Foreign Investors Contributing Capital, Buying Shares or Buying Contributed Capital Under the Law on Investment 2020

Foreign Investors Contributing Capital, Buying Shares or Buying Contributed Capital Under the Law on Investment 2020

“The Law on Investment 2020 has new points compared to the expired law in 2014 in investment activities of foreign investors in the form of capital contribution, share purchase, capital contribution purchase. If you do not know, it will take a lot of time and effort for foreign investors to conduct business investment activities in Vietnam. What are the changes.”

 

1. Conditions for investment in the form of capital contribution, purchase of shares, purchase of contributed capital

Clause 2 Article 24 of the Law on Investment 2020 stipulates that conditions for investment in the form of capital contribution, share purchase or purchase of contributed capital for foreign investors must fully meet the following conditions and regulations:

  • Conditions for market access for foreign investors as prescribed in Article 9 of this Law;
  • Ensuring national defense and security in accordance with the provisions of this Law;
  • Provisions of the land law on conditions for receiving land use rights and conditions for land use in islands, communes, wards, border towns, communes, wards or coastal towns.

Compared to the expired Law, the Investment Law 2020 adds provisions on ensuring national defense, security and conditions for receiving land use rights in border and coastal areas. The Law also supplements the list of sectors and trades that restrict market access to foreign investors, including sectors and trades that have not yet had access to markets and sectors with conditional market access.

 

2. Forms of capital contribution, share purchase, purchase of contributed capital

Investors may CONTRIBUTE capital to the business organization in the following forms:

  • Purchase of first-time issued shares or additional shares of joint-stock companies;
  • Contribute capital to limited liability companies and partnerships.

Investors BUY SHARES or CONTRIBUTED CAPITAL of economic organizations in the following forms:

  • Purchase of shares of joint-stock companies from companies or shareholders;
  • Purchase of contributed capital of members of a limited liability company; or
  • Purchase of capital contribution of capital contributing members in partnerships.

 

3. Procedures for capital contribution, share purchase or purchase of contributed capital

Conditions for implementation under Article 26 of the Law on Investment 2020:

a. Investors must meet the conditions and carry out procedures for changing members and shareholders in accordance with the provisions of law corresponding to each type of economic organization.

b. Foreign investors carry out procedures for registration of capital contribution, purchase of shares or purchase of contributed capital by economic organizations before changing members or shareholders if they are in one of the following cases:

  • Capital contribution, purchase of shares or contributed capital increases the ownership ratio of foreign investors in economic organizations doing business in sectors and trades accessing the market conditionally for foreign investors;
  • The capital contribution, purchase of shares or contributed capital 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 charter capital of economic organizations in the following cases: increasing the charter capital ownership rate of foreign investors from less than or equal to 50% to over 50%; increase the charter capital ownership rate of foreign investors when foreign investors already own more than 50% of charter capital in economic organizations;
  • Foreign investors contributing capital, buying shares, buying capital contributions of economic organizations with land use right certificates in islands and border communes, wards or townships; communes of coastal towns; areas affecting national defense and security.

The highlight of this Law on Investment 2020 is to change the capital ownership ratio from 51% to 50% to create unity in other legal documents. According to the Law on Investment 2020 and The Dispatch No. 8909/BKHĐT-PC of December 31, 2020 guiding the implementation of the Law on Investment 2020, clearly stating the dossier of registration of capital contribution, share purchase or contributed capital includes:

  • Written registration of capital contribution, purchase of shares or contributed capital;
  • Copies of legal papers of individuals and organizations contributing capital, buying shares or contributed capital and economic organizations with foreign investors contributing capital, buying shares or contributed capital;
  • Written agreement on capital contribution, share purchase, purchase of contributed capital between foreign investors and economic organizations with foreign investors contributing capital, buying shares or buying contributed capital;
  • Written declaration (enclosed with a copy) of the land use right certificate of the economic organization receiving capital contribution, shares and contributed capital of foreign investors (for the cases specified at Points b and c, Clause 2, Article 24 of the Law on Investment 2020).

Currently, there are many differences in investment regulations for capital contribution, share purchase, purchase of contributed capital compared to the expired Investment Law, investors should pay attention to update and comply, as well as consider when carrying out this activity. If you have any questions regarding the form of capital contribution investment, share purchase or purchase of capital contribution of economic organizations in Vietnam, please contact us for the most specific, quick and accurate answers.