When investing in Vietnam, foreign investors need to comply with the provisions of Vietnamese law on the rate of charter capital owned by foreign investors. For details of the above provisions, LTS LAW would like to share information on the rate of charter capital owned by foreign investors in Vietnam in the article below.
I. REGULATIONS ON THE RATIO OF CHARTER CAPITAL OWNED BY FOREIGN INVESTORS IN VIETNAM
– Under the provisions of Article 22 of the Law on Investment 2014, Foreign investors may own an indefinite amount of charter capital invested in business organizations, except for the following cases:
+ The holdings of the foreign investors at listed companies, public companies, securities-trading organizations, and securities investment funds are conformable with regulations of law on securities;
+ The holdings of the foreign investors at state-owned companies that have been equitized or converted are conformable with regulations of law on equitization and conversion of state-owned companies;
+ With regard to holdings of the foreign investors in other cases than those mentioned in Point a and Point b of Clause 1 of Article 22, relevant regulations of law and the international agreements to which the Socialist Republic of Vietnam is a signatory shall apply.
– Under Clause 2 of Article 1 of Decree 60/2015 / ND-CP, the rate of foreign ownership in a public company shall be stipulated as follows:
+ Where the International Agreement of which Vietnam is a signatory lays down regulations on the rate of foreign ownership, it will be governed by this Agreement;
+ Where a public company operates in the investment and business sector which is governed by the law on investment, other relevant laws stipulating the rate of foreign ownership, it will be governed by these legal regulations.
Where a public company operates in the investment and business sector subject to conditions applied to foreign investors but none of specific regulations on the rate of foreign ownership, the maximum rate of foreign ownership will be 49%;
+ Where a public company operates in multiple industries or sectors that have different regulations on the rate of foreign ownership, it will not exceed the lowest rate defined in these industries or sectors that have regulations on the rate of foreign ownership, unless otherwise regulated by the International Agreement;
+ As regards a public company which is not governed by regulations laid down in Point a, b, c of this Clause, the rate of foreign ownership will not be restricted, unless otherwise stipulated by the company’s rules and regulations.
ii. DETERMINATION OF OWNERSHIP RATE LIMITATION OF FOREIGN INVESTORS
Step 1: Determine the business area of the Company
Is that business area subject to an international agreement to which Vietnam is a member on the rate of charter capital owned by foreign investors? If so, it is required to comply with those regulations.
For example: According to the WTO commitments, for the film projection service business (CPC: 96121) must not exceed 51% of the foreign investor’s charter capital.
If the business area in which the foreign investor intends to invest is not covered by the WTO commitments, it is required to determine whether the business line is conditional or not.
Step 2: Determine the foreign investment ownership limit in accordance with the law
– Under the provisions of the specialized law or conditional business line:
Specialized law provisions: If the business line and the law prescribe the maximum ownership rate of foreign investors, determining the rate according to the stated regulations.
Regulations on conditional business lines: National Foreign Investment Portal regularly updates the list of conditional business lines, investors shall refer to on it to comply with detailed regulations of each business line.
– If the business line is on the list of conditional businesses, but there is no specific regulation, the maximum ownership rate for foreign investors is 49%.
– If the enterprise operates in multi-line businesses, the foreign investor needs to determine which business lines have regulations on the foreign ownership rate. Among those lines, the lowest is selected.
Step 3: Provisions in the company’s charter
If the business line is not on the list of conditional businesses and there are no regulations in the relevant law, it must be based on the company’s charter whether or not there is a limit on foreign ownership rate. ? If not, the limit for foreign investors is unlimited and can be up to 100%.
iii. LEGAL BASIC
- Law on Investment 2014;
- Decree No. 60/2015/ND-CP amending, supplementing several articles of the government’s Decree No. 58/2012/ND-CP dated July 20, 2012 on providing specific provisions for the implementation of certain articles of the Law on Securities and the Law on amending and supplementing a number of articles of the Law on Securities;
- Circular No. 123/2015/TT-BTC dated August 18, 2015 providing guidance on foreign investment activities on vietnam’s securities market.