Foreign investors’ capital contributions and share purchases

16 October 2021

Foreign investors’ capital contributions, share purchases, and capital contributions to businesses with 100 percent Vietnamese capital

Foreign investors’ capital contributions, share purchases, and capital contributions to Vietnamese businesses are all regular transactions on the market today. According to the provisions of Law on Investment 2021 (“LOI 2021”) and related guiding documents, the required procedures for these transactions involve as follows:

  1. The procedure of registration of capital contribution or purchase of shares or stakes of a business entity (Article 26, LOI 2021)

A foreign investor shall follow this procedures prior to change of members or shareholders in one of the following cases:

  • The capital contribution or purchase of shares or stakes rises the ownership rate by foreign investors in a business entity conducting business in the business lines allowed in market with conditions applied to foreign investors;
  • The capital contribution or purchase of shares or stakes results in a foreign investor or business entity specified in Points a, b and c Article 23.1 of LOI 2021 holding over 50% of the charter capital of the business entity in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital by the foreign investor is increased while this foreign investor is holding over 50% of the charter capital of the business entity.
  • The foreign investor that contributes capital, purchases shares or stakes of a business entity has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security.
  1. The procedure of change of members or shareholders at the business registration authority. (Article 66, Decree No. 31/2021/NĐ-CP)

If the target company is required to follow Section 1 procedure, after receiving approval from the Department of Planning and Investment where the target company’s head office is located, the target company must follow the regulations for changing members or shareholders at the business registration authority.

On the contrary, the target company only need to carry out the procedure for changing the members or shareholders at the business registration authority.

On the other hand, regarding payment of transfer value: capital contributions, share purchases, and capital contributions by foreign investors to Vietnamese businesses which are not yet to be listed or registered for transactions on stock exchanges of Vietnam and not in the cases specified in Article 3.2 of Circular No. 06/2019/TT-NHNN must be made through the investor’s indirect investment capital account (“IICA”) which must be opened with a licensed bank (commercial banks and branches of foreign banks licensed to trade and supply foreign exchange service according to legal provisions). (Article 5.1 and 6, Circular 05/2014/TT-NHNN).

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