Foreign investors usually choose Vietnam as a market to invest in. One of these forms is to contribute capital, purchasing shares or part of a company’s capital in Vietnam. To be able to do so, investors must meet specific conditions and procedures according to the Investment Law 2020 and related regulations of Vietnam. Through this investment method, investors have the right to participate in managing business activities of legally established companies according to Vietnamese law.
With experience in advising many foreign investors in Vietnam, in this article, LawPlus will provide customers with information on the forms of purchasing shares or part of a company’s capital of Vietnamese enterprises according to current regulations.
Table of Contents/Mục lục
1. Overview of investment form
Based on Article 25 of the Investment Law 2020, investors are allowed to. invest through capital contribution, purchasing shares or part of a. company’s capital of Vietnamese enterprises according to the following forms:
Investors contribute capital to economic organizations in the following forms:
– Purchasing shares of initial public offerings or additional. share issuance from joint stock companies (JSC);
– Contributing capital to limited liability companies and partnerships;
– Contributing capital to other economic organizations .not falling under the above two forms.
Investors can buy shares, purchase capital from economic organizations by the following methods:
– Purchasing shares from a JSC or shareholders;
– Buying capital contributions from a limited liability company. members to become members of a limited liability company;
– T Buying capital contributions from contributing members in partnership .companies to become contributing members of the partnership company;
– Buying capital contributions from other economic organizations not covered by the above three forms.
Benefits of investing in buying shares, capital contributions:
Buying shares, and capital contributions of a Vietnamese enterprise can. bring some benefits to foreign investors, such as saving time and costs, avoiding risks, .accessing existing resources and networks, and enhancing the reputation and credibility of investors .in the domestic market of Vietnam. In addition, since the enterprise has been established before, investors can continue to enjoy the available resources of the enterprise without having to perform establishment procedures.
2. Investment procedures
Buying shares, and capital contributions is a popular form of investment for .foreigners who want to do business in Vietnam, alongside establishing .new economic organizations. Therefore, foreign investors when investing through this form need to meet conditions and carry out procedures according to investment laws and other regulations.
To understand more about the investment procedure .through this form, customers can refer to LawPlus’ article here.
3. Notes for foreign investors
In addition to the benefits mentioned above, the form of capital contribution, purchasing shares, or part of a company’s capital of a Vietnamese company also poses certain challenges and risks for foreign investors. Among them are issues related to financial capacity assessment, legal assessment, valuation issues, integration issues, and cultural differences. With experience consulting many foreign investors in Vietnam LawPlus will outline some points that foreign investors should note when investing in Vietnam as follows:
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Business assessment
Foreign investors need to conduct a thorough evaluation of the enterprise on aspects such as legal, financial, and business situations to make an accurate investment decision. The pre-investment assessment process may be time-consuming, expensive, and difficult depending on the situation of the enterprise. However, this will help foreign investors minimize risks and assess potential future operations.
Consequently, investors can evaluate businesses by conducting audit activities performed by professional auditing firms before investing to assess the financial condition, business operations, assets, and liabilities of businesses.”
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Determination of business sectors, investment industries, and expected capital investment
Foreign investors need to determine the business sectors, and investment .industries that investor want to invest in if they belong to qualified business .fields under Investment Laws and Trade Agreements. These business sectors and industries require foreign investors to meet certain conditions or obtain approvals or licenses before investing in Vietnam. At the same time, foreign investors need to determine the percentage of equity they wish to purchase to evaluate whether this percentage is limited or restricted under Investment Law or other related regulations. Foreign investors may also have to comply with the international treaty that Vietnam has joined with investment forms, scope of activities, participation by Vietnamese partners in investment activities, etc.
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Ensure compliance with relevant laws and regulations relating to investment in Vietnam
Purchasing shares, and capital contribution can cause changes related to ownership ratios in a company in Vietnam. Therefore, foreign investors need to ensure that their investments follow the laws and regulations in Vietnam.
In addition, foreign investors also need to comply with registration procedures for buying stakes in Vietnamese companies at the Investment Registration Authority. These procedures may vary depending on the industry and business sector, investment ratio, and impact of investment on the market or consumer rights
4. Conclusion
Purchasing capital contributions in Vietnam is one of the investment. methods that foreign investors can use to gain some benefits when .participating in or expanding their business in the Vietnamese market. However, this method also requires investors to comply with .relevant investment regulations and have an understanding and evaluation of the potential companies before investing. Therefore, foreign investors should carefully do a business assessment before making any decision, ensure compliance with legal requirements, and develop a reasonable business plan to minimize risks and maximize profits from their business activities.
For more detailed advice on investing in Vietnam through investment forms, you can contact LawPlus via hotline 0965 052 039 / 0966 008 030 (WhatsApp, Viber, Zalo) or email info@lawplus.vn.
