Foreign investors contribute capital to Vietnamese companies

The State treats investors equally; adopt policies to encourage and create favorable conditions for investors to carry out business investment activities and sustainably develop economic sectors. This is recognized in the Investment Law 2020, thus, investors with foreign nationality can access and encourage effective investment. One of the popular forms of investment in Vietnam for foreign investors is: Capital contribution, share purchase, purchase of capital contribution to enterprises.

Legal bases

• WTO commitments and international treaties on investment to which Vietnam is a signatory or accedia;
• Investment Law 2020;
• Decree 31/2021/ND-CP guiding the Law on Investment;
• Enterprise Law 2020;
• Decree No. 01/2021/ND-CP guiding the Enterprise Law.

Forms of foreign investors contributing capital to Vietnamese companies

Investors are allowed to contribute capital to the company

• Purchase of first-time issued shares or additional issued shares of a joint-stock company;
• Capital contribution to limited liability companies, partnerships;
• Capital contribution to other economic organizations does not fall into the above 01 case.

Foreign investors buy shares, buy contributed capital of the company

• Purchase of shares of a joint-stock company from the company or shareholder;
• Purchase the contributed capital of a member of a limited liability company to become a member of a limited liability company;
• Purchase capital contribution of capital contributors in a partnership to become a capital contributing member of a partnership;
• Purchase capital contributions of members of other economic organizations that do not fall into the above cases.

Case 1: Foreign investors carry out procedures for registration of capital contribution, purchase of shares, purchase of contributed capital of the company before changing members

Foreign investors shall carry out procedures for registration of capital contribution, share purchase or purchase of contributed capital of economic organizations before changing members and shareholders if they fall into one of the following cases:

• The capital contribution, share purchase and purchase of contributed capital increase the ownership ratio of foreign investors in economic organizations doing business in industries and trades with conditional market access for foreign investors;
• The capital contribution, share purchase or purchase of contributed capital leads to foreign investors and economic organizations specified at Points a, b and c, Clause 1, Article 23 of the Law on Investment holding more than 50% of the charter capital of economic organizations in the following cases:
• Increase the foreign investor’s charter capital ownership ratio from less than 50% to over 50%;
• Increase the rate of ownership of charter capital of foreign investors when foreign investors already own more than 50% of charter capital in economic organizations.

Dossiers of registration of capital contribution, share purchase, capital contribution of foreign investors

• Documents on registration of capital contribution, share purchase, contributed capital;
• Copies of legal papers of individuals and organizations contributing capital, buying shares, purchasing contributed capital and economic organizations with foreign investors contributing capital, buying shares or purchasing contributed capital;
• Written agreement on capital contribution, share purchase, purchase of contributed capital between foreign investors and economic organizations receiving capital contribution, purchase of shares and contributed capital;
• A written declaration (enclosed with a copy) of the land use right certificate of the economic organization receiving capital contribution, shares or capital contribution of foreign investors.

Case 2: Foreign investors carry out procedures for changing shareholders and members at the Business Registration Office.

• Investors who do not fall into the cases specified in Case 1 shall carry out procedures for changing shareholders and members in accordance with relevant laws when contributing capital, buying shares or purchasing capital contributions of economic organizations at the business registration agency where the economic organization’s head office is located.
• In case there is a need to register the capital contribution, purchase of shares, purchase of contributed capital of economic organizations, investors shall comply with the provisions of Case 1.

Dossier of change of business registration

• Notice of change of business registration contents;
• Decide on the change of membership of the company;
• Minutes of the meeting on the change of company members (if any)
• The transfer contract and documents certifying the completion of the transfer are certified by the legal representative of the company;
• List of capital contributors or register of shareholders;
• Notarized copy of passport of new member contributing capital to the company (if any).

Procedures for foreign investors to contribute capital to Vietnamese companies

Procedures for foreign investors to register capital contribution, purchase shares and contributed capital to the Company with 100% Vietnamese capital

• Step 1: The investor submits the application at the Investment Department – Department of Planning and Investment where the economic organization is headquartered to carry out procedures for registration of capital contribution, share purchase, capital contribution to the company with 100% Vietnamese capital.
• In case the capital contribution, share purchase or capital contribution of a foreign investor satisfies the conditions, the Department of Planning and Investment will notify in writing within 15 days from the date of receipt of sufficient documents for the company to carry out procedures for changing shareholders, members as prescribed by law. In case the conditions are not met, the Department of Planning and Investment shall notify the investor in writing clearly stating the reason.
• Step 2: After obtaining the approval of the Investment Department – Department of Planning and Investment on the approval for foreign investors to contribute capital, purchase shares or contributed capital, investors shall carry out the following procedures: If buying from 51% capital of a Vietnamese company opens a direct investment capital account for a Vietnamese company, After that, the foreign investor makes the transfer capital contribution and declares the transfer income tax.
• Step 3: After that, the company from which the investor buys contributed capital and shares will carry out procedures for changing shareholders and members on the Business Registration Certificate (Business Registration  Certificate) in accordance with the law at the Business Registration Office – Department of Planning and Investment.

Procedures for foreign investors to register capital contribution, purchase of shares and contributed capital to foreign capital companies in Vietnam

• Step 1: Investors submit dossiers at the Investment Department – Department of Planning and Investment where the economic organization is headquartered to carry out procedures for registration of capital contribution, purchase of shares and contributed capital to foreign capital companies.
• Step 2: After obtaining the approval of the Investment Department – Department of Planning and Investment on the approval for foreign investors to contribute capital, purchase shares and contributed capital.
• Step 3: After obtaining the approval of the Investment Department – Department of Planning and Investment on the approval for foreign investors to contribute capital, purchase shares or contributed capital, investors shall carry out the following procedures: If buying from 51% of the capital of a Vietnamese company opens a direct investment capital account for a Vietnamese company, After that, the foreign investor makes the transfer capital contribution and declares the transfer income tax.
• Step 4: After or simultaneously with the procedures for changing business registration, the company changes the Investment Registration Certificate to recognize new foreign investors.

The payment of capital contribution of foreign investors to Vietnamese companies

Pursuant to Circular No. 06/2019/TT-NHNN of the State Bank of Vietnam, payment for transactions of transfer of investment capital in a foreign direct investment enterprise must be made through the foreign direct investment capital account of that enterprise. Therefore, when a foreign investor contributes capital, a Vietnamese company must open a foreign direct investment capital account at a bank in Vietnam; can be opened in Vietnamese dong or in foreign currency, depending on the currency used to contribute investment capital to the business.

Some questions about foreign investors contributing capital to Vietnamese companies

Do foreign investors have restrictions when making investments in Vietnam? 

Investors are required to meet the investment conditions of WTO commitments, international investment treaties to which Vietnam is a signatory or accede to and domestic laws.

What is the maximum foreign ownership ratio in a Vietnamese company?

Restrictions on the percentage of contributed capital are set for a number of industries with specific conditions that investors intend to register. In addition, there are still popular professions that do not limit the capital contribution rate to encourage investment.

Is foreign investor’s nationality restricted when contributing capital in a Vietnamese company?

Currently, investor nationality is no longer restricted from receiving investment, except for a small number of nationalities that are not allowed to receive investment because of the impact on national defense, security, politics and social order.

Foreign investors consulting services contributing capital to Vietnamese companies of Viet An Law Firm

• Advising on the capital contribution ratio of foreign investors when investing in capital contribution, buying shares, buying capital contributed to economic organizations in Vietnam;
• Advising on choosing the right type of company for investors: Limited Company or Joint Stock Company, head office address, capital, business lines, opening a capital transfer account, capital contribution duration;
• Advising on conditions, guiding investors to prepare necessary documents for investment in capital contribution, share purchase or purchase of contributed capital to economic organizations in Vietnam;
• Consulting, drafting investment dossiers on capital contribution, share purchase, purchase of capital contributed to economic organizations in Vietnam;
• Representatives of investors and economic organizations to submit and process dossiers arising with concerned agencies in the process of carrying out procedures for investment in capital contribution, share purchase or purchase of contributed capital to economic organizations;
• Support consulting and guiding customers on activities arising in the process of investment and business in Vietnam.

Customers wishing to learn the laws and legal regulations related to foreign investors’ capital contribution procedures to Vietnamese companies, please contact Viet An Law Firm for the fastest support.