Foreign investment in Vietnam plays a vital role in the country’s economic growth. This article provides an overview of the legal framework and procedures for foreign investors to contribute capital or purchase shares in both 100% Vietnamese-owned companies and foreign-invested enterprises in Vietnam.
1. Legal Basis
- WTO Commitments and international treaties on investment that Vietnam has signed or acceded to;
- Investment Law 2020;Decree 31/2021/ND-CP guiding the Investment Law;
- Enterprise Law 2020;Decree No. 01/2021/ND-CP guiding the Enterprise Law.
2. Forms of Foreign Investor Capital Contribution to a Vietnamese Company
Investors can contribute capital to a company in the following ways:
- Purchase newly issued shares or additional shares in a joint-stock company;
- Contribute capital to a limited liability company or a partnership;
- Contribute capital to other economic organizations not covered by the above cases.
Foreign investors can purchase shares or capital contributions in a company in the ways of purchasing:
- Shares of a joint-stock company from the company or its shareholders;
- Capital contributions from members of a limited liability company to become a member of the company;
- Capital contributions from members of a partnership to become a contributing member of the partnership;
- Capital contributions from members of other economic organizations not covered by the above cases.
Case 1: Foreign Investors Registering Capital Contribution, Share Purchase, or Capital Contribution Purchase Before Changing Members
Foreign investors must carry out the registration procedures for capital contribution, share purchase, or capital contribution purchase in an economic organization before any changes in its members or shareholders, in the following cases:
1. The capital contribution, share purchase, or capital contribution purchase increases the foreign investors’ ownership percentage in an economic organization engaged in sectors or industries that are subject to market access restrictions for foreign investors.
2. The capital contribution, share purchase, or capital contribution purchase results in foreign investors or the economic organization (as specified in points a, b, and c, Clause 1, Article 23 of the Investment Law) holding more than 50% of the charter capital of the economic organization in the following cases:
- Increasing the foreign investor’s ownership in the charter capital from 50% or less to more than 50%;
- Increasing the foreign investor’s ownership in the charter capital when the foreign investor already owns more than 50% of the charter capital in the economic organization.
Case 2: Foreign Investors Carrying Out Procedures to Change Shareholders or Members at the Business Registration Authority
Foreign investors who are not covered by the circumstances outlined in Case 1 must follow the legal procedures for changing shareholders or members when contributing capital, purchasing shares, or acquiring capital contributions in an economic organization. This process is carried out at the business registration authority where the organization is headquartered.
If there is a need to register capital contribution, share purchase, or capital contribution purchase in an economic organization, the investor must proceed according to the procedures outlined in Case 1.
3. Procedures for Foreign Investors Contributing Capital to a Vietnamese Company
Procedures for Foreign Investors Registering Capital Contribution, Share Purchase, or Capital Contribution in a 100% Vietnamese-Owned Company
Step 1: The investor submits the application to the Investment Department – Department of Planning and Investment (DPI) where the economic organization is headquartered to register the capital contribution, share purchase, or capital contribution in a 100% Vietnamese-owned company.
If the foreign investor’s capital contribution, share purchase, or capital contribution meets the conditions, the DPI will notify the company in writing within 15 days from the date the complete application is received, allowing the company to carry out procedures for changing shareholders or members in accordance with the law. If the conditions are not met, the DPI will notify the investor in writing and provide a clear explanation of the reasons.
Step 2: After receiving approval from the Investment Department – DPI for the foreign investor to contribute capital, purchase shares, or acquire capital contributions, the investor follows these steps:
If the investor acquires 51% or more of the company’s capital, they must open a direct investment capital account for the Vietnamese company. Afterward, the foreign investor will proceed with the capital contribution and transfer, and declare the transfer income tax.
Step 3: The company in which the investor has purchased shares or capital contributions will then carry out the procedure to change shareholders or members on the Business Registration Certificate (Enterprise Registration Certificate) in accordance with the law at the Business Registration Department – Department of Planning and Investment.
Procedures for Foreign Investors Registering Capital Contribution, Share Purchase, or Capital Contribution in a Foreign-Invested Company in Vietnam
Step 1: The investor submits the application to the Investment Department – Department of Planning and Investment (DPI) where the economic organization is headquartered to register the capital contribution, share purchase, or capital contribution in a foreign-invested company.
Step 2: After receiving approval from the Investment Department – DPI for the foreign investor’s capital contribution, share purchase, or capital contribution.
Step 3: After obtaining approval from the Investment Department – DPI, the investor proceeds with the following procedures:
If the investor purchases 51% or more of the company’s capital, they must open a direct investment capital account for the Vietnamese company. Then, the foreign investor will carry out the capital contribution and transfer procedures, and declare the transfer income tax.
Step 4: After, or simultaneously with, the procedure to change the business registration, the company will update the Investment Registration Certificate to reflect the new foreign investor.
In summary, foreign investors must follow specific legal procedures and meet the requirements set by Vietnamese regulations to invest in local businesses. By understanding these steps, investors can ensure compliance and successfully navigate the investment process in Vietnam.
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