In the current market economy, Vietnam is a developing country and receives the attention of many foreign investors. Investors when investing in Vietnam can choose for themselves an investment form suitable to their actual situation and needs. One of the popular forms of investment can be mentioned as the form of capital contribution, purchase of shares, or purchase of contributed capital to become a member or shareholder of a company. This article will focus on issues that need to be kept in mind when the company receives members and shareholders who are foreign investors through the form of capital contribution, share purchase, and contributed capital purchase.
Conditions for receiving members and shareholders who are foreign investors
First of all, it is necessary to understand that a foreign investor is an individual with foreign nationality or an organization established under foreign law that conducts business investment activities in Vietnam.
A foreign investor’s capital contribution, share purchase or contributed capital purchase must satisfy the following conditions:
- Conditions on market access for foreign investors specified in the list of industries and trades restricted from market access for foreign investors, including: the percentage of foreign investors’ ownership of charter capital in economic organizations, investment forms, scope of investment activities, capabilities of investors, partners participating in investment activities, and other conditions as prescribed by law;
- Conditions on the use of land, labor, natural resources, and minerals;
- Conditions on production and supply of public goods and services or state monopoly goods and services;
- Conditions when applying forms of support and subsidies of the State to several sectors, fields, or development of regions or territories;
- Conditions on assurance of national defense, security, and land use conditions for economic organizations in which foreign investors contribute capital, purchase shares, or purchase capital contributions in case such economic organization has a Certificate certification of land use rights in islands, communes, wards, border towns and coastal communes, wards, and townships; Other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial parks, export processing zones, hi-tech parks, and economic zones established under the Government’s regulations.
In addition to the above conditions, depending on different industries, the law will also stipulate the percentage of capital that investors are allowed to hold in economic organizations.
Cases where it is necessary to carry out procedures to receive members and shareholders who are foreign investors
As mentioned above, for an economic organization to receive a foreign investor as a member or shareholder, in addition to meeting the prescribed conditions, it is necessary to carry out necessary investment registration procedures to be legally recognized as an investor. Accordingly, Clause 1 Article 23, Point b Clause 2 Article 26 of the Law on Investment 2020 stipulates that foreign investors shall carry out procedures for registration of capital contribution, purchase of shares, and purchase of contributed capital of economic organizations before the change of members or shareholders in one of the following cases:
- The contribution of capital, purchase of shares, and purchase of contributed capital increases the ownership rate of foreign investors in business organizations with conditional market access;
- The contribution of capital, purchase of shares, and purchase of contributed capital leads to foreign investors and economic organizations specified at Points a, b and c Clause 1 Article 23 of the Law on Investment holding more than 50% of the capital. the charter of the economic organization;
- Foreign investors contribute capital, purchase of shares, and purchase of contributed capital from economic organizations with land use right certificates in islands and border communes, wards, and townships; coastal communes, wards, and towns; other areas affecting national defense and security.
Procedures for accepting foreign investors as members and shareholders
Accordingly, the procedures for receiving foreign investors in the form of capital contribution, purchase of shares, and purchase of contributed capital will be carried out as follows:
- Step 1: Foreign investors register to contribute capital, purchase shares, and purchase contributed capital by submitting dossiers to the Foreign Economic Affairs Office under the Department of Planning and Investment where the economic organization is located.
- Step 2: After receiving approval from the competent authority, the foreign investor will make the payment for capital contribution, purchase of shares, and purchase of contributed capital.
- Step 3: Simultaneously update changes, record foreign investors in the list of members and shareholders and declare tax from the transfer of shares and contributed capital.
Rights and obligations of foreign investors as members and shareholders of economic organizations shall be established upon completion of procedures for changing members and shareholders.
In addition, economic organizations as well as foreign investors should pay attention to comply with the conditions and procedures prescribed by law to update members and shareholders. Economic organizations will be fined from VND 20,000,000 to VND 30,000,000 (Clause 2, Article 46 of Decree 122/2021/ND-CP) if they commit one of the following acts:
- Registering for capital contribution, purchase of shares, or purchase of contributed capital at economic organizations in contravention of the law provisions;
- Does not have the right to contribute capital, purchase shares or purchase contribute capital but still do it.
Therefore, foreign investors and economic organizations need to strictly comply with the provisions of the law to avoid being sanctioned according to the above content. Knowing these regulations will help investors limit and eliminate the risks expected from the very beginning. Besides, it also helps investors find better business investment opportunities in Vietnam.