Procedures for investment in the form of capital contribution or purchase of shares or stakes

Choosing a suitable form of investment plays an important role in the project implementation process of investors. Among all of these forms, making investment by contributing capital, purchasing shares or stakes of business entities is increasingly attracting investors because of its quickness and cost savings. So how to register to contribute capital, purchase shares or stakes? What documents do investors need to prepare? To answer these questions, AZLAW would like to provide some basic legal information about this type of investment.

Cases in which investors shall follow procedures for registration of capital contribution or purchase of shares or stakes

According to Article 26 of the Law on Investment 2020, foreign investors must carry out the procedures for making capital contribution or purchasing shares or stakes of other economic entities in one of the following cases:

• The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business entity conducting business in the business lines allowed in market with conditions applied to foreign investors
• The capital contribution or purchase of shares or stakes results in a foreign investor or business entity specified in Points a, b and c Clause 1 Article 23 of this Law holding over 50% of the charter capital of the economic organization in the following cases: The charter capital ownership ratio by the foreign investor is increased from less than or equal to 50% to over 50%; the charter capital ownership by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business entity
• The foreign investor that contributes capital, purchases shares or stakes of a business entity has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security.

Conditions of making investment in the form of capital contribution or purchase of shares or stakes

According to Investment Law, Foreign investors making investment by contributing capital, purchasing shares and purchasing stakes of business entities must:

• satisfy market access conditions applied to foreign investors as prescribed in Article 9 of this Law;
• ensure national defense and security in accordance with this Law;
• comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.

Forms of capital contribution or purchase of shares or stakes

A foreign investor may contribute capital to a business entity in the following forms:

1. Purchase of shares of joint-stock companies through the initial public or additional issuance;
2. Contribution of capital to limited liability companies and partnerships;
3. Contribution of capital to other business entities not mentioned in Point a and Point b of this Clause.

A foreign investor may purchase shares or stakes of a business entity in the following forms:

1. Purchase of shares in a joint-stock company from such company or its shareholders;
2. Purchase of stakes of members of a limited liability company to become a member of such limited liability company;
3. Purchase of stakes of a capital contributing member of a partnership to become a capital contributing member of such partnership;
4. Purchase of stakes of members of other economic entities not mentioned in Points a, b and c of this Clause.

Applications for making investment by contribution capital, purchasing shares or stakes

Step 1: The business organization in which foreign investors invest in the form of capital contribution, purchase of shares or stakes shall submit 01 set of application for registration of capital contribution or purchase of shares or stakes to investment registration authority of the administrative division where the business organization’s headquarters is located. The application includes:

• A registration form for capital contribution/purchase of shares/stakes
• Copies of legal documents of the individual or organization that contributes capital or purchases shares/stakes and of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors
• A principal agreement on capital contribution or purchase of shares/stakes between the foreign investors and the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors or between the foreign investors and the shareholders or members of such business organization.
• A copy of the certificate of land use rights of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors (in the case specified in Point b Clause 4 Article 65 of Decree No.31/2021/ND-CP).

Step 2: Within 15 days from the receipt of the valid application, the investment registration authority shall consider the satisfaction of the conditions for capital contribution or purchase of shares or stakes and notify investors. If the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors has the certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security, it may be longer for investment registration authority to check the validity of the application.

Step 3: After foreign investors are granted the approval for capital contribution or purchase of shares or stakes, the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors shall follow procedures for change of members or shareholders at the business registration authority in accordance with regulations of law on enterprises and other law corresponding to each type of business organization.

Note: If the investor is not required to carry out the procedures for registration of capital contribution or purchase of shares or stakes, he/ she only needs to register the change of members or shareholders at the business registration authority in accordance with relevant laws. 

The article refers to the regulation on making investment in the form of capital contribution or purchase of shares or stakes of economic organizations. If you have any questions or need legal support related to investment activities in Vietnam, please contact Hotline 0987.748.111 or email info@azlaw.com.vn to advice.