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Official Gazette

Monday, March 30, 2020

Foreign holding caps in domestic firms to be raised

Updated: 17:21’ - 25/12/2013

Foreign investors would be allowed to own up to 60 percent of the total voting shares of listed companies, if a draft decision prepared by the State Securities Commission is approved.

However, the draft, which would replace Prime Minister Decision No. 55 of 2009 governing the participation of foreign organizations and individuals in the Vietnamese securities market, says that the foreign holding cap of 60 percent would be applied only to companies operating in domains unliable to any law-prescribed foreign ownership restrictions. Besides, their plans to raise capital through increasing foreign ownership must be approved by the General Meeting of Shareholders.

Alan Pham, chief economist of VinaCapital, was quoted by Vietnam Investment Review as saying that the decision was a significant step forward in creating more opportunities for foreign investors to participate in the local market. “The decision will open the door for foreign capital that should boost the market. It represents a more liberal and open attitude towards the role of foreign investors,” he said.  

For unlisted public companies, the draft stipulates that foreign investors could own up to 49 percent of voting shares, rather than 49 percent of charter capital as currently prescribed but does not limit preferential non-voting shares.

In addition, the draft also permits foreign investors to purchase from 49 per cent to 100 percent of stakes in securities companies instead of either 49 percent or 100 percent as currently provided. It is expected to serve as an effective tool for the restructuring process of securities companies in the market.

Under Decision No. 55, foreign investors may own at most 49 percent of certificates of closed-end funds. The draft now proposes raising this cap, which would apply to not only closed-end funds but also opened-end funds and exchange traded funds, to 100 percent. Funds with a foreign ownership ratio exceeding 49 percent would be considered foreign entities and, therefore, governed by relevant investment laws.

Last but not least, the draft paper provides that foreign securities business organizations may acquire 100 percent of charter capital of Vietnamese securities companies, instead of 49 percent as at present.-

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