Adjusting business valuation is a necessary activity to ensure sound investment decisions, especially in the context of a highly volatile market. However, identifying the legal grounds relating to such an issue within the current Vietnamese legal system is not an easy task. Understanding this concern, the article below by NPLaw will analyze the current situation, clarify the concept, and provide the legal regulations governing this matter.
Adjusting business valuation is a necessary activity to ensure sound investment decisions, especially in the context of a highly volatile market. However, identifying the legal grounds relating to such an issue within the current Vietnamese legal system is not an easy task. Understanding this concern, the article below by NPLaw will analyze the current situation, clarify the concept, and provide the legal regulations governing this matter.
I. Current situation relating to the adjustment of business valuation
The adjustment of business valuation is no longer an unfamiliar activity for investors, particularly in M&A (Mergers and Acquisitions) transactions or investment capital raising activities in Vietnam. The mechanism for adjusting business valuation serves as a risk mitigation measure for investors themselves.
In practice, such a situation arises for various reasons, but mainly due to the following causes:
- The continuous fluctuation of the market makes valuations based on financial assumptions prone to inaccuracies.
- The business performance capacity of enterprises is difficult to predict accurately.
- Investors and enterprises tend to have opposing perspectives when determining business valuation.
In summary, the existence of a business valuation adjustment mechanism clearly helps limit disputes and facilitates smoother investment processes among relevant parties.
II. Concept of adjustment of business valuation
1. What is the adjustment of business valuation?
The current legal system does not provide a specific definition of “adjustment of business valuation”. Therefore, in order to understand such a term, it is necessary to rely on practical application and relevant legal provisions.
Pursuant to Clause 10, Article 4 of the Law on Enterprise 2020, an enterprise is understood as an organization having its own name, assets, transaction headquarters, established or registered for establishment in accordance with law for business purposes.
In addition, Clause 3, Article 3 of Circular No. 36/2024/TT-BTC also clearly provides that the value of a going concern enterprise means the value of an operating enterprise under the assumption that the enterprise will continue its operations after the valuation date.
Accordingly, a basic concept of adjustment of business valuation may be understood as an act of changing (increasing or decreasing) the value of an enterprise that has been previously determined, based on factors arising after the initial valuation date.
Understanding the definition of business valuation adjustment is the first step for readers to identify and comprehend the legal provisions governing such an issue.
2. What factors commonly lead to the need for adjusting business valuation?
Based on Article 4 of Circular No. 36/2024/TT-BTC and current practice, several factors commonly leading to the need for business valuation adjustment may include:
- Purpose of valuation: Changes in the valuation client’s requirements under the valuation service contract may result in the initially applied valuation method no longer being accurate.
- Legal characteristics: Changes in legal regulations or tax policies are also factors causing discrepancies in the initial business valuation results.
- Market characteristics of the enterprise subject to valuation: Fluctuations in business performance (such as revenue and profits failing to meet planned targets) or market changes at specific times (such as wars, epidemics, etc.) also make valuation adjustment necessary.
In addition to the above factors, the discovery of hidden risks or outstanding liabilities of the enterprise after valuation may also necessitate the adjustment of the initial valuation results.
3. Does adjustment of business valuation mean re-determining the entire enterprise value?
Adjustment of business valuation only involves re-determining criteria that have changed compared to the initial valuation and recalculating based on such changes, rather than re-valuating the entire enterprise value from the beginning.
It means that the adjustment only focuses on offsetting arising differences based on unchanged methods and factors that were previously determined. It helps investors save costs compared to re-determining the entire enterprise value.
For example: Enterprise A was initially valued at 1,000 USD based on its position ranked 40th in the manufacturing market and its charter capital of 100 billion USD. However, after the valuation, due to the impact of an epidemic, Enterprise A dropped to 200th position in the market. Accordingly, the valuation adjustment for Enterprise A would be recalculated based on the change in market position while maintaining the charter capital factor unchanged.
III. Legal regulations relating to the adjustment of business valuation
1. In which cases does adjustment of business valuation commonly arise?
The first issue when studying regulations on business valuation adjustment is identifying the circumstances requiring such adjustment. Understanding these cases helps parties proactively manage valuation adjustments.
Referring to Article 27 of Decree No. 57/2026/ND-CP and based on current practice, several cases leading to business valuation adjustment may include:
- There are objective causes (natural disasters, wars, changes in State policies, or other force majeure) affecting the value of the enterprise’s assets.
- Errors or discrepancies are discovered during the initial enterprise valuation process.
In summary, business valuation adjustment only arises when affected by objective, unforeseen factors or resulting from mistakes in the initial valuation process.
2. Principles for implementing business valuation adjustment
Based on the spirit of Chapter II of Circular No. 36/2024/TT-BTC, several basic principles for implementing business valuation adjustment may be summarized as follows:
- Principle of voluntariness and agreement: Parties may freely agree on valuation adjustment methods and mechanisms.
- Principle of legal compliance: When adjusting business valuation, parties must comply with regulations governing valuation methods (Circular No. 36/2024/TT-BTC) and other relevant legal provisions.
- Principle of honesty: Data used for adjustment must be based on audited financial statements or objective actual figures.
- Principle of consistency: The method used for adjustment must be consistent with the method used for the initial valuation.
These are the fundamental principles that parties must comply with when conducting business valuation adjustment.
3. Which subjects have the authority to decide on business valuation adjustment?
For business valuation adjustment to be lawful, the deciding subject must have the proper authority. In practice, depending on the purpose of the initial business valuation, the subjects having such authority may differ.
For cases where business valuation serves internal corporate purposes (such as restructuring, attracting investment, etc.), the decision-making authority belongs to:
- Members’ Council: For multi-member limited liability companies, the Members’ Council will be the decision-making body due to its the highest authority (Article 55 of the Law on Enterprise 2020, amended in 2025)
- Board of Directors or General Meeting of Shareholders: Joint-stock companies have a more complex structure, so depending on the authority of the Board of Directors or General Meeting of Shareholders as clearly stipulated in the company charter, so the competent authority to decide valuation adjustment may differ among enterprises (Articles 138 and 153 of the Law on Enterprise 2020, amended in 2025).
- Private enterprise owner/owner of a single-member limited liability company: Since these two types of enterprises have one individual or organization as the sole owner, the authority to decide valuation adjustment also belongs to such owner (Article 76 and Clause 1, Article 190 of the Law on Enterprise 2020, amended in 2025).
For cases where business valuation serves transactional purposes (such as M&A transactions, etc.): the parties involved in the transaction shall be the subjects having authority to decide on the adjustment of business valuation.
In summary, depending on the valuation purpose, the authority to decide business valuation adjustment may belong either to the transaction parties or to the highest internal governing body of the enterprise.
4. When the parties cannot agree on the adjustment amount, what dispute resolution mechanisms are commonly applied?
When the parties cannot agree on the adjustment amount, the commonly applied dispute resolution mechanisms include:
- Negotiation and mediation: It is usually the preferred method chosen by parties to minimize costs arising during dispute resolution.
- Commercial arbitration: If the contract clearly stipulates the application of commercial arbitration, the parties may apply such a method if negotiation and mediation fail.
- Court proceedings: If the parties have no other agreement or the dispute is complex and requires an enforceable judgment, initiating a lawsuit before the Court is the final resolution method.
These are the four general dispute resolution methods and specifically the methods for resolving disputes concerning business valuation adjustment amounts. Parties may choose the method most suitable for their needs.
IV. Questions relating to business valuation adjustment
1. Can the mechanism for business valuation adjustment be agreed upon in advance in an investment contract?
In practice, a contract is an agreement between parties for the purpose of establishing, changing, or terminating civil rights and obligations (Article 385 of the Civil Code 2015).
Therefore, in an investment contract, the parties may agree in advance on the mechanism for business valuation adjustment, provided that such provisions comply with current legal regulations.
2. In cases of fraudulent conduct in the initial valuation, how is legal liability determined?
In cases of fraudulent conduct in the initial valuation, legal liability may be determined as follows:
- Civil liability: The valuation entity committing fraud in the initial valuation may be liable for damages and may cause the contract to be declared invalid.
- Administrative liability: A fine ranging from 20,000,000 VND to 30,000,000 VND may be imposed for the intentional provision of false information regarding valuation assets (Clause 2, Article 24 of Decree No. 87/2024/ND-CP).
- Criminal liability: If the fraudulent conduct aims to appropriate property, the organization or individual may also be subject to criminal prosecution for the offence of fraudulently appropriating property (Article 174 of the Criminal Code 2015, amended and supplemented in 2025).
In summary, depending on the seriousness of the conduct and the consequences caused, legal liability may be determined differently.
3. Must business valuation adjustment be approved by the general meeting of shareholders or the members’ council?
Pursuant to Articles 55 and 138 of the Law on Enterprise 2020, amended and supplemented in 2025, the General Meeting of Shareholders and the Members’ Council are the highest decision-making bodies in joint-stock companies and multi-member limited liability companies. Thus, they will be entitled to approve decisions affecting the enterprise, such as business valuation adjustment.
4. Is it mandatory to hire an independent valuation organization when adjusting business valuation?
Currently, there is no mandatory legal requirement to hire an independent valuation organization when adjusting business valuation. However, in order to minimize future risks, engaging an independent valuation organization is still highly advisable.
5. Can the maximum adjustment amount be limited in an investment contract?
Contracts in general and investment contracts in particular are essentially agreements between parties. Therefore, if the contracting parties agree on a maximum adjustment limit, such agreement may be included as a contractual clause.
V. Why should you seek legal advice from NPLaw regarding business valuation adjustment issues
Business valuation adjustment is an important matter that directly affects enterprises; therefore, using legal services is the choice of many entities. NPLaw, with its team of highly experienced consulting lawyers and profound understanding of relevant legal regulations, is a reliable partner for many enterprises in need of such services.
The above information is for reference purposes only. For detailed advice regarding specific cases, please contact NPLaw Law Firm for immediate consultation.
