Foreign investor buy shares to contribute capital in Vietnamese company

In order to conduct the capital contribution or purchase of shares/capital contributions of economic organizations established in accordance with the provisions of Vietnamese law, investors and economic organizations need to prepare dossiers to carry out legal procedures in accordance with the law on investment and enterprises. In this article, Viet An Law would like to have some legal opinions on the dossier for foreign investors to contribute capital or buy shares/capital contributed to economic organizations as follows:

Conditions for investment in the form of capital contribution, purchase of shares/contributed capital in Vietnam

Foreign investors who contribute capital, purchase shares or purchase capital contributions of economic organizations must satisfy the following regulations and conditions:

• Market access conditions for foreign investors include:
  • The percentage of ownership of charter capital of foreign investors in economic organizations;
  • Forms of investment;
  • Scope of investment activities;
  • Competence of investors; partners engaged in the implementation of investment activities;
  • Other conditions as prescribed in laws, resolutions of the National Assembly, ordinances and resolutions of the National Assembly Standing Committee, decrees of the Government and international treaties to which the Socialist Republic of Vietnam is a contracting party.
• Ensure national defense and security in accordance with this Law;
• Provisions of the land law on conditions for receiving land use rights and conditions for land use in islands, communes, wards, border towns, communes, wards and coastal towns.

Cases in which procedures for registration of capital contribution or purchase of shares/contributed capital must be carried out in Vietnam

Investors contributing capital, buying shares or purchasing capital contributions of economic organizations must satisfy the conditions and carry out procedures for changing members and shareholders in accordance with the provisions of law corresponding to each type of economic organization.

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, purchase of contributed capital leads to foreign investors and economic organizations specified at Points a, b and c, Clause 1, Article 23 of the 2020 Investment Law 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;
• Foreign investors contribute capital, purchase shares or purchase capital contributions of economic organizations having land use right certificates in islands and border communes, wards and townships; coastal communes, wards and townships; other areas that affect national defense and security.

Investors not falling into the above cases shall carry out procedures for changing shareholders and members in accordance with relevant laws when contributing capital, buying shares or purchasing contributed capital of economic organizations. In case there is a need to register the capital contribution, purchase of shares or purchase of contributed capital of economic organizations, investors shall comply with the provisions of law with relevant procedures as mentioned above.

Investment dossiers in the form of capital contribution, purchase of shares/contributed capital in Vietnam

Investment procedures in the form of capital contribution, purchase of shares/contributed capital are carried out according to the following steps:

• Step 1: Register for capital contribution, share purchase, purchase of contributed capital of economic organizations

• Step 2: Procedures for changing members and shareholders in accordance with the provisions of law corresponding to each type of economic organization.

Step 1: Register for capital contribution, share purchase, purchase of contributed capital of economic organizations

This step is done before changing members and shareholders if it falls into one of the cases mentioned in the section Cases in which procedures for registration of capital contribution or purchase of shares/contributed capital of this article must be carried out.

Dossiers of registration for capital contribution, share purchase or purchase of contributed capital of economic organizations include:

• A document of registration of capital contribution, share purchase or purchase of contributed capital includes the following contents: information on enterprise registration of economic organizations to which foreign investors plan to contribute capital, purchase shares or purchase contributed capital; business lines; list of owners, members, founding shareholders, list of owners, members, shareholders being foreign investors (if any); the percentage of ownership of charter capital of foreign investors before and after capital contribution, share purchase or purchase of contributed capital to economic organizations; expected transaction value of contracts for capital contribution, share purchase, purchase of contributed capital; information on investment projects of economic organizations (if any);
• Copies of legal papers of individuals, organizations contributing capital, buying shares, purchasing contributed capital and economic organizations with foreign investors contributing capital, buying shares or purchasing contributed capital: Passport (if an individual); Business license or equivalent document and passport of the person authorized to manage the capital portion in Vietnam (if it is an organization);
• A written agreement in principle on capital contribution, share purchase or purchase of contributed capital between foreign investors and economic organizations in which foreign investors contribute capital, purchase shares, purchase contributed capital or between foreign investors and shareholders or members of such economic organizations;
• A copy of the land use right certificate of an economic organization in which foreign investors contribute capital, purchase shares or purchase contributed capital if such economic organization has a land use right certificate in islands, communes, wards, border towns and coastal communes, wards and townships; other areas affecting national defense and security, except economic organizations implementing investment projects in industrial parks, export processing zones, hi-tech parks or economic zones established under the Government’s regulations.
• Power of attorney for Viet An Law.

Place of application: Department of Planning and Investment where the economic organization is headquartered.

Order and procedures: If the capital  contribution, share purchase or capital contribution of foreign investors satisfies the conditions on ownership ratio and investment form in accordance with the Schedule of commitments and Vietnamese law, within 15 days from the date of receipt of complete dossiers,  The Department of Planning and Investment will notify in writing. In case the application does not meet the conditions, the Department of Planning and Investment will notify in writing clearly stating the reason.

Step 2: Procedures for changing members and shareholders in accordance with the provisions of law corresponding to each type of economic organization.

Depending on the type of enterprise, the company conducts corresponding procedures such as:

• Change of owner for a one-member limited liability company in case the foreign investor buys 100% of the owner’s contributed capital
• Change of member of a two-member limited liability company
• Change of shareholders being foreign investors for joint-stock companies.

Details of each corresponding procedure, customers can contact Viet An Law directly for more detailed instructions.

Services of Viet An Law Firm related to foreign investors’ capital contribution to buy shares in Vietnam

• Advising on conditions for capital contribution, purchase of shares/contributed capital in accordance with the provisions of the law on investment
• Advising on choosing the right type of company for investors after contributing or receiving capital transfer: Limited company or joint stock company;
• Advising on procedures for payment of capital transfer;
• Advising and guiding investors to prepare necessary documents to implement license modifications;
• Investor representatives shall work with competent state agencies of Vietnam in the process of carrying out procedures for adjustment of licenses.