Foreign Investors Purchasing Capital Contributions in Vietnamese Companies

News about foreign investors acquiring capital contributions in Vietnamese companies is generally a positive sign for the country’s economic development. It reflects international investors’ interest and confidence in Vietnam’s potential and investment opportunities. Foreign investment also brings significant benefits to local enterprises through knowledge and technology sharing, as well as expanded export markets.

However, to protect national interests and ensure that FDI delivers benefits to both the country and the Vietnamese people, the government imposes various regulations and conditions on foreign investors, including controls on capital sources, technology, and environmental impact. In this section, BKC Law provides additional information on the procedure for foreign investors to purchase capital contributions in Vietnamese companies, along with legal advice to guide investors in carrying out the steps in compliance with current legal regulations.

I. Legal Regulations on Foreign Investors Purchasing Capital Contributions

1. What conditions must foreign investors meet when purchasing capital contributions in Vietnamese companies?

Pursuant to Clause 2, Article 24 of the Investment Law 2020, the conditions for foreign investors contributing capital, purchasing shares, or purchasing capital contributions in economic organizations are as follows:

“Article 24. Investment in the form of capital contribution, share purchase, or capital contribution purchase

2. Foreign investors contributing capital, purchasing shares, or purchasing capital contributions in economic organizations must satisfy the following regulations and conditions:

a) Market access conditions for foreign investors as stipulated in Article 9 of this Law;

b) National defense and security assurance as prescribed by this Law;

c) Regulations of the land law regarding conditions for receiving land use rights, and conditions for land use in islands, border communes, wards, townships, coastal communes, wards, and townships.”

Accordingly, foreign investors wishing to contribute capital or purchase shares must satisfy the above conditions.

2. Forms of capital contribution and capital contribution purchase by foreign investors

Pursuant to Article 25 of the Investment Law 2020, investors may contribute capital to economic organizations in the following forms:

“Investors may contribute capital to economic organizations in the following forms:

Purchasing initial issued shares or additionally issued shares of a joint stock company;

Contributing capital to a limited liability company or partnership company;

Contributing capital to other economic organizations not falling under points a and b of this clause.

Investors may purchase shares or capital contributions of economic organizations in the following forms:

Purchasing shares of a joint stock company from the company or shareholders;

Purchasing capital contributions of members of a limited liability company to become a member of the limited liability company;

Purchasing capital contributions of contributing members in a partnership company to become a contributing member of the partnership company;

Purchasing capital contributions of members of other economic organizations not falling under points a, b, and c of this clause.”

II. Cases of Foreign Investors Contributing Capital, Purchasing Shares, or Purchasing Capital Contributions in Vietnamese Companies

Case 1: Foreign investors contributing capital, purchasing capital contributions, or purchasing shares at a ratio of 50% or less in Vietnamese enterprises operating in unconditional business lines.

The investor carries out capital contribution/transfer and declares income tax on transfer (if any).

The enterprise only needs to carry out the procedure to amend the Enterprise Registration Certificate (previously called business registration amendment procedure).

Required dossier:

1. Notification of amendment to business registration contents;
2. Decision on amendment by the company;
3. Minutes of the meeting on company amendment;
4. Transfer contract and documents certifying completion of the transfer, confirmed by the company’s legal representative;
5. List of contributing members or List of foreign shareholders;
6. Notarized copy of passport / Business Registration Certificate of the investor.

Procedure for foreign investors contributing capital, purchasing shares, or purchasing capital contributions at a ratio of 50% or less of charter capital in Vietnamese enterprises operating in unconditional business lines

The enterprise submits the dossier to the Business Registration Authority.

Within 03 working days from the date of receipt of a valid dossier, the Business Registration Authority issues a new Enterprise Registration Certificate to the enterprise.

Case 2: Foreign investors contributing capital, purchasing capital contributions, or purchasing shares in conditional business lines, or where the foreign investor’s contribution results in holding more than 50% of the charter capital of the Vietnamese company.

Procedure steps:

Step 1: Registration of capital contribution, share purchase, or capital contribution purchase in a Vietnamese enterprise at the Investment Registration Authority

Procedure for registration of capital contribution, share purchase, or capital contribution purchase by foreign investors in Vietnamese enterprises

Required dossier

1. Application for registration of capital contribution, share purchase, or capital contribution purchase, including: information on the enterprise registration of the economic organization into which the foreign investor intends to contribute capital, purchase shares, or purchase capital contribution; business lines; list of owners, members, founding shareholders, list of owners, members, foreign shareholders (if any); ratio of charter capital ownership by the foreign investor before and after the capital contribution, share purchase, or capital contribution purchase; expected transaction value of the capital contribution contract, share purchase contract, or capital contribution purchase contract; information on the investment project of the economic organization (if any);
2. Certified copies of legal documents of the individual or organization contributing capital, purchasing shares, or purchasing capital contribution, and of the economic organization receiving foreign investor capital contribution, share purchase, or capital contribution purchase;
3. Principle agreement on capital contribution, share purchase, or capital contribution purchase between the foreign investor and the economic organization receiving foreign investment, or between the foreign investor and shareholders or members of such economic organization;
4. Certified copy of the Land Use Rights Certificate of the economic organization receiving foreign investor capital contribution, share purchase, or capital contribution purchase (in cases where the economic organization holds land use rights on islands, border communes, wards, townships, coastal communes, wards, townships, or other areas affecting national defense and security);
5. Introduction letter and power of attorney for dossier submission.

Implementation procedure:

The foreign investor submits the dossier to the Investment Registration Authority;

– If the company is located in an industrial zone: Management Board of Industrial Zones.

– If the company is located outside an industrial zone: Foreign Economic Relations Division – Department of Planning and Investment at provincial level.

Within 15 working days from the date of receipt of a valid dossier, the Business Registration Authority issues a Notification confirming that the conditions for capital contribution, share purchase, or capital contribution purchase are met, and notifies the Vietnamese enterprise.

In particular, in cases where the economic organization receiving foreign investor capital contribution, share purchase, or capital contribution purchase holds land use rights on islands, border communes, wards, townships, coastal communes, wards, townships, or other areas affecting national defense and security, the Investment Registration Authority shall proceed as follows:

• Within 03 working days from the date of receipt of a valid dossier, the Investment Registration Authority seeks opinions from the Ministry of National Defense and the Ministry of Public Security regarding compliance with national defense, security, and land use conditions;
• Within 07 working days from the date of receipt of the consultation request from the Investment Registration Authority, the Ministry of National Defense and the Ministry of Public Security provide opinions on compliance with national defense and security conditions for the economic organization receiving foreign investor capital contribution, share purchase, or capital contribution purchase; if no opinion is provided within the required time limit, it shall be deemed that the conditions for national defense and security assurance have been met;
• Within 15 days from the date of receipt of a valid dossier, the Investment Registration Authority reviews compliance with conditions for capital contribution, share purchase, or capital contribution purchase and, based on opinions from the Ministry of National Defense and the Ministry of Public Security, notifies the investor. The notification document is sent to the foreign investor and the economic organization receiving foreign investor capital contribution, share purchase, or capital contribution purchase.

Step 2: The foreign investor carries out capital contribution, share purchase, or capital contribution purchase in the Vietnamese enterprise.

In cases where the foreign investor contributes more than 51% of capital, the Vietnamese company opens a direct investment capital account. The investor carries out capital contribution and transfer through the direct investment capital account.

Transferring members/shareholders declare tax on transfer in accordance with personal income tax and corporate income tax laws (if any);

Step 3: Amend the Enterprise Registration Certificate to add foreign individuals to the enterprise registration dossier, submitted at the Business Registration Office – Department of Planning and Investment

The procedure is similar to Case 1 mentioned above.

Step 4: Carry out the procedure to apply for an Investment Registration Certificate for business lines requiring an Investment Registration Certificate (e.g., education/training services, etc.).

Required dossier:

• Written request to implement the investment project;
• Documents proving the legal status of the investor:
  • For individual investors: Certified copy of citizen ID card, citizen identity card, or passport;
  • For organizational investors: Certified copy of establishment certificate or other equivalent document confirming legal status;
• Investment project proposal including: investor implementing the project, investment objectives, scale, investment capital and financing plan, location, duration, investment schedule, labor requirements, proposed investment incentives, assessment of impacts and socio-economic efficiency of the project;
• Certified copy of one of the following documents:
  • Financial statements for the last 2 years of the investor;
  • Commitment of financial support from the parent company;
  • Commitment of financial support from a financial institution;
  • Financial capacity guarantee for the investor;
  • Explanation of the investor’s financial capacity;
• Proposal for land use requirements; in cases where the project does not request land allocation, land lease, or land use purpose change by the State, submit a certified copy of the location lease agreement or other documents confirming the investor’s right to use the location for project implementation;
• Explanation of technology use, including: technology name, technology origin, process diagram; main technical specifications, usage status of machinery, equipment, and main technology lines for projects using technology on the List of restricted transfer technologies;
• Business Cooperation Contract (BCC) for projects implemented in the form of BCC.

Implementation procedure:

The foreign investor submits the dossier to the Investment Registration Authority;

– If the company is located in an industrial zone: Management Board of Industrial Zones.

– If the company is located outside an industrial zone: Foreign Economic Relations Division – Department of Planning and Investment at provincial level.

Processing time:

The Investment Registration Authority issues the Investment Registration Certificate to the investor within 15 days from the date of receipt of a valid dossier when the project satisfies the following conditions:

1. Not falling under prohibited business lines as prescribed in Article 6 of the Investment Law and international treaties on investment;
2. Having a defined project implementation location based on certified copies of land use rights documents or certified copies of location lease agreements or other documents confirming the investor’s right to use the location for project implementation;
3. The investment project complies with planning regulations as prescribed in Clause 7, Article 31 of Decree 31/2021/ND-CP;
4. Meeting investment rate conditions per land area as prescribed by the Provincial People’s Committee based on local actual conditions and approved by the Standing Committee of the Provincial People’s Council (if any), and labor usage requirements (if any);
5. Meeting market access conditions for foreign investors.

III. Consultation Services Related to Foreign Investors’ Capital Contribution Purchase Activities at BKC Law

With a team of seasoned lawyers with extensive experience, solid legal knowledge, and excellent bilingual consultation capabilities, BKC LAW is confident in being one of the best legal partners in the market to support services related to foreign investors’ capital contribution purchase activities.

In addition, BKC LAW also provides the following services:

• Litigation
• Post-Incorporation Enterprise Services
• Comprehensive Accounting and Tax Services
• Services for Foreigners in Vietnam