I. Overview

• Investing in an established business (Hereinafter called the “target business”) through capital contribution, purchase of shares or capital contribution in that business is also a form of investment that foreign investors often choose to invest in Vietnam. Foreign investors can make an investment in target business by the following forms:

+ Foreign investors contribute capital to economic organizations through the purchase of shares issued for the first time or additionally issued by a joint-stock company; contribute capital to limited liability companies, partnerships and contribute capital to other economic organizations.

+ Foreign investors purchase shares, capital contributions of economic organizations in the form of purchasing shares of joint-stock companies from companies or shareholders; purchase the capital contribution of a member of a limited liability company to become a member of that limited liability company; purchase capital contribution of capital-contributing members in a partnership to become a capital-contributing member of that partnership company and purchase capital contributions of members of other economic organizations.

II. Investment requirements in the form of capital contribution, purchase of shares or capital contribution

• Determining the type of target business is one of the important issues to consider, because each type of target business may lead to different applicable laws, accordingly, the investment procedures are also different. In case of pouring capital into target businesses which are public companies, fund management companies, oil and gas companies, insurance…, the foreign investor should pay attention to the requirements, procedures for implementing that specialized law.

• Pursuant to the provisions of Clause 2, Article 24 of the Law on Investment 2020; Clause 4, Article 65 of Decree 31/2021/ND-CP, foreign investors investing in the form of capital contribution, purchase of share or capital contribution must satisfy the following regulations and requirements:

+ Satisfying market access requirements for foreign investors;

+ Satisfying the requirements for ensuring national defense, security and land use requirements for economic organizations with foreign investors contributing capital, purchasing shares or capital contributions in case such economic organizations have Certificates of land use rights in islands, communes, wards and townships; other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial parks, export processing zones, high-tech zones, and economic zones established under the government’s regulations.

• Pursuant to the provisions of Clause 8, Article 2 of Decree 31/2021/ND-CP, other areas affecting national defense and security include:

​+ Areas with national defense and security works, military zones, prohibited areas, protected areas, safety belts of defense works and military zones according to the law on protection of national defense works and military zones;​

+ Areas bordering on important political, economic, diplomatic, science – technology, culture and society are guarded by the People’s Police force responsible for armed protection in accordance with the law on guard;​

+ Important works related to national security and protection corridors of important works related to national security according to the law on protection of important works related to national security;​

+ Economic – national defense zones according to the Government’s regulations on combining national defense with socio-economic and socio-economic with national defense;​

+ Areas of value in terms of military and national defense under the Prime Minister’s decision approving the master plan on arrangement of defense in combination with socio-economic development;​

+ Areas that do not allow foreign organizations and individuals to own houses to ensure national defense and security in accordance with the law on housing.

​III. Investment procedures in the form of capital contribution, purchase of shares or capital contribution

• Foreign investors must carry out procedures for registration of capital contribution, purchase of shares or capital contribution from economic organizations before changing members or shareholders, including:

+ The contribution of capital, purchase of shares or capital contribution increases the foreign investors’ ownership ratio in economic organizations engaged in business lines and trades with conditional market access for foreign investors.​

+ The contribution of capital, purchase of shares or capital contribution leads to the fact that foreign investors and economic organizations specified at Points a, b and c, Clause 1, Article 23 of the Law on Investment 2020 hold more than 50% of the capital the charter of the economic organization in the following cases: increase the rate of ownership of charter capital of foreign investors from less than or equal to 50% to over 50%; increase the rate of ownership of charter capital of foreign investor when that foreign investors already own more than 50% of charter capital in economic organizations.​

+ Foreign investors contribute capital, purchase shares or capital contributions from economic organizations having land use right certificates in islands and border communes, wards and townships; coastal communes, wards and towns; other areas affecting national defense and security. In this case, the investment registration agency consults with the Ministry of National Defense and the Ministry of Public Security on conditions for ensuring national security and land use…

• Foreign investors that do not fall into the above cases shall carry out procedures for changing shareholders or members in accordance with relevant laws when contributing capital, purchasing shares or capital contributions from economic organizations. If there is a need to register capital contribution, purchase of shares or capital contribution of an economic organization, the investor shall comply with the law.

• In the case of public companies (except for a few exceptions), investors should note that the purchase of shares may have to follow the procedures of a public offer to buy and register with the State Securities Commission if they belong to the case specified in Article 35 of the Law on Securities 2019.

• In addition to the above issues, foreign investors also need to pay attention to a number of other issues when making a capital contribution, purchase of shares or capital contribution in a target business: Requirements for foreign investors that capital contribution must be made through a transfer to the direct investment capital account as prescribed in Clause 3, Article 4 of Circular 06/2019/TT-NHNN, the issue of corporate income tax of the seller in transactions, other procedures to note when changing business registration information...

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