A cap table, short for capitalization table, is a critical tool used to track the ownership of a company, including its shares and equity. For cross-border mergers and acquisitions (M&A) transactions in Vietnam, creating a cap table is an essential step that can help ensure a smooth and efficient deal. In this article, we will discuss the key elements of creating a cap table for cross-border M&A transactions in Vietnam.
Identify shareholders and their respective shares:
The first step in creating a cap table is to identify all shareholders and the number of shares they hold. This information is usually contained in the company’s charter or shareholder agreement. It is important to distinguish between different types of shares, such as common shares, preferred shares, and options. This information should be documented in a spreadsheet or database by those who master Excel and understand a comprehensive picture of proposed cross-border M&A transactions, especially legal or financial advisors who mastered Excel and deeply understand the proposed transaction, along with each shareholder’s contact information.
Calculate the ownership percentage:
Once the shareholders and their shares have been identified, the next step is to calculate the ownership percentage of each shareholder. This can be done by dividing the number of shares held by each shareholder by the total number of outstanding shares. The sum of all ownership percentages should equal 100%.
Once completion of calculating the ownership percentage, they can decide whether or not they are required to obtain an M&A approval or must file an application for clearance of merger filing as required by laws. Based on that, the ownership percentage can deem to be the consequence of a series of the following legal actions and procedures that shall carry out by investors or the target companies for the completion of the said proposed transaction at the competent relevant authorities in Vietnam.
Consider dilution
Dilution occurs when new shares are issued, which can reduce the ownership percentage of existing shareholders. It is important to consider the impact of potential dilution events, such as a new funding round or stock option plan. This can be done by creating different scenarios and calculating the resulting ownership percentages for each shareholder.
Include convertible securities
Convertible securities, such as convertible bonds or convertible preferred shares, can be converted into common shares at a later date. It is important to include these securities in the cap table and to calculate the potential impact on ownership percentages if they are converted.
Consider the impact of the transaction
The M&A transaction itself can have an impact on the cap table. For example, if the transaction involves the issuance of new shares or the exchange of shares between the two companies, this will need to be reflected in the cap table. It is also important to consider any post-transaction agreements, such as earn-out provisions or stock options, and to document them in the cap table.
Verify accuracy
Finally, it is crucial to verify the accuracy of the cap table. This can be done by double-checking the data with the company’s legal and financial advisors. Any errors or discrepancies should be corrected before finalizing the cap table.
In conclusion, creating a cap table for cross-border M&A transactions in Vietnam is a critical step in ensuring a smooth and efficient deal. By following the steps outlined above and seeking the advice of legal and financial experts, companies can create an accurate and comprehensive cap table that reflects the ownership structure of the company and considers the potential impact of the transaction.
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