This article examines the restrictions on the holding rate of foreign investors in Vietnam. It outlines the conditions under which foreign investors can hold equity in Vietnamese businesses and how these restrictions vary by industry and market access.
Legal basis
- The Investment Law No. 61/2020/QH14;
- Decree No. 31/2021/ND-CP on Detailing and guiding the implementation of a number of articles of the Law on Investment;
- The Securities Law No. 54/2019/QH14;
- Decree No. 155/2020/ND-CP on Detailing and guiding the implementation of a number of articles of the Law on Securities
1. Holding rate of foreign investors under investment treaties
According to the provisions in Clauses 2 and 3, Article 9 of the Investment Law, the conditions for foreign investors to access the market include conditions related to the foreign investor’s ownership percentage in the charter capital of economic organizations and other conditions specified in points b, c, d, and đ of this clause.
Appendix 1 attached to Decree No. 31/2021/ND-CP dated March 26, 2021, which details and guides the implementation of several provisions of the Investment Law stipulates the list of industries and sectors with restricted access to the market for foreign investors:
(i) industries and sectors that are not open to foreign investors;
(ii) industries and sectors that are open to foreign investors under certain conditions.
Point a, Clause 4, Article 17 of Decree No. 31/2021/ND-CP stipulates the industries and sectors where Vietnam has not yet committed to opening up the market to foreign investors.
Based on the above provisions, foreign investors are allowed to own charter capital in a business under the following principles:
(i) Foreign investors are not allowed to own charter capital in businesses operating in industries or sectors that are not open to foreign investors.
(ii) For industries or sectors with conditional market access for foreign investors, the determination of the foreign investor’s ownership percentage is as follows:
- If laws, resolutions, ordinances, decrees, or treaties specify a maximum ownership percentage for foreign investors, that maximum percentage will apply.
- If laws, resolutions, ordinances, decrees, or treaties do not specify any restrictions on the foreign investor’s ownership percentage, foreign investors may own up to 100% of the business’s charter capital, subject to meeting other conditions set out in points b, c, d, and đ of Clause 3, Article 9 of the Investment Law (if applicable).
(iii) For industries or sectors not included in the list of restricted sectors for foreign investors, foreign investors may own up to 100% of the business’s charter capital.
2. Holding rate of foreign investors in companies operating on the stock market
Point c, Clause 10, Article 17 of Decree No. 31/2021/ND-CP stipulates: “For public companies, securities companies, securities investment fund management companies, securities investment funds, or securities investment companies defined by the law on securities, in case the law on securities contains other provisions on the holding rate of foreign investors, such provisions shall apply”
According to Clause 1, Article 51 of the Securities Law, foreign investors and foreign-invested economic organizations participating in investment and activities in the Vietnamese securities market must comply with the regulations on foreign ownership percentages, conditions, procedures, and investment processes as stipulated by securities law and the securities market.
Based on the above provisions, the foreign investor ownership percentage for foreign investors and foreign-invested economic organizations participating in the securities market must comply with the regulations of securities law.
Clause 1, Article 139 of Decree No. 155/2020/ND-CP dated December 31, 2020, detailing and guiding the implementation of certain provisions of the Securities Law, stipulates the maximum foreign ownership percentage in public companies.
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