Foreign investors purchase Vietnamese credit institutions’ shares

Currently, with the increasingly integrated and developed economy, foreign investment attraction in the domestic market is now being highly promoted by the State. Especially, to concretize that purpose, the law stipulates that foreign investors are allowed to buy shares of Vietnamese organizations and enterprises at a certain ratio. Thus, what cases are foreign investors allowed to purchase shares of Vietnamese credit institutions, and what are the conditions for foreign investors to be approved by law to buy shares? In the article below, Viet An Law will provide clients with general legal advice to advocate for foreign investors purchase shares of Vietnamese credit institutions.

Which credit institutions can foreign investors purchase shares in Viet Nam?

Foreign investors, in accordance with the applicable law, include:

• Foreign individuals: people who do not have Vietnamese nationality;
• Foreign organizations:
• Organizations established and operating under foreign law and having their branches in Vietnam;
• Organizations, closed funds, member funds, and security investment companies established and operating in Vietnam with a foreign capital contribution of over 49%.
• Strategic investors: foreign organizations with financial capacity and a written commitment of an authorized person to have a long-term interest in the Vietnamese credit institution and assist in transferring modern technology, developing banking products and services, and enhancing financial capacity, governance, and operations.

According to Decree 01/2014/ND-CP, foreign investors can purchase shares of credit institutions that are joint-stock entities, meaning those established as joint-stock companies, which include:

• Joint-stock commercial banks;
• Joint-stock finance companies;
• Joint-stock leasing companies.

Foreign investors can acquire shares of joint-stock credit institutions through the following methods:

• Foreign investors purchasing shares from existing shareholders of joint-stock credit institutions;
• Foreign investors purchasing shares in cases where the credit institution issues new shares to increase its charter capital or sells treasury shares;
• Foreign investors purchase shares when a credit institution converts its legal form into a joint-stock entity.

The shareholding ratios for foreign investors are outlined in the 2024 Law on Credit Institutions as follows:

• Foreign individuals: Up to 5% of charter capital;
• Foreign organizations: Up to 10% of charter capital;
• Strategic investors: Up to 20% of charter capital;
• Foreign investors and related parties: Up to 20% of charter capital. Related parties include:
  • Individuals with parents, children, siblings, grandparents, grandchildren, aunts/uncles, and nephews/nieces;
  • Parent companies with subsidiaries, and vice versa; credit institutions with subsidiaries of their subsidiaries, and vice versa.

Note: The total foreign ownership across all investors must not exceed 30% of the charter capital. Furthermore, foreign ownership may be increased to 49% in cases where shares are transferred to foreign investors according to a mandatory transfer plan approved by the government.

Currency in transactions and its sale price

• The currency used in transactions for the purchase and sale of shares by foreign investors in Vietnamese credit institutions is Vietnamese dong (VND).
• For unlisted credit institutions: The share sale price for foreign investors is determined through an auction or mutual agreement.
• For listed joint-stock credit institutions: The share price is determined by the credit institution in accordance with securities laws.

Rights and obligations of foreign investors purchase shares of Vietnamese credit institutions

Rights of foreign investors

• Full rights of a shareholder according to Vietnamese law, the charter of the credit institution, and any agreements in the share purchase/sale contract;
• The right to transfer income from investments, share purchases, and share transfers abroad after fulfilling all financial obligations;
• The right to participate or appoint a representative to the Board of Directors, Supervisory Board, or Executive Board of the credit institution;
• Be guaranteed other lawful rights and interests by the State.

Obligations of foreign investors

• Fulfill all obligations as shareholders;
• Guarantee and bear responsibility for the legality of the funds used to purchase shares, the legitimacy of the share purchase documents, and the accuracy of the provided information and documents;
• Report on and bear responsibility for the accuracy of information regarding related parties’ shareholding, ownership through related parties, and investments through proxy arrangements at Vietnamese credit institutions;
• Transfer the full amount of registered capital to purchase shares in the Vietnamese credit institution according to the agreement in the share purchase contract;
• Strategic foreign investors are not allowed to transfer their shares to other individuals or organizations within at least five years from the time they become a strategic investor;
• Foreign investors, being organizations, owning at least 10% of the charter capital, cannot transfer their shares to other parties within at least three years;
• Foreign investors purchasing shares in credit institutions under restructuring must submit a share purchase plan and restructuring plan to the State Bank of Vietnam;
• Comply with Vietnam’s current foreign exchange management regulations.

Conditions, procedures for foreign investors to purchase shares of credit institutions in Viet Nam

Conditions for foreign ownership in credit institutions

In addition to the limits on shareholding ratios, in some cases, foreign investors must meet specific additional conditions:

For foreign organizations purchasing shares resulting in ownership of 10% or more of a credit institution’s charter capital:

• The foreign investor must be rated by a reputable international credit rating agency at a minimum of “stable" or equivalent;
• The investor must have sufficient financial resources, as determined by audited financial reports for the year immediately before the application and legitimate funds to purchase shares;
• The purchase must not negatively impact the safety and stability of the Vietnamese financial system or create monopolies or competition restrictions;
• No serious violations of monetary, banking, securities, and capital markets laws in the investor’s home country or Vietnam within the 12 months before the share purchase application;
• The investor must have total assets of at least USD 10 billion (for foreign banks, finance companies, or leasing companies) or at least USD 1 billion in charter capital (for other types of foreign investors) in the year immediately before the application.

Conditions for foreign investors to become strategic investors

• The investor must be rated at least stable or equivalent or more;
• The investor must have sufficient financial resources for the share purchase;
• The purchase must not jeopardize the safety or stability of the credit system or create monopolies or competition restrictions;
• The investor must not have violated serious financial law in their home country or Vietnam;
• The investor must be a foreign bank, finance company, or leasing company authorized to operate according to the laws of their home country;
• The investor must have at least 5 years of international experience in the financial and banking sector;
• The investor must have total assets of at least USD 20 billion in the year before submitting the share purchase application;
• The investor must provide a clear written commitment and plan to have a long-term interest, assist the Vietnamese credit institution in adopting modern technology, developing banking products, and enhancing financial and governance capacity;
• The investor must not own 10% or more of any other credit institution in Vietnam;
• The investor must commit to or already own 10% or more of the credit institution in which they are seeking to purchase shares and become strategic investors.

Procedures for foreign investors to purchase shares in Vietnamese credit institutions

Entities involved

Foreign investors wishing to purchase shares in a Vietnamese credit institution.

Authorized agencies

The State Bank of Vietnam.

Documents required

For listed credit institutions:

• Application for approval to purchase shares by foreign investors (using the prescribed form);
• A copy of the Securities Transaction Code;
• Other documents proving the foreign investor has sufficient legal funds to purchase shares;
• A list of shareholdings of the foreign investor and related parties before and after the transfer;
• Self-declared profile, certified copy of the legal identification of the foreign individual investor, the legal representative, and the authorized representative;
• License for establishment and operation or equivalent document, Decision on the purchase of shares, Charter or other legal documents of the foreign institutional investor;
• Summary report on the history of formation and development of the foreign investor;
• Cooperation agreement document.

Note:

• In case of authorization, add the following:
  • Authorization contract, entrustment contract, investment appointment contract, etc., between the foreign investor and the representative handling transactions in Vietnam;
  • Confirmation document from the State Securities Commission regarding the transaction representative or change of the transaction representative in Vietnam (if applicable).
• In case of a Vietnamese credit institution issuing private shares to increase its charter capital, add the following:
  • Registration document for private share offering;
  • Resolution of the General Shareholders’ Meeting approving the policy for issuing private shares and the plan for using the raised capital;
  • Share purchase agreement document;
  • Approval document from the State Bank of Vietnam regarding the increase in charter capital and the issuance of private shares.

In the case of a Vietnamese credit institution that is not listed but has registered to trade shares on the stock exchange

• Documents prepared by the Vietnamese credit institution:
  • Document from the Vietnamese credit institution requesting approval for the foreign investor’s share purchase;
  • List and percentage of shares owned by the foreign investor before and after the share transfer;
  • In case the Vietnamese credit institution issues private shares to the foreign investor to increase its charter capital, include the additional documents as previously provided.
• Documents prepared by the foreign investor: Similar to the case of a listed institution or registered to trade shares.

Submission methods

Submit directly/by post to the headquarters of the State Bank of Vietnam (One-stop Department) at the address: No. 49 Ly Thai To – Hoan Kiem – Hanoi. (Phone: (84 – 243) 266.9435, Website: http://www.sbv.gov.vn)

Processing time

• In case the application is incomplete or invalid, within 10 days from the date of receiving the application, the State Bank of Vietnam will issue a written request for the credit institution to supplement the documents.
• Within 45 days from the date of receiving a complete and valid application, the State Bank of Vietnam or the Banking Supervision and Inspection Agency will issue a written approval or disapproval of the share purchase. In case of disapproval, a written explanation will be provided.

Administrative procedure result

A written approval or disapproval of the share purchase.

Specific procedures and steps

Step 1: Prepare and submit the application

• For the case of a foreign investor purchasing shares in a Vietnamese credit institution that is listed or has registered to trade shares on the Stock Exchange: The Vietnamese credit institution prepares the application and submits it to the State Bank of Vietnam, requesting approval for the foreign investor to purchase shares in the Vietnamese credit institution in accordance with regulations.
• For the case of a foreign investor purchasing shares in a Vietnamese credit institution that is not listed and has not registered to trade shares on the Stock Exchange: The foreign investor prepares the application and submits it to the State Bank of Vietnam, requesting approval for the share purchase by the applicable law.

Step 2: Receive, process the application, and issue the result

The State Bank of Vietnam receives the application and proceeds to process:

• In case the application is incomplete or invalid, within 10 days from the date of receiving the application, the State Bank of Vietnam will issue a written request for the credit institution to supplement the documents.
• In case the application is valid, within 45 days from the date of receiving a complete and valid application, the State Bank of Vietnam or the Banking Supervision and Inspection Agency will conduct the evaluation and issue the result:
  • Issue a written approval for the share purchase if all conditions are met;
  • Issue a written disapproval of the share purchase if the conditions are not fully met. In case of disapproval, a written explanation will be provided.

This provides a summary of the process and requirements for foreign investors purchase shares of Vietnamese credit institutions. Should you have any questions or need further legal consultation, please contact Viet An Law for the best support.