Forms of capital contribution of foreign investors to Vietnamese companies

4/1/2021

Forms of capital contribution of foreign investors to Vietnamese companies

Under the provisions of the Law on Investment 2020, when fully meeting the conditions prescribed by Vietnamese law, a foreign investor has the right to contribute capital to, purchase shares, or purchase capital contributions of Vietnamese company. 

1. Forms and conditions for capital contribution, share purchase, capital contributions purchase 

1.1. Forms of capital contribution to Vietnamese enterprises by foreign investors 

According to Article 25 of the Investment Law 2020, foreign investors are entitled to contribute capital to economic organizations in the following forms: 

  • Buying shares in the initial issue or additional shares of a joint stock company. A foreign investor becomes a shareholder of a joint stock company.
  • Capital contribution to limited liability companies and partnerships. Foreign investor becomes a member of a limited company or a member of a partnership. 
  • Contributing capital to other economic organizations.

1.2. Forms of buying shares and capital contributions of Vietnamese companies 

Foreign investors purchase shares or capital contributions of business organizations in the following forms: 

  • Purchase of shares in a joint stock company from a company or a shareholder.
  • Purchase of equity interests from members of a limited liability company to become a member of a limited liability company.
  • Purchase of equity interests from capital contributors in a partnership to become a capital contributor of a partnership.
  • Buying capital contributions of members of economic organizations other than the above cases.

1.3 Conditions for foreign investors to contribute capital, purchase shares, or purchase capital contributions

Capital contribution, share purchase, capital contributions purchase of foreign investors in the above-mentioned forms must satisfy the following conditions:

  • The proportion of foreign investors' ownership of charter capital is limited in listed companies, public companies, securities trading organizations and securities investment funds; In state-owned enterprises, equitization or ownership transformation in other forms. (Clause 1, Article 23 of the 2020 Law on Investment)
  • The form of investment, the scope of activities, the Vietnamese partner's participation in the investment activities and other conditions under the provisions of the international treaties to which the Socialist Republic of Vietnam is a contracting party.

2. Procedures for investment in the form of capital contribution, share purchase, capital contribution purchase

Depending on the business lines of the enterprise or the company in which the foreign investor intends to contribute capital, purchase shares or capital contribution, the procedure is as follows:

2.1 A foreign investor must carry out the procedures for registration of capital contribution, share purchase, or capital contribution to an economic organization in the following cases:

  • Foreign investors contribute capital to, or purchase shares or capital contribution of economic organizations operating in conditional business investment sectors or trades applicable to foreign investors.
  • Capital contribution, share purchase or capital contribution purchase leads to foreign investors, economic organizations in one of the following cases holding 51% or more of the charter capital of economic organizations:

i. Having 51% or more of the charter capital held by foreign investors or the majority of the general partners are foreign individuals, if the business organization is a partnership; or

ii. Having an economic organization at point i holding 51% or more of the charter capital; or

iii. Having foreign investors and economic organizations specified in points i, ii holding 51% or more of the charter capital.

** Application for registration of capital contribution, share purchase, capital contribution purchase:

  • The written registration of capital contribution, share purchase, capital contribution purchase includes the following contents: information about the economic organization in which the foreign investor is expected to contribute capital, purchase shares or purchase capital contribution; ratio of foreign investors' ownership in charter capital after capital contribution to, or share purchase, or capital contribution purchase of economic organizations.
  • Copy of ID card or passport for individual investor; a copy of the Certificate of Establishment or another equivalent document certifying the legal status of the institutional investor.

** Procedures for registration of capital contribution, share purchase, capital contribution:

  • Step 1: The investor submits the application to the Department of Planning and Investment where the head office of the economic organization is located to register capital contribution.
  • Step 2: After being approved for the registration of capital contribution, share purchase, capital contribution purchase, the investor shall make capital contribution, receive transfer of shares or contributed capital amount and follow the procedures in accordance with the Law on Enterprises.

2.2. The investor is not required to carry out the procedures for registration of capital contribution, share purchase or capital contribution purchase:

The investor who is not required to carry out the procedures for registration of capital contribution, purchase of shares or purchase of capital contribution mentioned above, change shareholders or members in accordance with the law when making capital contribution or buying shares or capital contribution of economic organizations. Where there is a need to register the capital contribution, share purchase or capital contribution purchase of an economic organization, the investor shall comply with regulations.