, in theory, there is no need for actual cross-border cash transfers. However, although Decree No. 103/2026/NĐ-CP recognizes the share swap structure, it still provides no specific guidance on exempting these transactions from the requirement to transfer funds through an outbound investment capital account opened at a commercial bank.
Under the practical application of the earlier Decree No. 31/2021/NĐ-CP, the State Bank of Vietnam and licensed credit institutions have generally required actual cash inflows and outflows for reconciliation and verification purposes within the foreign exchange management system. Meanwhile, Decree No. 103/2026/NĐ-CP merely recognizes the value of swapped shares and equity interests as part of the total outbound investment capital, without adequately addressing how the parties can prove that capital contribution or payment obligations have been fulfilled in cases where no cash flow arises. Against this backdrop, a key legal question emerges: in the absence of actual cash transfers through the investment capital account, on what basis can banks certify that the investment capital has been contributed overseas, thereby providing the legal basis for recording, monitoring and ultimately permitting the repatriation of profits to Vietnam in accordance with foreign exchange regulations?
This ambiguity may continue to force enterprises engaging in outbound investment transactions under the share swap structure — in the absence of more detailed guidelines on the implementation of Decree No. 103/2026/NĐ-CP — to resort to cumbersome processes carrying potential legal risks, similar to those seen in practice under the previous regulatory framework. Under such practice, investors are often required not only to complete registration procedures by entering into agreements concerning the asset swap arrangement, but also to work closely with commercial banks in order to have the swapped shares or equity interests recognized as outbound capital contributions, despite the fact that no foreign currency transfer actually takes place.
Notably, in many cases, commercial banks still appear reluctant to accept these “non-cash” investment structures. As a result, the parties involved are often compelled to arrange technical inflows and outflows of funds that merely simulate conventional share acquisition or capital contribution transactions, thereby eroding the core commercial benefits of the share swap structure.
Proposed solutions
First and foremost, share swaps should be clearly defined through clarification of the following key issues:
First, the scope of “share swap”: A standalone legal definition should be introduced to clarify that a share swap is a transaction in which the consideration is not cash, but rather shares or equity interests in another enterprise.
Second, conditions and procedures for application: More detailed guidance should be issued to elaborate on the general principles currently set out under Decree No. 103/2026/NĐ-CP, including the applicable conditions and implementation procedures for share swap transactions. In particular, for share swap transactions involving shares of public companies (including listed companies), the legal framework governing share swaps should be developed and implemented in a manner that is consistent and aligned with the securities law.
Third, the “cash flow” issue must be completely resolved. For share swaps to operate effectively, the following principles should be clearly recognized: transactions conducted under a share swap structure should not be required to demonstrate actual cash flow, except in cases involving partial swaps — for example, where the transaction includes a cash adjustment component.
Finally, there should be a clear mechanism for recognizing swap ratios determined either under contractual agreements between the parties or based on independent valuation reports. In practice, swap ratios may be determined through agreements between the parties as recorded in transaction documents, taking into account financial indicators identified through due diligence processes, investment strategies, bargaining positions and long-term expectations. Depending on the nature of the transaction and the level of independence between the parties, valuation reports and independent opinions issued by financial advisory firms — particularly in material or public-interest transactions — may also serve as important reference sources for determining swap ratios.
However, Decree No. 103/2026/NĐ-CP currently provides no clear guidance as to the basis upon which regulators will recognize swap ratios, and merely imposes the general requirement that transaction values be determined “in accordance with market principles.” This poses a risk that regulators may subsequently reassess transaction values through post-transaction audits, potentially giving rise to disputes relating to tax, transfer pricing or other financial obligations.
To address the above limitations, a clearer legal framework is needed: (i) recognizing swap ratios agreed upon by the transaction parties as the primary basis, provided that the parties are independent and there are no signs of evasion of legal obligations; and (ii) in more “sensitive” cases (such as public companies or related-party transactions), independent valuation reports may be required as a transparency safeguard, rather than as a mandatory condition for the validity of the transaction.
Concluding remarks: From “tentative recognition” to “legal clarity”
In practice, share swaps have been used in numerous cross-border M&A transactions, particularly those involving public companies. However, most of these transactions have relied more on a “market precedent” than on a fully developed legal framework.
The formal recognition of share swaps under Decree No. 103/2026/NĐ-CP is therefore a welcome step forward. But for this structure to truly become workable in practice, a further step is needed — moving from principle-based recognition to recognition supported by clear operational mechanisms.
As Vietnam continues to promote financial integration and encourage domestic enterprises to expand into international markets, share swaps should not be viewed merely as a technical transaction tool. With a more complete legal framework, they could become an important lever enabling Vietnamese enterprises to pursue cross-border M&A transactions more flexibly, attract foreign investment capital and gradually integrate more deeply into the global financial ecosystem.
The remaining question is whether Vietnam is prepared to move from “tentative recognition” to “unequivocal legal acceptance”.
