Issue 011021 - Procedures for transferring capital to foreign investors

Dear Valued Clients,

Transfer capital to foreign investors is currently one of the popular business activities. In particular, Vietnam’s opening market policies have attracted many foreign investors to invest in Vietnam. The following article will provide the procedures to receive transferred capital for foreign investors in accordance with current regulations.

I. RELEVANT LEGISLATION

The following legal documents are referenced in this article:

1. Law on Investment No.61/2020/QH14 dated June 17, 2020 (“LOI”);

2. Law on Enterprises No.59/2020/QH14 dated June 17, 2020 (“LOE”);

3. Decree No.31/2021/ND-CP of the Government dated March 26, 2021 regarding detailing and guiding the implementation of a number of articles of the Law on Investment (“Decree 31”);

4. Circular No.03/2021/TT-BKHDT of the Ministry of Planning and Investment dated April 09, 2021 stipulating templates of documents and reports related to investment activities in Vietnam, Vietnam’s investment abroad and investment promotion (“Circular 03”).

II. OVERVIEW OF TRANSFER OF CAPITAL TO FOREIGN INVESTORS

Definitions mentioned in this Article

1. Foreign investor is an individual with foreign nationality or an organization established under foreign law conducting investment activities in Vietnam.

2. Economic organization is an organization established and operated in accordance with Vietnamese law, including enterprises, cooperatives, unions of cooperatives and other organizations conducting investment activities.

3. Foreign-invested economic organization is an economic organization whose foreign investors are members or shareholders.

Transfer of capital to foreign investors

In this Legal Article, transfer of capital to foreign investors is understood as the transfer of shares or contributed capital of members of economic organizations to foreign investors when foreign investors invest to an economic organization established in Vietnam through the purchase of shares or contributed capital specified in Clause 2, Article 21 of the LOI.

Implementation of investment activities of foreign-invested economic organizations

Economic organizations must satisfy the conditions and carry out investment procedures as prescribed for foreign investors when they purchase shares or contributed capital of other economic organizations if such economic organizations are under one of the following cases:

(i) Having foreign investors holding more than 50% of charter capital or having the majority of general partners being foreign individuals for economic organizations being partnerships;

(ii) There are economic organizations specified in Section II.3.(i) holding more than 50% of charter capital;

(iii) There are foreign investors and economic organizations specified in Section II.3.(i) holding more than 50% of the charter capital;

Economic organizations are not mentioned above shall comply with- the investment conditions and procedures prescribed for domestic investors when they invest by purchasing shares or contributed capital from other economic organizations.

Conditions for foreign investors to purchase shares, contributed capital of economic organizations

The purchase of shares or contributed capital from an economic organization by a foreign investor must satisfy the following regulations and conditions:

(i) Market access conditions for foreign investors are specified in Article 9 of the LOI, including:

Ratio of ownership of charter capital of foreign investors in economic organizations
Forms of investment;
Scope of investment;
Capacity of the investors and partners;
Other conditions as prescribed in laws, resolutions of the National Assembly, ordinances and resolutions of the National Assembly Standing Committee, Government decrees and international treaties of which the Socialist Republic of Vietnam is a member.

(ii) Ensuring national defense and security in accordance with the LOI;

(iii) Regulations of land law related to conditions for receiving land use rights, conditions for land use in islands, communes, wards, border towns, communes, wards and coastal towns.

The cases that foreign investors must carry out procedures for registration to purchase shares or contributed capital

Foreign investors have to carry out procedures for registration to purchase shares or contributed capital from economic organizations before changing members or shareholders if it happens one of the following cases:

(i) The purchase of shares or contributed capital increases the foreign investors’ ownership ratio in the economic organization engaged in conditional business lines and trades for foreign investors:

List of conditional business lines and trades for foreign investors will be written in the Section IV of this Article.

(ii) The purchase of shares or contributed capital leads to foreign investors, economic organization mentioned in Section II.3 holding more than 50% of the charter capital of other economic organization in the following cases: increase the ratio of ownership of charter capital of foreign investors from less than or equal to 50% to over 50%; increase the ratio of ownership of charter capital of foreign investors when foreign investors have already owned more than 50% of charter capital in economic organization; having a foreign investor holding more than 50% of the charter capital or having the majority of general partners being foreign individuals for economic organization being a partnership;

(iii) Foreign investors purchase shares or contributed capital from economic organizations with land use rights certificates in islands and border communes, wards and townships; coastal communes, wards and towns; other areas affecting national defense and security.

III. PROCEDURES FOR TRANSFERRING CAPITAL TO FOREIGN INVESTORS

The cases that foreign investors are not required to carry out procedures for registration to purchase shares and contributed capital

If foreign investors purchase shares or contributed capital that not specified in Section II.5, the foreign-invested economic organization shall carry out the procedures for registration of change of members or shareholders at the business registration authority in accordance with the provisions of the LOE and other laws corresponding to each type of economic organization.

The cases that foreign investors are required to carry out procedures for registration to purchase shares and contributed capital

If foreign investors purchase shares or contributed capital that specified in Section II.5, they have to carry out procedures as below:

Step 1. Investors shall carry out the procedures for registration of purchase of shares or contributed capital to the economic organization at the Investment Registration Office in which the economic organization’s head office is located.

Dossier for registration to purchase shares or contributed capital includes:

(i) Registration document to purchase shares, contributed capital

Currently, Ministry of Planning and Industry provided the template of this document in the Appendix of Circular 03 (Template A.I.7).

(ii) Certified true copy of legal documents of individuals or organizations purchasing shares, contributed capital and economic organization in which the foreign investors purchase shares, contributed capital;

(iii) Written agreement in principle on purchasing shares or contributed capital between foreign investors and economic organizations in which foreign investors purchase shares, contributed capital or between foreign investors and shareholders or members of that economic organization;

(iv) Certified true copy of the land use rights certificate of the economic organization in which the foreign investor purchases shares or contributed capital in the case (iii) that mentioned in Section II.5.

Term of processing application

(i) In the case (i) and (ii) specified in Section II.5, within 15 days from the date of receipt of a valid application, Investment Registration Office considers ability to meet the conditions for purchasing shares or contributed capital and notifies to investors. The notice shall be sent to foreign investors and economic organizations in which foreign investors purchase shares or contributed capital.

(ii) In the case (iii) specified in Section II.5, Investment Registration Office implements with the following order:

– Within 03 working days from the date of receipt of a valid application, Investment Registration Office collects opinions from the Ministry of National Defense and the Ministry of Public Security on the satisfaction of conditions related to national defense and security;

– Within 07 working days from the date of receiving the request from the Investment Registration Office, Ministry of National Defense and the Ministry of Public Security give opinions on the satisfaction of conditions for ensuring national defense and security for economic organizations in which foreign investors purchase shares or contributed capital. If the opinions are not made within the request time limit, it shall be deemed to have agreed to meet the conditions for ensuring national defense and security for economic organizations whose foreign investors purchase shares or contributed capital;

– Within 15 days from the date of receipt of a valid application, Investment Registration Office shall base on the opinions of the Ministry of National Defense and the Ministry of Public Security to consider conditions satisfaction for purchasing shares or contributed capital; then notify to the investor. The notice shall be sent to foreign investors and economic organizations in which foreign investors purchase shares or contributed capital.

Step 2. The economic organization in which foreign investors purchase shares or contributed capital carries out the procedures for registration of change of members or shareholders at the business registration authority in accordance with the provisions of the LOE and other laws corresponding to each type of economic organization. Rights and obligations of foreign investors as members or shareholders of the economic organization shall be established upon completion of procedures for changing members or shareholders.

IV. APPENDIX

List of conditional business lines and trades for foreign investors is stipulated in Section B Appendix I of Decree 31, including 59 following business lines and trades:

No.	Names of conditional business lines and trades for foreign investors
	Manufacture and distribution of media products, including video recordings.
	Manufacture, distribution, broadcasting of TV programs, stage performances and cinematic works.
	Provision of audio and television broadcasting services.
	Insurance; banking, securities trading and relevant services.
	Postal and telecommunications services.
	Advertising services.
	Printing and publishing services.
	Geodesy and cartography services.
	Aerial photography services.
	Education services.
	Survey, extraction and processing of natural resources, minerals and petroleum.
	Hydropower, offshore wind power and nuclear power.
	Transport of goods and passengers by rail, air, road, river, sea, pipeline.
	Fisheries.
	Forestry and hunting.
	Betting and casino business.
	Security services.
	Construction, operation and management of river ports, seaports and airports.
	Real estate business.
	Legal services.
	Veterinary services.
	Trade in goods and activities directly related to trade in goods of foreign service providers in Vietnam.
	Technical analysis and inspection services.
	Tourism services.
	Health and social services.
	Sports and entertainment services.
	Paper production.
	Manufacture of vehicles with more than 29 seats.
	Development and operation of traditional markets.
	Operation of Goods Exchanges.
	LCL consolidation services.
	Audit, accounting and tax services.
	Valuation services; valuation of enterprises serving equitization.
	Services relevant to agriculture, forestry, aquaculture.
	Manufacture of airplanes.
	Manufacture of locomotives and railway carriages.
	Manufacture, sale tobacco products, tobacco ingredients, equipment for tobacco industry.
	Publisher’s activities.
	Building and repair of seagoing ships.
	Waste collection services, environmental monitoring services.
	Commercial arbitration services, arbitration mediation services.
	Logistics services.
	Coastal transport services.
	Farming, manufacture or processing of rare and valuable plants, breeding of rare, valuable wild animals and processing thereof, including live animals and their products.
	Manufacture of building materials.
	Construction and relevant technical services.
	Motorcycle assembly.
	Services relevant to sports, fine art, performing art, fashion show, beauty pageant and other entertainment activities.
	Auxiliary services for air transport; ground services at airports; catering services on aircraft; navigation information services, air navigation and control services, meteorological services.
	Shipping agencies; towing services.
	Services relevant to cultural heritages, copyrights and related rights, photography, video recording, audio recording, art exhibitions, festivals, libraries, museums.
	Services relevant to tourism promotion and advertising.
	Representation, recruitment, scheduling, management services for artists and athletes.
	Family-related services.
	E-commerce activities.
	Cemetery business, cemetery services and funeral services.
	Aerial application.
	Marine pilotages.
	Business lines in which investment is under pilot mechanisms of the National Assembly, Standing committee of the National Assembly, the Government or the Prime Minister.

Kind regards,

ENT Law LLC

The full version of this Legal Aritcle can be found here.

Legal Article

Issue 011021 – Procedures for transferring capital to foreign investors