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Foreign investors contribute capital to securities company in Vietnam

Vietnam’s stock market has made important strides in international integration, especially since our country joined the WTO. WTO commitments have opened up many opportunities for foreign investors to participate in securities business activities in Vietnam. When there is a need to contribute capital to a securities trading company, what should investors pay attention to? In this article below, Viet An Law will advise foreign investors contribute capital to securities company in Vietnam according to current legal regulations.

Foreign investors contribute capital to securities company in Vietnam

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    Legal basis

    • Vietnam’s WTO Commitment Schedule;
    • Law on Investment 2020;
    • Law on Securities 2019;
    • Decree 31/2021/ND-CP details the implementation of several articles of the Investment Law.
    • Decree 155/2020/ND-CP details the implementation of several articles of the Securities Law.

    What is a foreign investor?

    Specifically, according to Clause 18, Article 3 of the Investment Law 2020, foreign investors are individuals with foreign nationality or organizations established under foreign law that conduct business investment activities in Vietnam.

    According to Appendix I of Decree 31/2021/ND-CP, the securities business is a conditional market access industry for foreign investors. Therefore, to contribute capital to a securities trading company in Vietnam, foreign investors need to meet certain conditions.

    Market access conditions for foreign investors

    According to Vietnam’s WTO Commitment Schedule, in the field of securities, immediately upon accession, foreign securities service providers are allowed to establish joint venture companies with Vietnamese partners in which the capital contribution ratio of the foreign side does not exceed 49%. After 5 years from joining, the establishment of 100% foreign-invested securities enterprises is allowed.

    Thus, currently, foreign investors are allowed to establish securities enterprises with 100% foreign investment capital.

    Conditions for capital contribution of foreign investors

    According to Article 77 of the Securities Law 2019, investors who are allowed to contribute capital to establish a securities company must meet the following conditions:

    In case the foreign investor is an organization that owns up to 100% of the charter capital

    Foreign investors who are organizations are allowed to own up to 100% of the charter capital of a securities company or securities investment fund management company when meeting the following conditions:

    • Be licensed and have continuously operated in the fields of banking, securities, and insurance for 02 years immediately preceding the year of contributing capital to establish, purchasing shares, or contributing capital;
    • The licensing agency of the home country and the State Securities Commission have signed a bilateral or multilateral cooperation agreement on information exchange, management cooperation, inspection, and supervision of securities and stock market;
    • Profitable business activities for 02 consecutive years preceding the year of capital contribution for the establishment, purchase of shares, capital contribution, and the most recent year’s financial statements must be audited with full approval.

    In case the above regulations are not met, foreign investors who are organizations and related persons are only allowed to own up to 49% of the charter capital of a securities company or securities investment fund management company.

    In case the foreign investor is an individual

    Foreign investors who are individuals and related persons are only allowed to own up to 49% of the charter capital of a securities company or securities investment fund management company.

    Note in case of capital contribution of 10% or more of charter capital

    According to Point c Clause 2 Article 74 and Point c Clause 2 Article 75 of the Securities Law 2019, shareholders and capital contributing members own 10% or more of the charter capital of 01 securities company/investment fund management company. Securities investors do not own more than 5% of the charter capital of another securities company/stock investment fund management company.

    Application for approval for foreign organizations to own more than 49% of the charter capital of a securities company

    According to Clause 1, Article 144 of Decree 155/2020/ND-CP, foreign organizations expected to own more than 49% of the charter capital of securities companies or fund management companies must submit a request for approval for foreign investors to own more than 49% of charter capital to the State Securities Commission.

    Document components include:

    No Dossier components Preparer
    1 Application for approval of transaction to change ownership ratio to over 49% of charter capital of securities company, securities investment fund management company Viet An Law
    2 Principle contract on share transactions and capital contributions between parties participating in the transaction (if any); Enclosed with a document from a foreign organization authorizing a securities company or securities investment fund management company to carry out procedures for requesting transaction approval. Client
    3 License for establishment and operation, Enterprise Registration Certificate, or legal documents of equivalent value Client
    4 The decision of the General Meeting of Shareholders, Board of Members, or owner of a foreign organization on purchasing to own more than 49% of charter capital Client
    5 Minutes of meetings and resolutions of the General Meeting of Shareholders, Council of Members, or Decision of the owner of a securities company or securities investment fund management company on allowing foreign organizations to buy and own over 49% of charter capital Client
    6 The most recent audited annual financial statements and the most recent quarterly financial statements of the foreign organization. Client
    7 Power of Attorney for Viet An Law to carry out the procedure Viet An Law

    Procedure for requesting approval for foreign investors to own more than 49% of charter capital

    This order and procedures are guided by Clause 1, Article 144 of Decree 155/2020/ND-CP. As follows:

    Step 1: Submit application

    Foreign investors who are expected to own more than 49% of the charter capital of securities companies, and fund management companies must submit to the State Securities Commission 01 dossier of application for approval for foreign investors to own more than 49% of charter capital.

    Step 2: The State Securities Commission receives and processes the application

    • Within 15 days from the date of receiving complete and valid documents, the State Securities Commission has a decision to approve foreign organizations to conduct transactions to own more than 49% of the charter capital of securities companies, securities investment fund management companies.
    • In case of refusal, you must respond in writing and clearly state the reason.

    Step 3: The parties conduct transactions

    Related parties must complete the approved transaction within 06 months from the date of approval decision of the State Securities Commission.

    Step 4: Report transaction results

    Within 05 working days from the date of completion of the transfer transaction, the securities company and securities investment fund management company must report the transaction results to the State Securities Commission.

    Note

    • In case a securities company or securities investment fund management company conducts a private securities offering or public securities offering and the offering results in a foreign investor owning the market, 49% of charter capital, the securities company or securities investment fund management company is responsible for supplementing the securities offering registration dossier with relevant documents and complying with the legal regulations on offer sell securities.
    • In case a foreign organization plans to buy and own more than 49% of charter capital at a securities company or securities investment fund management company that is a public company, the foreign organization is responsible for complying with the regulations of Law on public tender offers.

    Legal consulting services on the capital contribution of Viet An Law

    • Legal advice on conditions for capital contribution to securities trading companies by foreign investors;
    • Consulting on documents and procedures to apply for approval for foreign investors to own more than 49% of charter capital;
    • Consulting on documents and procedures for issuance of Licenses for establishment and securities business operations;
    • Regular legal advice during securities business activities.

    If you have related questions or need legal support regarding foreign investors contribute capital to securities company in Vietnam, please contact Viet An Luat for the best support!

    Disclaimer: This article was last updated in April 2024. Laws may have changed since then. Please contact Viet An Law to confirm the information in this article is current and for any legal assistance.

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