Draft regulations on foreign investors’ capital contribution and share purchase in Vietnamese enterprises have been recently posted up on the Government website for public opinion.
The regulations would not govern the establishment of economic organizations with 100% foreign capital; capital contribution with domestic investors for the establishment of joint-venture economic organizations; investment in forms of BCC, BOT, BTO and BT contracts; investment in the merger or acquisition of enterprises; and other forms of direct investment.
Foreign investors defined in the regulations include foreign organizations established and operating under foreign laws and their branches based in foreign countries and
Vietnamese enterprises include economic organizations doing business in domains and branches not banned by law, including enterprises with 100% state capital which are equitized or have their ownership transformed under other forms, joint-stock companies, limited liability companies, partnerships and private enterprises.
As per the draft regulations, foreign investors’ ownership rate in Vietnamese enterprises would not be restricted except when they buy shares of public companies; contribute capital to and buy shares of Vietnamese enterprises engaged in domains and branches governed by specialized laws; or contribute capital to and buy shares of domestic enterprises in investment domains under treaties to which Vietnam is a contracting party.
Particularly, foreign investors would be allowed to buy shares at the rate specified in a plan approved by a competent authority, which, however, must not exceed 30% of the charter capital of an equitized enterprise with 100% state capital which has for the first time issued shares. For enterprises with 100% state capital which have their ownership transformed in other forms, foreign investors’ ownership rate should comply with a plan approved by a competent authority.
The draft regulations stipulate that foreign investors would be permitted to acquire contributed capital portions of members of limited liability companies or contribute capital to those companies in order to become new members of limited liability companies with two or more members; or acquire the whole charter capital of owners of one-member limited liability companies in order to become new owners of those companies.
They may acquire contributed capital portions of capital contributors to partnerships or contribute capital to partnerships in order to become new capital contributors.
Foreign individual investors may acquire contributed capital portions of partners or contribute capital to partnerships in order to become new partners.
They may also acquire capital portions of owners of private enterprises or contribute capital with those owners in order to transform private enterprises into limited liability companies with two or more members and become the company members.
Regarding forms of share purchase, the regulations allow foreign investors to buy shares issued for the first time by joint-stock companies, including equitized enterprises with 100% state capital; buy shares among the shares offered for sale or additionally issued shares of joint-stock companies; or acquire shares of shareholders in joint-stock companies, including those listed at the Stock Exchange or the Securities Trading Center.
To contribute capital and buy shares, foreign investors must have accounts opened at Vietnam-based commercial banks and satisfy other conditions prescribed in enterprises’ charters (for both organizations and individuals), and have copies of business registration certificates or equivalent documents proving their legal person status, authenticated by competent agencies of host countries in which the organizations are registered (for organizations) or copies of passports (for individuals).
Foreign investors that wish to become strategic investors of Vietnamese enterprises must be financially capable to support the enterprises to develop, raise their management and administration capacity and apply modern technologies, and meet specific criteria set by the enterprises, according to the draft regulations.
Foreign investors would be permitted to use share certificates as pledges in credit relations and in assurance of the performance of their civil obligations; transform the ownership of share certificates and participate in transactions in the securities market after joint-stock companies have been listed; transfer their contributed capital portions or adjust investment capital in the course of doing business; convert into foreign currencies capital amounts (both principals and interests) and proceeds from the sale of shares, the transfer of contributed capital, as well as other lawful sums and assets gained from investment activities in Vietnam, in order to transfer them abroad after having fulfilled financial obligations towards the Vietnamese State and related parties; enjoy interests like domestic investors when investing in joint-stock companies, limited liability companies or partnerships; and participate in corporate governance (unless they are capital contributors to partnerships).
Profits gained from the transformation of ownership of share certificates or the transfer of contributed capital would be subject to income tax under the provisions of law.-