Things to keep in mind for foreign investors prior to capital contributions to Vietnamese enterprises

In recent years, foreign investment into Vietnam has been increasingly active, thanks to the reforms of investment incentive policies for qualified investment projects, and the benefits related to economy - market, immigration, ... for foreign investors in Vietnam. However, foreign investors when investing in Vietnam still need to concern certain issues. In this article, HTC Vietnam Law Firm would like to provide better understanding related to regulations for foreign investors looking to make capital contributions to Vietnamese enterprises.

1. Legal grounds

- Law on Investment 2020;
- Decree 31/2021/ND-CP guiding the Investment Law.

2. Methods of capital contribution available for foreign investors.

a) Investors may contribute capital to enterprises:

- Purchase of shares of joint-stock companies through the initial public or additional issuance;

- Contribution of capital to limited liability companies and partnerships;

- Contribution of capital to other business organizations not mentioned above

b) Investors may purchase shares or stakes of existing businesses:

- Purchase of shares in a joint-stock company from such company or its shareholders;

- Purchase of stakes of members of a limited liability company to become a member of such limited liability company;

- Purchase of stakes of a capital contributing member of a partnership to become a capital contributing member of such partnership;

- Purchase of stakes of members of other economic entities not mentioned above.

3. Notable points

In some cases, when contributing capital, purchasing shares from Vietnamese enterprises, foreign investors are required to perform a number of legal procedures. Specifically:

a) Foreign investors shall carry out registration procedures for capital contribution, shares purchase, capital purchase of the company before changing members.

A foreign investor shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization prior to change of members or shareholders in one of the following cases:

- 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; (The list of industries and trades with conditional market access for foreign investors is specified in Part B, Appendix I of Decree 31/2021/ND-CP).

- The contribution of capital, purchase of shares, purchase of contributed capital leads to the holding of more than 50% of the charter capital of foreign investors specified at Points a, b and c, Clause 1, Article 23 of the Law on Investment falls into these 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

b) Foreign investors carry out procedures for changing shareholders and members at the investment registration authority.

- Investors who are not specified in section 1 shall carry out the procedures for changing shareholders or members in accordance with relevant laws when contributing capital, buying shares or purchasing capital contributions from business organizations at the investment registration authority where the organization is headquartered.

- In case there is a requirement to register the capital contribution, purchase of shares or purchase of capital contribution of an economic organization, the investor shall comply with the provisions in section 1.

In addition, foreign investors also need to pay attention to other conditions when investing in Vietnam such as: market, general conditions for foreign investors, etc.

Legal consultation services related to foreign investment

HTC Vietnam Law Firm would like to consult on issues related to capital contribution by foreign investors as follows:

Matters related to choosing the right type of business for foreign investors;

Investment registration procedures for foreign investors;

Guide customers to draft and complete the documents related to the procedures for registration of capital contribution, purchase of shares, purchase of contributed capital of economic organizations;

Guide customers to draft and complete the documents related to the procedures for changing shareholders and members;

Representing the Client to work with the competent authority.

Service Quality Commitment

The following are HTC Vietnam Law Firm’s Principles of Operation: Conscientious - Effective - Reliable. HTC Vietnam Law Firm assures quality, specifically as follows:

Ensure that the work is carried out according to the agreed schedule, in accordance with the law, and in accordance with the code of ethics and Codes of Conduct of Vietnamese lawyers.

Give priority to customers' interests, and make every effort to provide customers with the best quality of service.

Respect the confidentiality of information that clients provided and information pertaining to the clients.

We are looking forward to a long-term cooperation.

Best Regards!

(Writer: Trinh Minh Phuong/200; Date: 28/04/2022

Translator: Vu Ngoc Anh)