Vietnam Decree 357 introduces financial risks for privatized firms

Decree 357/2026/NĐ-CP introduces new regulations regarding financial obligations following the equitization of state-owned enterprises in Vietnam. Under the decree, old receivables managed by the Enterprise Restructuring and Development Support Fund will be reviewed and transitioned to the state budget management mechanism.

Crucially, the decree establishes that privatization does not automatically extinguish financial obligations originating from the period of state ownership. This includes receivables related to ownership transfers, state capital transfers, dividends, and profits. Even if a company has been fully privatized or transferred to the State Capital Investment Corporation (SCIC), existing obligations may persist, creating potential risks for Mergers and Acquisitions (M&A).

Late payment penalties are set at 0.03% per day on the principal amount. For large debts accumulated over several years, these penalties can become significant. Investors conducting M&A on companies with a history of state ownership are advised to perform independent legal audits specifically targeting equitization records, settlement documents, and obligations to the Fund.