Foreign-invested limited liability companies and joint-venture companies would face stricter requirements upon their transformation into shareholding firms.
Specifically, foreign entities being founders of a foreign-invested enterprise (FIE) which is transformed into a joint-stock company would be required to hold at least 30% of stake in 10 years since the transformation. During the restriction period, if the company joins the stock market, the shares owned by foreign founding shareholders must not be traded.
This is one of the proposals in a draft decree intended to supersede Decree No. 101 of 2006 on FIEs’ re-registration and transformation and registration for new investment certificates under the Enterprise Law and the Investment Law.
Besides, an FIE must report a return-on-equity (ROE) ratio of at least 5% in three consecutive years before its transformation and operate in Vietnam for at least five years with a minimum charter capital of USD 10 million, report profits and not incur accumulated losses in three consecutive years before the transformation.
As argued by the drafter, the Ministry of Planning and Investment, FIEs getting investment licenses before 2005 were just joint-venture or limited liability companies. Therefore, they must satisfy requirements proving they are financially capable and effectively operate upon business restructuring. Besides, stricter regulations, such as a ban on the transfer of founding shareholders’ stocks to local individual or corporate partners for a certain period of time, are needed to control the outflow of foreign investment capital after FIEs are converted into joint-stock companies.
Bourbon Tay Ninh Joint-Stock Company, a sugar firm, may be cited as an example. In 2007, the wholly foreign-owned company was transformed into a joint-stock company. More than three years later, the France-backed Bourbon Group which owned a 70% stake in the company sold all its stocks to a group of Vietnamese investors for USD 46.5 million. The company was one of a few FIEs listed on the Vietnamese bourse in 2008.-