Foreign Investors Purchase Shareholding In Vietnamese Companies

FOREIGN INVESTORS PURCHASE SHAREHOLDING IN VIETNAMESE COMPANIES

First, as for foreign investors’ capital contribution to a shareholding company in Vietnam.

Pursuant on Article 46 Decree No. 118/2015/ND-CP, regulations on investment procedures in the form of capital contribution, share purchase and a capital contribution of foreign investors are as follows:

"Foreign investors who make the investment through capital contribution or purchase of shares/stakes of business organizations are not required to obtain Investment Certificates.”

Clause 1, Article 26 of the Investment Law of 2014 stipulates the procedures for registration of capital contribution at the Department of Planning and Investment as follows:

"(a) Foreign investors contribute capital to, or purchase shares or capital contributions at, economic organizations operating in the sectors or trades in which business investment activities of foreign investors must meet certain conditions; (b) The capital contribution or share or capital contribution purchase leads to a situation whereby foreign investors or the economic organizations prescribed in Clause 1, Article 23 of this Law hold 51% or more of charter capital of the concerned economic organizations.”

As a result, foreigners have the right to invest under the forms of capital contribution, share purchase or capital contribution in joint stock companies without having to carry out the procedures of applying for investment certificates. However, although the procedures for granting investment certificates are not required, foreigners must still register for their capital contribution at Department of Planning and Investment in the case of a shareholding company with a Shareholder as stipulated in Clause 1, Article 26 of the Investment Law 2014.

Second, about application dossiers for capital contribution, share purchase and capital contribution.

Clause 2, Article 26 of the Investment Law 2014 specifies the dossier for registration of capital contribution, share purchase and capital contribution as follows:

"(a) A written registration of capital contribution or share or capital contribution purchase, covering information on the economic organization to which or at which the foreign investor intends to contribute capital or purchase shares or capital contributions; the foreign investor’s charter capital holding rate after contributing capital to, or purchasing shares or capital contributions at, the economic organization; (b) A copy of the identity card or passport, for individual investors; a copy of the establishment decision or another equivalent document certifying the legal status, for institutional investors.”

Third, these following contents should be noted if a joint stock company has a foreign shareholder.

- Firstly, the level of capital contribution and share purchase:

The foreign investors' capital contribution and share purchase shall be implemented in accordance with Article 3 of Decision No. 88/2009/ QD-TTG stipulating the level of capital contribution and share purchase as follows:

"1- Foreign investors shall be permitted to purchase the shareholding in public companies at the ratios stipulated in the law on securities and relevant implementing guidelines. 2- Foreign investors shall be permitted to contribute capital and purchase the shareholding in Vietnamese enterprises operating in sectors and business lines subject to specialized branch laws at the ratios stipulated in such specialized branch laws. 3- The ratios of capital contribution and purchase of shareholding by foreign investors in Vietnamese enterprises conducting business in commercial services shall comply with international treaties of which Vietnam is a member. 4- In the case of a Vietnamese enterprise with a multi-sector and/or multi-business line operation including several trades and/or sectors for which the stipulated participation ratios of foreign investors are different, foreign investors shall be permitted to contribute capital and purchase shareholding, not in excess of the lowest participation ratio of foreign investors stipulated for such trades and/or sectors. 5. In the case of an enterprise with 100% state-owned capital converting its form of ownership, foreign investors shall be permitted to contribute capital and purchase shareholding at the ratio stipulated in the plan approved by the authorized body, but not in excess of the stipulated (applicable) ratio if the enterprise had converted its operation in the sectors mentioned in clauses 2, 3 and 4 of this article. 6- Apart from the above-mentioned cases, foreign investors shall be permitted to contribute capital and purchase a shareholding in Vietnamese enterprises at unrestricted levels.”

- Secondly, the conditions for foreign investors to contribute capital or purchase shares:

The conditions for foreign investors to contribute capital and purchase shares are stipulated in Article 6 of Decision No. 88/2009/QD-TTg as follows:

"2. Applicable to a foreign investor being an individual: (a) He or she has an individual account opened at a commercial bank in Vietnam. Every activity of purchase and sale of shares, assignment of capital contribution, receipt and use of dividends, profit distribution, remittance of monies overseas and every other activity related to investment in the Vietnamese enterprise must be conducted via this account; (b) Copy of valid passport; (c) Other conditions stipulated in the charter of the enterprise to which the foreign investor contributes capital (and/or) in which he or she purchases shareholding, ensuring such provisions are not contrary to law.”

Thirdly, in the case of changes to foreign shareholders, the enterprise must notify the registration agency of such changes, except for the case of a listed company.

Article 32 Law on Enterprises 2014:

"The legal representative of the enterprise is responsible to make a notice of the change to the content of enterprise registration within ten (10) days from the date of such change.

3. A company must send a written notice to the business registration office in the locality where the head office of the company is located within ten (10) days from the date of a change to any shareholder being a foreign investor who is registered in the register of shareholders of the company. Such notice must contain the following particulars:

(a) Name, enterprise code number, head office address;

(b) In the case of a shareholder being a foreign investor who transfers shares, [the following particulars must be stated]: name, head office address of the foreign shareholder being an organization; full name, nationality, address of the shareholder being an individual; volume of shares and class of shares and ratio of ownership of its or his/her existing shares in the company; volume of shares and class of shares transferred;

(c) In the case of a shareholder being a foreign investor who receives an assignment, [the following particulars must be stated]: name, head office address of the foreign shareholder being an organization; full name, nationality, address of the shareholder being an individual; volume of shares and class of shares of which the shareholder receives assignment; volume of shares, class of shares and ratio of ownership of its or his/her respective shares in the company;

(d) Full name and signature of the legal representative of the company.”

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