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Aside from establishment of economic organizations, the purchase of shares in Vietnamese companies is another popular investment option chosen by those desiring to invest in Vietnam. In comparison to the establishment of economic organizations, the purchase of shares may be relatively easier to achieve.
In this article, we present the regulations pertaining to the purchase of shares from Vietnamese companies by foreign investors.
What Does It Mean To Purchase Shares In Vietnamese Companies?
Purchases of shares by foreign investors are the buying of shares from organizations, individuals (shareholders of joint stock companies or contributed capital of organizations), and/or individuals who are members of limited liability companies made by foreign investors.
Once the transactions of shares between the investors and shareholders/members of the company is successful, investors become shareholders/members of that company from which the shares were purchased.
Methods For Foreign Investors To Purchase Shares In Vietnamese Companies
According to the regulations, foreign investors might purchase shares in Vietnamese companies via the following methods:
Note: Requirements For Foreign Investors To Purchase Shares in Vietnamese Companies
Investment via purchases of shares is one of the more popular methods of investment in Vietnam opted for by foreign investors.
To purchase shares from Vietnamese companies, foreign investors must satisfy the following conditions:
- Market access conditions applicable to foreign investors;
- Foreign investors must also comply with market access conditions on (i) the ratio of foreign capital within the economic organization; (ii) the method of investment; (iii) the scope of investment; (iv) the capacity of the investors; (v) investment collaborators (vi) other conditions per the law.
- Requirements pertaining to National defense, security;
- Compliance with land laws, land use right requirements, requirements to use land located on islands, coastal, and border areas.
Procedures For Foreign Investors To Purchase Shares In Vietnamese Companies
Foreign investors who invest in Vietnam via share purchases ARE NOT required to undergo procedures to obtain Investment Registration Certificates.
However, if the purchases of shares by foreign investors belongs to one of the categories listed below, foreign investors ought to consider undergoing the procedures for the registration of capital contributions and purchases of share prior to the adjustment to the list of shareholders, and members of the company:
In cases where the Registration of capital contributions, purchases of shares is required
For purchases of shares by foreign investors that require certain conditions to be fulfilled or purchases which would result in foreign investors owning more than 50-percent of the charter capital, the following steps shall be taken:
Step 1: Register the capital contribution, purchase shares in Vietnamese companies
*Dossier preparation:
- 1) Application for registration of capital contributions, purchases shares;
- 2) Agreement on the capital contribution, purchase shares between the foreign investor and shareholder/member of the company;
- 3) Copies of the foreign investor’s passport
- 4) Copies of the company’s Enterprise Registration Certificate;
- 5) Copies of the company’s Land Use Right Certificate - whose sharesthe foreign investor has brought (if the concerned company is in possession of land use rights of lands on islands, in or near coastal and border areas, or other areas that may affect national defense, security);
- 6) Letter of Authorization (if the applicant is not the representative of the company)
* Procedures:
Foreign investors may submit completed dossiers to the appropriate investment registration authority:
- Company headquarters within an industrial park: Management Board of the Industrial Park
- Company headquarters outside of an industrial park: Division of Foreign Economic Relations – Provincial Department of Planning and Investment
Within 15-business days of submitting a complete and valid application, the Investment registration authority will issue a Notification of the foreign investor’s satisfaction of requirements to contribute capital, purchase shares in Vietnamese company. If the foreign investor hasn’t satisfied the requirements, the Investment registration authority will provide a detailed written explanation.
If the company whose shares the foreign investor purchased is in possession of a land use rights certificate for land on an island, in coastal/border areas, or other areas for which national defense, security may be affected, the investment registration authority will perform the following actions:
- Within 3 business days after submitting a complete and valid application, the investment registration authority inquires of the Ministry of National Defense and Ministry of Public Security on the satisfaction of national defense, security requirements, and land use right requirements;
- Within 7 business days after receiving the inquiry from the investment registration certificate, the Ministry of National Defense and Ministry of Public Security provides their determination of satisfaction pertaining to national defense and security requirements by the economic organization from which the foreign investor has purchased shares; If no answer is provided within the allotted time, the national defense and security requirements are deemed to have been satisfied by the economic organization from which the foreign investors purchased shares;
- Within 15 business days of submitting a complete and valid application, the investment registration authority evaluates the satisfaction of the requirements to purchase shares based on the Ministry of National Defense and Ministry of Public Security responses and will notify the investor of the results. The notification will be sent to both the foreign investor and the economic organization from which the investor has purchased shares.
Step 2: Adjust the Enterprise Registration Certificate
Upon receipt of approval for Registration of capital contribution, purchase of shares by foreign investors, the concerned Vietnamese company proceeds with the procedure to adjust the Enterprise Registration Certificate to reflect the addition/adjustment to the member list of the company
* Dossier preparation:
- 1) Notification of adjustment to the company’s registered information;
- 2) Decision on the addition, adjustment to the member list of the company;
- 3) Memorandum on the addition, adjustment to the member list of the company;
- 4) Shares transfer contract between foreign investors and shareholders or members of the company;
- 5) Member List (For Limited Liability Companies, Partnerships) or Shareholder List of foreigners who are shareholders (For Joint Stock Companies);
- 6) Copies of passport/investment registration certificate of the foreign investor;
* Procedure:
The application will be submitted by the company to the Enterprise registration authority wherever its headquarters is located.
Within 3 business days from the date of submission of a complete and valid application, the Enterprise registration authority issues the adjusted Enterprise Registration Certificate for the company. The Enterprise registration authority may reply in writing with a detailed explanation.
Step 3: Open Direct Investment Capital Account
After receiving the Enter Registration Certificate from Step 2, the company shall open a direct investment capital account. Foreign investors shall make the transfer via the direct investment capital account.
Step 4: Obtaining Operational Permits and/or Licenses
Lastly, don’t forget to obtain any special permits, licenses, and/or approvals before opening for business. Although this is an optional step, there are areas of practice that require investors obtain one or more of these special provisions.
For example, business lines involving the sale of food, certificates of food hygiene and safety are required; business lines involving supply of personnel, permits for labor lease or employment service licenses are required, etc.
Instances in which Registration of capital contributions, purchases of shares is not required
Foreign investors only need to undergo the procedure to adjust the Enterprise Registration Certificate if no Registration of capital contributions and purchases of shares is required of their purchases.
The procedure is similar to that which was previously mentioned Step 2 of instances in which registration of capital contributions, purchases of shares is required.
Attention: When Foreign Investors Purchase Shares
- Investment Registration Certificates are generally not required of foreign investors when they make investments via purchases of shares, however, in the event that the relevant business line requires Investment Registration Certificates, such as training or education services, etc., foreign investors must acquire Investment Registration Certificates.
- Within 10 days, from the date of transfer, the shareholder/member who transfers their shares to the foreign investors will submit individual income tax and corporate income tax declarations to competent authorities.
- Should foreign investors consider the business line of the company and whether or not there is a limitations on ownership by foreign investors when they purchase shares?
If the purchases of shares from companies operating in business lines with limitations on ownership by foreign investors and the purchase causes said limitation to be exceeded, then foreign investors should consider not purchasing or purchasing at a lesser amount to remain within the limitation.
Above are the steps for Foreign investors to purchase shares in Vietnamese companies. For further consultation or support pertaining to procedures for the purchase, sale, or transfer of shares, please contact our legal team via the information shown below.
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Ho Chi Minh, Vietnam
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