In addition to establishing investment projects and establishing enterprises to carry out business activities in Vietnam, foreign investors can also participate in economic activities in Vietnam through capital contribution, share purchases, or stakes according to Investment Law 2020. Hearby, Ami introduces you to the conditions and procedures for Investment in the form of capital contribution or purchase of shares or stakes.
1. Conditions for Investment in the form of capital contribution or purchase of shares or stakes.
According to Article 24.2 Investment law, Foreign Investors must meet all of the below requirements:
i) Satisfy market access conditions applied to foreign investors as prescribed in Article 9 of Investment Law;
Market access conditions applied to foreign investors are the same as those applied to domestic investors, except for the case specified in Clause 2 of this Article.
Specifically: Pursuant to Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government, and international treaties to which the Socialist Republic of Vietnam is a signatory, the Government shall promulgate a Negative List for Market Access, including:
a) Prohibited business lines;
b) Restricted business lines.
Hence, Foreign investors who are subject to restricted business lines must meet the conditions stipulated in the Investment Law, Decrees of the Government, and international treaties to which the Socialist Republic of Vietnam is a signatory and other related regulations.
ii) Ensure national defense and security in accordance with this Law;
This condition is not specifically detailed in any regulation, however, when the company at which the investor intends to contribute, purchase shares, or stakes submits the dossier to notify about the change in the foreign investment, they would be checked if this category is met by the local Department of Planning and Investment
iii) comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.
Just like the second condition, This condition is also determined by competent authorities whether an entity is qualified when enterprises submit for change in foreign Investor
2. Procedure for Investment in the form of capital contribution or purchase of shares or stakes
2.1 The case where Foreign Investor must register capital contribution or purchase of shares or stakes of a business organization before changing members or shareholders ( stipulated in Article 26.2 Investment Law)
In one of the following cases, A foreign investor shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization before changing of members or shareholders:
a) The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization conducting business in the restricted business lines;
b) The capital contribution or purchase of shares or stakes results in a foreign investor or business organization holding over 50% of the charter capital of the business organization 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 such foreign investor is holding over 50% of the charter capital of the business organization.
In this case, the foreign Investment shall follow the steps hereunder:
Step 1: register capital contribution or purchase of shares or stakes of a business organization
This application includes (According to Article 66.2 Decree 31/2021/NĐ-CP):
- A registration form for capital contribution/purchase of shares/stakes, which contains: enterprise registration information of the business organization to which the foreign investors expect to contribute capital or whose shares/stakes are expected to be purchased by the foreign investors; business lines; list of owners, members and founding shareholders, list of owners, members and founding shareholders that are foreign investors (if any); holding of charter capital by foreign investors before and after the capital contribution/purchase of shares/stakes in the business organization; expected transaction value of the contract for capital contribution/purchase of shares/stakes; information about the business organization’s investment project (if any);
- Copies of legal documents of the individual or organization that contributes capital or purchases shares/stakes and of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors;
- A principal agreement on capital contribution or purchase of shares/stakes between the foreign investors and the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors or between the foreign investors and the shareholders or members of such business organization.
- A copy of the certificate of land use rights of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors (in the case specified in Point b Clause 4 Article 65 of this Decree: the business organization has the certificate of rights to apply to use land on the island, in border commune, ward or town and coastal commune, ward or town).
Step 2: change of members or shareholders (taking steps according to the type of enterprises and the content of the company’s charter )
2.2 Investors other than those mentioned in Article 26.2 Investment Law
Those are not subject to the first case and only need to follow procedures changing shareholders/ /members as prescribed by law when contributing capital, purchasing shares, or stakes of business organizations. If such investors wish to register their capital contribution or purchase of shares or stakes of business organizations, regulations in Article 26.2 2 of the Investment law shall be complied with.
However, Ami suggest that the Investor, though not belong to the case stipulated in Article 26.2 should make a capital contribution or purchase of shares or stakes before starting steps to change members or shareholders according to the Law on Enterprise and other laws in connection with the type of enterprise.
For more information related to the Procedure for Investment in the form of capital contribution or purchase of shares or stakes, contact our lawyers for supporting
3. Notes
- Foreign investors must open an indirect investment capital account at a bank licensed to operate in Vietnam. The capital contribution, purchase of shares or contributed capital must be transferred to the indirect investment capital account before being transferred to the capital-receiving company (in case of capital contribution to a limited liability company or partnership), or to the transferor’s account (in case of purchase of shares, contributed capital).
- The transferred shares and contributed capital must be the shares and contributed capital that have been fully paid to the company. Therefore, before signing a contract for the transfer of shares or contributed capital, foreign investors should request the transferor or related company to provide
