The transfer of capital contributions between foreign investors in Vietnam must comply with strict legal regulations. Moreover, the related procedures require a clear understanding of the legal provisions. Failure to comply may, in turn, lead to legal and financial risks. Below, DNP Vietnam Law Firm will provide a concise and comprehensive overview of the capital contribution transfer procedures.
1. Applicable Entities
According to Clause 2, Article 26 of the Law on Investment 2020, foreign investors must carry out registration procedures when contributing capital, purchasing shares, or acquiring capital contributions of an economic organization if they fall into one of the following cases:
– The capital contribution, share purchase, or capital acquisition increases the foreign investors’ ownership ratio. This applies to an economic organization. The organization operates in a business line with market access conditions. These conditions are applicable to foreign investors;
– The capital contribution, share purchase, or capital acquisition results in a foreign investor holding more than 50% of the charter capital of the economic organization:
- The foreign ownership ratio increases from 50% or less to more than 50%;
- The foreign ownership ratio continues to increase when already holding more than 50% of the charter capital;
- The investment is made in areas sensitive to national defense and security.
2. Conditions for Transferring Capital Contributions in FDI Enterprises
The conditions for transferring capital contributions in foreign-invested enterprises (FDI enterprises) include the following key requirements:
- Market access conditions: Foreign investors must comply with regulations regarding permitted investment sectors, foreign ownership limitations, and other relevant conditions as stipulated in Article 9 of the Law on Investment 2020;
- National defense and security: The contribution of capital, share purchase, or capital acquisition must not affect national security, especially in sensitive areas such as borders or coastal zones;
- Land use regulations: If the enterprise holds land use rights in special areas such as islands, border communes, or coastal wards, the transfer must comply with land laws.
(According to Clause 2, Article 24 of the Law on Investment 2020)
Additionally, pursuant to Clause 4, Article 65 of Decree No. 31/2021/ND-CP, foreign investors must also comply with:
- Specific market access regulations as stated in Clauses 3 of Articles 9, 15, 16, and 17 of the Law on Investment 2020;
- Conditions on ensuring national defense and security applicable to enterprises with land use right certificates in sensitive areas, except for projects located in industrial zones, export processing zones, high-tech zones, or economic zones as regulated by the Government.
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3. What Procedures Must the Foreign Investor Receiving Capital Contribution Perform?
According to Article 66 of Decree No. 31/2021/ND-CP, the procedure for transferring capital contributions in an FDI enterprise to a foreign investor shall be implemented as follows:
- For cases not falling under Clause 2, Article 26 of the Law on Investment 2020: the transfer procedure shall follow the regulations applicable to the specific type of economic organization;
- For cases falling under Clause 2, Article 26 of the Law on Investment 2020:
| NO | TITLE OF THE DOSSIER | DETAILED CONTENT |
| 1 | Registration Document for Capital Contribution, Share Purchase, and Capital Share Acquisition | – Information on the business registration of the economic organization expected to receive capital contributions; – Business sectors and activities; – List of owners, members, founding shareholders, foreign investors (if any); – The foreign investor’s equity ownership ratio before and after the transaction; – The estimated transaction value of the capital contribution contract; – Information about the investment project of the economic organization (if any). |
| 2 | Notarized copies of legal documents of individuals and organizations making capital contributions, purchasing shares, or acquiring equity interests and of economic organizations with foreign investors involved in such transactions | A valid Citizen Identification Card or passport (for individuals), or an Enterprise Registration Certificate (for organizations) |
| 3 | Memorandum of Understanding | The agreement between the foreign investor and the economic organization with foreign capital contribution, share purchase, or capital contribution acquisition, or the agreement between the foreign investor and the shareholders or members of such economic organization. |
| 4 | A copy of the Certificate of Land Use Rights. | Applicable to the case specified at Point b, Clause 4, Article 65 of this Decree. |
Note: Upon approval, the foreign-invested economic organization must register the change of members or shareholders. This must be done in accordance with applicable laws.
The information above is for reference only. If you require further details, please contact us using the information below.
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