Vietnam has participated in several world economic organizations with the commitment to open up to foreign investors in Vietnam. Accordingly, enterprises, organizations, foreign individuals viewed Vietnam as a potential investment markets. However, the legal system overlap and inconsistency in many texts also led businesses, foreign individuals encounter when intending to invest in Vietnam. Through this article Kim Huc take out the legal provisions about the ratio of capital ownership in businesses investors when investing in Vietnam.
- Under the provisions of Article 22 of the Investment Law 2014: Foreign investors may own unlimitedcharter capital in economic organizations, except for the following cases:
- Ownership of foreign investors at listed companies, public companies, securities trading organizations and securities investment funds in accordance with the law on securities;
- The ownership ratio of foreign investors in equitized State enterprisesor ownership transformation in other forms shall comply with the law provisions on equitization and transformation of State enterprises;
- The ownership percentage of foreign investors other than those defined at Points a and b of this Clause shall comply with other provisions of relevant laws and treaties towhich the Socialist Republic of Vietnam Is a member.
- According to Clause 2, Article 1 of Decree No. 60/2015 / ND-CP Foreign ownership in a public company is as follows:
- In cases where an international treaty towhich Vietnam is a contracting party contains provisions on foreign ownership, the international treaty shall apply.
- Where a public company operating in a line of business conducts its business, the law on investment and the relevant laws provide for the foreign ownership ratio, the provisions of that law shall apply.
- For public companies operating in conditional business lines and tradesapplicable to foreign investors without specific provisions on foreign ownership, the maximum foreign ownership is 49% ;
- Where a public company operating in a number of branches and tradeshas different provisions on foreign ownership, the foreign ownership shall not exceed the lowest level in the branches and trades (of which the company that operate) with provisions on foreign ownership , unless otherwise provided for by international treaties;
- For public companies not falling under the cases specified at Points a, b and c of this Clause, foreign ownership shall not be restricted, unless otherwise provided for by the company charter.
- For State owned enterprisesconducting equitization in the form of offering securities to the public, the foreign ownership ratio shall be in accordance with the law on equitization . In cases where the law on equitization does not contain provisions, this ratio shall be implemented in accordance with the provisions.
- Therefore, a foreign investor who intends to contribute capital to, or acquire shares in, an enterprise operating in Vietnam should determine the foreign investor’s percentage limit through the steps after:
Step 1: Determine the business area of the company:
- Is the business sector subject to international treaties that Vietnam is a member of the ownership interest of foreign investors? If an international treaty exists, it must comply with the provisions therein.
For example: According to the Schedule of WTO Commitments, the enterprise engaged in other services and inland waterway transport, the maximum capital ownership ratio of foreign investors is 49%.
- If the business sector of the company in which the foreign investor intends to invest does not belong to the schedule of WTO commitments, it must determine the conditional business sector.
Step 2: Determining the limit of ownership of foreign investors in accordance with the law:
- According to the provisions of specialized law or conditional business lines:
- Provisions of specialized law: If such trades, the law prescribes the maximum ownership ratio of foreign investors, must comply with such regulations.
- Conditional business lines: The list of conditional business lines is regularly updated on the National Information Portal on foreign investment. This case must comply with the regulations of each industry on the limit of ownership of foreign investors.
For example: Film Services (CPC: 96121), the charter capital of foreign investors in economic organizations does not exceed 51%.
- If the business is on the list of conditional business, the maximum foreign ownership is 49%.
- In the case of multi-sectoral activities, foreign investors need to determine which industries are regulated by foreign investors. In those professions, choose the lowest level.
Step 3: Provisions in the company charter
- If the relevant laws do not regulate as well as the business lines are not on the list of conditions, then it must be based on the charter of the company that regulates the proportion of ownership of foreign investors. Otherwise, the limit for foreign investors is unlimited, up to 100%. For example, Vietnam Dairy Products Joint Stock Company, on May 21, 2016, the Board of Directors decided to allow the charter capital of foreign investors up to 100%.
- In cases where an equitized State enterprise:
The equitization of state-owned enterprises shall comply with the provisions of Decree No. 59/2011 / ND-CP on transformation of State-owned enterprises into joint stock companies, Decree 116/2015 / ND-CP. Some articles of Decree 59/2011 / ND-CP, Circular 123/2015 / TT-BTC guiding foreign investment activities on the stock market.
