Foreign Investors Transferring Shares in Vietnamese Companies

During business courses in Vietnam, some foreign investors who are shareholders of joint stock companies will need to transfer capital to other entities, including Vietnamese individuals or organizations; or foreign individuals or organizations. Through the following article, Viet An Law will clarify the conditions and procedures for foreign investors transferring shares in Vietnamese companies according to the provisions of current law.

Conditions for foreign investors to transfer shares in Vietnamese companies

Conditions for transferring shares in companies

Conditions for shares transfer in joint stock companies

• Founding shareholders have the right to freely transfer their shares to other shareholders if the enterprise has been in operation for 3 years from the date of being granted the enterprise registration certificate.
• The transfer of common shares to others who are not founding shareholders of the company may only be carried out with the approval of the General Meeting of Shareholders.
• In case the remaining founding shareholder does not agree to the transfer of shares to a person outside the company, the transferor has the right to request the company or the remaining shareholder to purchase the shares to be transferred.

Conditions for transferring capital contributions in a multiple-member LLC

According to regulations, members of a multiple-member LLC have the right to transfer part or all of their capital contribution to another person according to the following procedures:

• Members must offer to other members of the company under the same conditions and in proportion to their capital contributions;
• If within 30 days from the date of offering, no one buys or does not buy all, the member can transfer to an individual or organization that is not a member.

Conditions for transferring capital contributions in a single-member LLC

Transferring capital in a single-member LLC is simpler than in a multiple-member LLC because there is only one owner. If the owner of a single-member LLC wants to transfer capital, there are two cases:

• If the company owner transfers part of the capital contribution to another individual or organization, the company now has more than one owner, so it must complete procedures to convert the business type to Multiple-member Limited liability company or Joint Stock Company;
• If the company owner transfers all of his/her capital contribution to another individual or organization, the company must change the owner.

Note: After signing the transfer contract, within 10 days the owner must declare personal income tax due to capital transfer at the tax authority.

Other conditions for foreign investors to transfer shares to foreign investors

Pursuant to Article 24 of the Investment Law 2020 and Article 65 of Decree No. 31/2021/ND-CP stipulating the conditions and principles for implementing investment activities in the form of capital contribution, share purchase, and capital contribution purchase, when transferring capital contribution to a foreign investor, the foreign investor must satisfy the following conditions:

Conditions on market access for foreign investors when contributing capital, purchasing shares, or purchasing capital contributions in economic organizations established in Vietnam.

For examples:

• For public companies, the capital ownership ratio for foreign investors is 50% according to Clause 1, Article 139 of Decree 155/2020/ND-CP.
• For securities companies, securities investment companies, and securities investment funds, the capital ownership ratio for foreign investors is up to 100% according to Article 77 of the Securities Law 2019.

Conditions on ensuring national defense, security, and land use conditions for economic organizations with foreign investors contributing capital, purchasing shares, or purchasing capital contributions in cases where such economic organizations have Land Use Rights Certificates in the following areas (except for economic organizations implementing investment projects in industrial parks, export processing zones, high-tech zones, and economic zones established under Government regulations):

• Border islands, communes, wards, and towns and coastal communes, wards and towns;
• Other areas affecting national defense and security

Procedures for foreign investors to transfer shares to foreign investors

Pursuant to Article 66 of Decree 31/2021/ND-CP stipulating the procedures for carrying out investment activities in the form of capital contribution, share purchase, and capital contribution purchase for foreign investors as follows:

Carry out procedures for transferring capital contributions for Vietnamese individuals and organizations.

Foreign individuals and organizations transferring shares do not need to register with competent authorities if they do not fall under the following cases specified in Clause 2, Article 26 of the Investment Law 2020:

“a) Capital contribution, share purchase, and capital contribution purchase increase the ownership ratio of foreign investors in economic organizations operating in industries and trades with conditional market access for foreign investors;

b) Capital contribution, share purchase, or capital contribution purchase resulting in a foreign investor or foreign economic organization holding more than 50% of the charter capital of an economic organization in the following cases: increasing the foreign investor’s charter capital ownership ratio from less than or equal to 50% to over 50%; increasing the foreign investor’s charter capital ownership ratio when the foreign investor already owns more than 50% of the charter capital in the economic organization;

c) Foreign investors contribute capital, purchase shares, or purchase capital contributions of economic organizations with land use right certificates on islands and border communes, wards, and towns; coastal communes, wards, and towns; and other areas that affect national defense and security”

The capital transfer must be carried out following procedures by competent authorities.

Case 1: Within the scope of regulation of clauses a and b, Article 26 of the Investment Law 2020

Step 1. Submit dossier

Enterprises needing to transfer capital must submit their dossier to the investment registration agency where the enterprise has its headquarters.

The dossier includes:

• Documents for registration of capital contribution, purchase of shares, and purchase of capital contribution
• Copies of legal documents of individuals and organizations contributing capital, purchasing shares, purchasing capital contributions, and economic organizations with foreign investors contributing capital, purchasing shares, purchasing capital contributions
• Agreement in principle on capital contribution, share purchase, and capital contribution purchase
• Copy of Land Use Rights Certificate of economic organizations with foreign investors contributing capital, purchasing shares, or purchasing capital contributions
• Power of attorney for Viet An Law

Step 2. Wait for results

Within 15 days from the date of receipt of the valid dossier, the investment registration agency shall consider the satisfaction of capital transfer conditions and notify the investor.

Step 3. Procedures after share transfer approval

After the foreign investor is approved for capital transfer, the economic organization with foreign investors contributing capital, purchasing shares, or purchasing capital contributions shall carry out procedures to change members and shareholders at the business registration agency following the provisions of the law on enterprises corresponding to each type of economic organization.

Case 2: Capital transfer under point c, clause 2, Article 26 of the Investment Law 2020

Step 1. Submit dossier

FDI enterprises needing to transfer capital must submit their dossier to the investment registration agency where the enterprise has its headquarters.

The dossier includes:

• Documents for registration of capital contribution, purchase of shares, purchase of capital contribution
• Copies of legal documents of individuals and organizations contributing capital, purchasing shares, purchasing capital contributions, and economic organizations with foreign investors contributing capital, purchasing shares, purchasing capital contributions
• Agreement in principle on capital contribution, share purchase, and capital contribution purchase
• Copy of Land Use Rights Certificate of economic organizations with foreign investors contributing capital, purchasing shares, or purchasing capital contributions
• Power of attorney for Viet An Law

Step 2. Wait for results

• Within 03 working days from the date of receiving the valid dossier, the investment registration agency shall consult the Ministry of National Defense and the Ministry of Public Security on compliance with legal conditions.
• Within 07 working days from the date of receipt of the requested document from the investment registration agency, the Ministry of National Defense and the Ministry of Public Security shall give their opinions on meeting the conditions for ensuring national defense and security for share
• If there is no comment within the required time limit, it is considered that the guarantee conditions have been met.
• Within 15 days from the date of receiving the valid dossier, the investment registration agency shall consider the satisfaction of the conditions for capital transfer and, based on the opinions of the Ministry of National Defense and the Ministry of Public Security, notify the investor.

Step 3. Procedures after approval

After the foreign investor is approved for share transfer, the economic organization with foreign investors contributing capital, purchasing shares, or purchasing capital contributions shall carry out procedures to change members and shareholders at the business registration agency under the provisions of the law on enterprises corresponding to each type of economic organization.

The above is the advice of Viet An Law on foreign investors transferring shares in Vietnamese companies. If there are any other legal problems related to the transfer of capital contributions in enterprises, please contact Viet An Law for more specific and detailed advice. Sincerely!

Update: 8/2024