Article 21 of Law on Investment 2020 stipulates forms of investment including: (i) Investment for the establishment of economic organisations; (ii) Investment in the form of capital contribution, share purchase, purchase of capital contribution; (iii) Implementation of investment projects; (iv) Investment in the form of BCC contracts and (v) New forms of investment and types of economic organisations as prescribed by the Government.
Currently, foreign investors often decide to choose foreign investment in Vietnam in the investment form of capital contribution, share purchase, and capital contribution purchase. This article focuses on the conditions, forms and procedures for foreign investment in Vietnam in the investment form of capital contribution, share purchase, capital contribution purchase in accordance with the prevailing Vietnamese law so that investors can actively grasp the basic information and decide to choose the appropriate form of investment.
As prescribed by law, investors have the right to contribute capital, purchase shares, purchase capital contributions of economic organisations, but foreign investment in Vietnam in the investment form of capital contribution, share purchase, capital contribution purchase must satisfy the following conditions:
- Market access conditions for foreign investors in accordance with Law on Investment;
- Ensuring national defence and security in accordance with Law on Investment;
- Provisions of the law on land on conditions for receiving land use rights, land use conditions in islands and in border and coastal communes, wards and towns.
Foreign investors are allowed to contribute capital to economic organisations in the following forms:
- Purchase of initially issued shares or additional issued shares of joint-stock companies;
- Contributing capital to limited liability companies, partnerships;
- Contributing capital to other economic organisations that do not fall into the above-mentioned
Foreign investors purchase shares or purchase capital contributions of economic organisations in the following forms:
- Purchasing shares of a joint-stock company from the company or shareholders;
- Purchasing the capital contribution portion of a member of a limited liability company to become a member of such limited liability company;
- Purchasing the capital contribution portion of the capital contributing member in the partnership to become a capital contributing member of such partnership;
- Purchasing the capital contribution portion of members of other economic organisations in addition to the above cases.
Foreign investors investing in the form of capital contribution, share purchase or capital contribution purchase in one of the following cases must carry out procedures for registration of capital contribution, share purchase or capital contribution purchase at the Department of Planning and Investment of the province or centrally-run city where the economic organisation’s head office is located before carrying out the procedures for change of members, shareholders at the business registration agency in accordance with the law on enterprises and other laws corresponding to each type of economic organisations:
- The capital contribution, share purchase, capital contribution purchase increase the ownership rate of foreign investors in economic organisations doing business in lines and trades with conditional market access applicable to foreign investors;
- The capital contribution, share purchase or capital contribution purchase result in the foreign investors and economic organisations specified in Points a, b and c, Clause 1, Article 23 of Law on Investment holding more than 50% of the charter capital of economic organisations in the following cases: increasing the percentage of charter capital ownership of foreign investors from below or equal to 50% to more than 50%; increasing the percentage of charter capital ownership of foreign investors who have already own more than 50% of charter capital in economic organisations;
- Foreign investors contribute capital, purchase shares, purchase capital contributions of economic organisations which have land use right certificates for land on islands, or on coastal or border communes, wards and towns; other areas that affect defence and security.
Applications of registration for capital contribution, share purchase, capital contribution purchase include:
- Request for registration of capital contribution, share purchase, capital contribution purchase;
- Copies of legal papers of individuals and organisations contributing capital, purchasing shares, purchasing capital contributions and economic organisations with foreign investors contributing capital, purchasing shares or purchasing capital contributions;
- Written agreement on principles on capital contribution, share purchase, purchase of capital contribution between foreign investors and economic organisations in which foreign investors contribute capital, purchase share, purchase capital contribution or between foreign investors and shareholders or members of such economic organisations; and
- A copy of the land use right certificate of an economic organisation in which foreign investors contribute capital, purchase shares or purchase capital contribution in some cases in accordance with the provisions of investment law.
If being not in the case that the procedures for registration of capital contribution, share purchase, capital contribution purchase, foreign investors only need to carry out procedures of changing shareholders and members at the business registration office in accordance with the law on enterprises and other laws corresponding to each type of economic organisation.
Rights and obligations of foreign investors in its capacity as members and shareholders of economic organisations shall be established upon completion of procedures of changing members, shareholders.
Thus, before choosing this type of investment as well as in the process of investment implementation, foreign investors must clearly understand the provisions of law, operation situation, financial capacity of the economic organization expected to invest to limit legal risks and protect their legitimate rights and interests. Therefore, in order to ensure foreign investment in Vietnam in the form of capital contribution investment, share purchase, capital contribution purchase in compliance with the law, foreign investors should search and choose to use the legal services of reputable law firms in Vietnam with experience in corporate and investment legal consultancy who can provide useful legal advice for saving investors’ time and costs to carry out procedures related to foreign investment in Vietnam in the investment form of capital contribution, share purchase, capital contribution purchase.
