HOW DO FOREIGN INVESTORS CONTRIBUTE CAPITAL AND PURCHASE CAPITAL CONTRIBUTIONS/SHARES IN VIETNAMESE COMPANIES?

In theory, foreign investors, whether individuals or organizations, can hold or buy up to 100% of shares in all types of domestic companies, except for some special cases such as investing in foreign companies. specific industries (such as banking) or into public companies operating in investment and business industries with conditions applicable to foreign investors without specific regulations on foreign ownership (up to 49%) or due to the charter of the public company, the listed company has regulations limiting foreign ownership and has reported to the State Securities Commission. In general, current Vietnamese law recognizes and treats foreign-invested companies (with foreign investors as members or shareholders) at 50% of charter capital or less, or a partnership company without a majority of partners being foreign individuals, similar to Vietnamese companies established domestically, when these companies establish subsidiaries/joint companies. new contracts or acquisition of contributed capital/shares in other companies in Vietnam.

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In general, currently, all types of companies in Vietnam, including state-owned enterprises, joint stock companies, limited liability companies, and joint ventures, have the right to sell capital contributions/shares to foreign investors. In theory, foreign investors can buy up to 100% of the company's charter capital, however, depending on time and especially in some specific industries, the investment of foreign investors is is still subject to some ceiling restrictions below 100%, for example in the banking industry, foreign investors are only allowed to own a maximum of 30%, or for public companies operating in the industry , conditional business investment applies to foreign investors without specific regulations on foreign ownership, foreign investors can only own a maximum of no more than 49% of charter capital.

According to current regulations, foreign investors can buy capital contributions/shares and directly or indirectly transfer distributed profits/dividends and principal to foreign countries through domestic and foreign banks. are licensed to operate in Vietnam. To support these transactions, foreign investors have the right to open indirect investment capital accounts at banks in Vietnam, unless the Vietnamese enterprise has been granted a Certificate by a competent authority. investment registration or a foreign-invested company (whose members or shareholders are foreign entities) with a foreign investor ownership ratio of over 50% of charter capital, this enterprise must comply Open a direct investment capital account, which is a payment account in foreign currency or Vietnamese Dong, at a licensed bank to carry out transactions related to foreign investors' activities in Vietnam.

Legal regulations confirm that the legitimate rights and interests of foreign investors in investing and purchasing capital contributions/shares in Vietnamese companies are protected by law and the Government of Vietnam.

Activities that are allowed to be performed

As a holder of contributed capital/shares, foreign investors can:

• Participate or not participate in the management and administration of the company;
• Convert dividends and payments received from local currency to foreign currency before transferring abroad;
• Pledge or mortgage shares held for credit transactions;
• Exemption from corporate income tax for income distributed from capital contribution activities, joint ventures, and associations with domestic companies, after paying corporate income tax;
• Be granted a visa valid once or multiple times,
  • Type DT1 (issued to foreign investors in Vietnam and representatives of foreign organizations investing in Vietnam with capital contribution worth 100 billion VND or more or investing in industries and professions with investment incentives , investment incentive areas according to the Government's decision)
  • Type DT2 (issued to foreign investors in Vietnam and representatives of foreign organizations investing in Vietnam with capital contribution value from 50 billion VND to less than 100 billion VND or investing in industries, occupations are encouraged for investment and development according to the Government's decision)
  • Type DT3 (issued to foreign investors in Vietnam and representatives of foreign organizations investing in Vietnam with capital contribution value from 3 billion VND to less than 50 billion VND)
  • Type DT4 (issued to foreign investors in Vietnam and representatives of foreign organizations investing in Vietnam with contributed capital worth less than 03 billion VND) with a term of not more than 5 years, certified temporary residence and temporary residence card to enter and reside in Vietnam. Enjoy the same rights and benefits as domestic investors.

Procedure to buy contributed capital/shares

The procedure for buying contributed capital/shares is much simpler than the previous regulations. Foreign investors buying or selling contributed capital/shares in Vietnamese companies must comply with current Vietnamese laws. The current regulation allows the owner or management of a Vietnamese company or corporation to decide this issue for themselves, as provided in the company's charter or bylaws. For equitized SOEs wishing to sell shares to foreign investors, the State agency that decides on equitization will be the one to decide on the sale of shares to foreign investors.

Foreign investors must carry out procedures to register capital contributions and purchase capital contributions/shares in Vietnamese companies when:

• Contributing capital and purchasing shares/capital contributions from foreign investors increases the foreign investor's ownership ratio in the target economic organization or company operating in the relevant investment and business industry. Conditions applicable to foreign investors.
• Capital contribution, share purchase, capital contribution leads to foreign investors and economic organization(s) with more than 50% of charter capital held by:
  • foreign investor(s), or a partnership with the majority of partners being foreign individuals;
  • Economic organization(s) with more than 50% of charter capital held by foreign investors or partnerships with the majority of partners being foreign individuals;
  • Foreign investor(s) and economic organization(s) in which foreign investors hold more than 50% of charter capital or partnerships with the majority of partners being foreign individuals;
• Holding more than 50% of the charter capital of an economic organization in the following cases: raising the charter capital ownership ratio of foreign investors from 50% or less than 50% to over 50%, increasing the ownership ratio of foreign investors charter capital of foreign investors who own more than 50% of charter capital in economic organizations.
• Foreign investors contribute capital, buy shares, or purchase capital contributions in economic organizations that have been granted land use rights certificates for land on islands, communes, wards, coastal towns, border areas or other areas. other areas, affecting national defense and security.

Foreign investors submit applications to register capital contributions and purchase capital contributions/shares at the Department of Planning and Investment of the province/centrally-run city where the Vietnamese company's headquarters is located. In case the capital contribution or purchase of contributed capital/shares by a foreign investor meets the prescribed conditions, the Department of Planning and Investment shall notify in writing within 15 days from the date of receipt of complete documents to Foreign investors carry out procedures to change members/shareholders according to the provisions of law in cases (i) and (ii), but in case (iii) it takes another 10 days to get opinions from the Ministry. National Defense and Ministry of Public Security.

If not required to carry out investment registration procedures, foreign investors only need to carry out procedures for changing shareholders and members according to LDN regulations when contributing capital, purchasing shares, or capital contributions of Vietnamese companies.

For any questions or comments, please contact:

OTIS AND PARTNERS LAW FIRM

Office address: K28 - Group K, Lane 68 Trung Kinh, Yen Hoa Ward, Cau Giay District, Hanoi

Email: [email protected]

Hotline: 0987748111