In accordance with the Commercial Law 2005, trade service company is a business organization specializing in buying and selling activities and activities related to buying and selling goods such as export, import and distribution of goods. Nowadays, trading plays a very important role in developing economic, which is the reason why there are more and more investors contribute capital to this service sector. For foreign investors wishing to operate trading in Vietnam, one of the most convenient ways to do so is to contribute capital to a trade service company. This article details the legal procedures for foreign investors to contribute capital to a Vietnam’s trade service company.

Legal documents (for reference):

• Law on Investment 2014;
• Law on Enterprise 2014;
• Commercial Law 2005 and guidelines (Decree No. 23/2007/NĐ-CP the goods trading and directly related activies of foreign investors in Vietnam; Circular 34/2013/TT-BCT; Cicular 08/2013/TT-BCT);
• International treaties and commitments to which Vietnam is a signatory (eg Vietnam’s WTO Protocol on Accession; ASEAN Framework Agreement on Services (AFAS), VKFTA (Vietnam-Korea), VJEPA (Vietnam – Japan)

First is the conditions that foreign investors have to fulfill:

• The form of investment, operating scope, Vietnamese partners, and other aspects are conformable with the international agreements to which the Socialist Republic of Vietnam is a signatory:
  • On the form of investment: Investors are entitled to contribute capital, buy shares, or buy capital contributions of business organizations;
  • On the products which are bought and sold must satisfy the conditions stated in Decree No.23/2007/ND-CP, the list of commodities not allowed to be imported, exported or distributed as referred to in this Circular. 34/2013/TT-BCT;
  • Scope of activities: Within the scope of operation stipulated in the Investment registration certificate, Business registration certificate…, and corresponding the scope of commitments in International treaties and agreements;
• The investor’s charter capital: According to WTO Protocol to Accession, foreign investors is permitted to engage in the commission agents, wholesale and retail business of all legally imported and domestically with no limit on the investor’s capital.
• If foreign investors contribute more than 51% of company’s charter capital, they have to carry out the procedure to register for capital contribution or purchase of shares/capital contribution.

An application for registration of capital contribution or purchase of shares/capital contribution:

• A written for registration of capital contribution or purchase of shares/capital contributions, which specify information about the business organization to which investment is made; the holding of the foreign investor after making investment;
• A copy of the ID card or passport (if the investor is an individual); a copy of the Certificate of establishment or an equivalent paper that certifies the legal status of the investor (if the investor is an organization);
• A procuration or service contract (in case company’s legal presentative does not directly do the formality to file and receive the result).

Procedures for registration of capital contribution or purchase of shares/capital contributions:

• The investor shall submit the application prescribed above at the Service of Planning and Investment of the province where the headquarter of the business organization is situated;
• If the contribution of capital, purchase of shares/capital contributions satisfies the conditions of the Law on Investment 2014, the Service of Planning and Investment shall send a written notification to the investor within 15 days from the day on which the satisfactory application is received. If conditions are not satisfied, the Service of Planning and Investment shall notify the investor in writing and provide explanation.

After receiving the permit, foreigners shall contribute capital to trade service company. The company receiving the capital contribution will carry out procedures for changing its members/shareholders in accordance with the law. For investors wishing to set up a new trading company, the procedure will be: Apply for Investment Registration Certificate  Establish an enterprise (with registration for the right of export, import or distribution). Depending on the requirements of the investor).

All procedures related to foreign investors to contribute capital to Vietnam’s trade service companies, please contact the Viet An Law Firm for detailed information.

When operating a business, loss and failure are unavoidable risks in several situations.  Because of that, many investors choose to transfer the capital contribution to other person, terminating their rights and obligations related to an enterprise. The following article will provide information on the conditions and procedures for foreign investors in limited liability companies (Ltd) to transfer their stakes to other person.

Legal documents (for reference):

• Law on Enterprise 2014;
• Decree No.78/2015/NĐ-CP on enterprise registation.

In limited single-member liability company:

In a single-member limited liability company, foreign investor is the owner of the company. Under Law on Enterprise 2014, the owner may decide to transfer a part or whole of the company’s charter capital to other individuals or organizations.

1. In cases where the foreign investor is the company owner transfer the entire charter capital

The transfer of capital must be made in writing (Capital transfer contract) or be accompanied with documents evidencing the transfer. The content of capital transfer contract must be clearly (including the information of the transferor and the transferee, amount of money, time, rights and other obligations …). If foreign investors transfer capital to a Vietnamese invididual or an enterprise, the transferees may immediately carry out procedures for changing the owner of the company.

Documents for the procedures of changing ownership include:

• A notification of changes of enterprise registration information bearing the signatures of the old owner or his/her legal representative and the new owner or his/her legal representative;
• A legitimate copy of the ID paper of the transferee (if the transferee is an individual) or legitimate copy of certificate of enterprise registration or an equivalent document (if the transferee is an organization); a list of authorized representatives, a legitimate copy the ID paper of the authorized representative and a letter of attorney issued by the owner;
• A legitimate copy of the revised charter of the company;
• A capital transfer contract or documents proving completion of the capital transfer;
• Authorization letter (If any).

The above documents will be submited to the Service of Planning and Investment of the province where the headquarter of the business organization is situated.

In case the transferee is a foreign individual or an organization, they have to carry out the procedure to register for  purchase of capital contribution.

An application for registration of purchase of capital contribution:

• A written for registration of purchase capital contributions, which specify information about the business organization to which investment is made; the holding of the foreign investor after making investment;
• A copy of the ID card or passport (if the investor is an individual); a copy of the Certificate of establishment or an equivalent paper that certifies the legal status of the investor (if the investor is an organization);
• A procuration or service contract (in case company’s legal presentative does not directly do the formality to file and receive the result).

Procedures for registration of purchase of capital contributions:

• The investor shall submit the application prescribed above at the Service of Planning and Investment of the province where the headquarter of the business organization is situated;
• If the contribution of capital, purchase of shares/capital contributions satisfies the conditions of the Law on Investment 2014, the Service of Planning and Investment shall send a written notification to the investor within 15 days from the day on which the satisfactory application is received. If conditions are not satisfied, the Service of Planning and Investment shall notify the investor in writing and provide explanation.

After having permit from the Service of Planning and Investment, foreign transferee shall carry out procedure to change ownership mentioned above.

2. In cases where the foreign investor is the company owner transfer  part of charter capital

The owner transfers part of the capital resulting in the fact that the company has many members who contribute to charter capital. Therefore, it is necessary to carry out the formility to convert the type of the company to a multi-member limited liability company or joint stock company (depends on legal regulations and the demand of members). If the transferees who is foreigners owning more than 51% of charter capital or companies operating conditional business lines, they must carry out procedures for registration of purchase of capital contributions.

Application for conversion of the type of the company includes:

• Application form for enterprise registration;
• Charter of the converted company according to Article 25 of the Law on Enterprises;
• A list of members/shaeholders and legitimate copies of ID papers of the company’s members that are individuals and legitimates copies of certificate of enterprise registration or equivalent documents of the company’s members being organizations.
• Transfer contract or documents proving completion of the transfer;
• Approval of purchase of capital contribution (for foreign transferees holding more than 51% of charter capital or companies conducting conditional business lines);
• Power of attorney (if any).

Dossiers shall be submitted to the Service of Planning and Investment of the province where the headquarter of the business organization is situated.

In multi-member limited liability company

Except for cases where the company does not repurchase stakes of foreign member, the member shall have the right to freely transfer his/her stakes, the process of transfer the capital contribution shall be as follows:

• It must be offered to the remaining members in proportion to their share of capital in the company under the same conditions;
• Only transfer to non-members if the remaining members of the company do not buy or not buy all of stakes within thirty days from the date of offering.

The procedures for changing members of a limited liability company shall be as follows:

Application needs preparing:

• Notification of changes of enterprise registration information;
• A legitimate copy of the ID paper of the transferee (if the transferee is an individual) or legitimate copy of certificate of enterprise registration or an equivalent document (if the transferee is an organization); a list of authorized representatives, a legitimate copy the ID paper of the authorized representative and a letter of attorney issued by the owner;
• A legitimate copy of the revised charter of the company;
• A capital transfer contract or documents proving completion of the capital transfer;
• A written approval for purchase of stakes by foreign investors given by Department of Planning and Investment of the province Power of attorney (if any);
• Power of attorney (if any).

After preparing the above mentioned documents, the enterprise shall submit the dossier at the Service of Planning and Investment of the province where the headquarter of the business organization is situated.

For more information on foreign capital transfer procedures, please contact Viet An Law Firm.