In addition to the form of investment by establishing a company in Vietnam or participating in a business cooperation contract, foreign investors also have the right to contribute capital, purchase shares/capital contribution to another company in Vietnam. Accordingly, the foreign investors may contribute capital, purchase shares/ capital contribution in companies in Vietnam under the ways as follows:
1. Foreign investors contribute capital to a company in Vietnam by way of:
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- Purchasing shares of joint-stock companies through the initial offering or additional issuance;
- Contributing capital to limited liability companies and partnerships;
- Contribute capital to other economic organizations that do not fall into the above cases in accordance with the provisions of law.
2. Foreign investors purchase shares and capital contributions in a company in Vietnam by way of:
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- Purchasing shares of a joint-stock company from the company itself or the shareholders of the company;
- Purchasing capital contribution from a member in a limited liability company to become a member of a limited liability company;
- Purchasing capital contribution from a limited partner in a partnership to become a limited partner of a partnership; and
- Purchasing capital contributions of members of other economic organizations that do not fall into the above cases.
3. Conditions applied:
Foreign investors who contribute capital, purchase shares or contribute capital to Vietnamese economic organizations must satisfy the following regulations and conditions:
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- Market access conditions applied for foreign investors as specified in Article 9 of the Investment Law 2020;
- Ensure national defense and security in accordance with the Law on Investment 2020;
- Provisions of land law on conditions for receiving land use rights, conditions for using land in islands, communes, wards, border towns, wards, and coastal townships.
4. Procedures
1st Scenario: Foreign investors must carry out procedures for registration of capital contribution, share purchase or purchase of capital contribution at the investment registration agency if they fall into the following cases:
a) The capital contribution, purchase of shares, purchase of capital contribution lead to an increase of the ownership ratio by foreign investors in the company engaging in restricted business lines;
b) The capital contribution, purchase of shares, purchase of capital contribution result in foreign investor ownership ratio in the target company is increased to over 50%;
c) The foreign investor contributes capital, purchases shares or purchases capital contribution in the target company that holds a certificate of rights to use land on an island or in a border or coastal commune, or in another area that affects national defense and security.
In the above cases, the capital contribution, share purchase and capital contribution of foreign investors to a Vietnam-based company shall follow the following steps:
Step 1: Carry out procedures for registration of capital contribution, purchase of shares and purchase of capital contribution
At this step, the investment registration agency will appraise the satisfaction of market access conditions for foreign investors in accordance with laws. The result of this step is “notification of satisfaction of conditions for capital contribution, share purchase or purchase of capital contribution by foreign investors”. This is the most important step in all M&A transactions in Vietnam where foreign investors involve as buyers.
Step 2: Foreign investors make payment for capital contribution, purchase of shares and purchase of capital contribution
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- Foreign investors shall make payment for capital contribution, purchase of shares and purchase of capital contribution through direct investment capital accounts or indirect investment capital accounts (as the case may be).
- Members and shareholders transferring capital shall declare and pay capital gain tax under the applicable laws (if any).
Step 3: Carry out procedures for notifying changes in enterprise registration contents to recognize foreign investors as new shareholders and members in the target company in Vietnam
The business registration information that needs to be notified of changes includes:
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- Information about shareholders or members who are foreign investors;
- The percentage of capital ownership of foreign investors in limited liability companies and partnerships;
- Increase the company’s charter capital (in case foreign investors contribute additional capital).
The time to process the application at the business registration office is within 03 working days from the date of proper submission.
2nd Scenario: Foreign investors make capital contributions, purchase shares or capital contribution but do not fall into the cases in Section 4.1 above, are required to transfer money and carry out procedures for notifying changes in enterprise registration contents to recognize foreign investors as shareholders, new members in the target company in Vietnam.
