Transitioning the capital of Vietnamese companies to companies that have foreign investments is a complicated process and requires a lot of legal procedures. To make this transition, the Vietnamese company needs the consent of its shareholders, tax agencies, state management agencies and other relevant parties. The transitioning of the capital of a Vietnamese company to a company with foreign investments must meet a number of business requirements in accordance with legal regulations. Below are some noteworthy points on transitioning the capital of Vietnamese companies to companies with foreign investments:

I. The reality of transitioning the capital of Vietnamese companies to companies with foreign investments

In the business process, many Vietnamese enterprises have chosen the solution of calling for capital contributions from foreign investors. This means that the enterprise will be transitioned from 100% Vietnamese capital to a foreign-invested enterprise. It can be observed that the demand for the transition of capital into foreign-invested companies is increasing. Various benefits from the transition of the capital of a Vietnamese company to a company with foreign investments, such as obtaining advanced management methods from the international community and the application of modern technology and advanced science, may result in higher economic efficiency for enterprises. Additionally, invested capital as well as human resources are invested fully. Enterprises with foreign investments (including less than 51%, more than 51%, or 100% of foreign-invested capital) would be a cultural interaction of corporate managements between nations, which will create a more diverse corporate identity. Creating the conditions for the introduction of Vietnamese goods and services to be widely promoted internationally and at the same time to maximize international integration into the Vietnamese market.

II. Learn about the transition of capital of a Vietnamese company to a company with foreign investments

1. What are the conditions for transitioning the capital of a Vietnamese company to a company with foreign investments?

Conditions for the transition of capital of a Vietnamese company to a company with foreign investments include:

- Only investors from countries and territories that are members of the WTO to which Vietnam is a member committed to opening up the market are entitled to contribute capital to the Vietnamese company.

- When transitioning from a 100% Vietnamese capital company to a company with foreign investments, it is necessary to check and adjust the business occupation because there are occupations that require a minimum capital ratio or are not permitted under the WTO commitment form.

2. The advantages and disadvantages of the transition of capital of a Vietnamese company to a company with foreign investments

Transition of capital of a Vietnamese company to a company with foreign investments has advantages such as:

- Attracting foreign investment: When enterprises receive foreign investments, it means that enterprises are transferred from 100% Vietnamese capital to enterprises with foreign investments.

- Market Expansion: Expand the market and reach new customers from overseas.

- Increase competitiveness: With capital and technology from overseas, enterprises can enhance their competitive capacity.

However, in addition to the advantages, the transition of Vietnamese capital to a company with foreign investments still has a number of disadvantages, namely:

- Legal complexity: capital transitions require complex and time-consuming legal procedures.

- Management risk: enterprise management can become more complicated with the involvement of foreign investors.

- Company structure changes: The company may have to change its structure to meet the requirements of foreign investors.

- Investment conditions: Foreign investors must comply with the conditions of investment as regulated by Vietnamese law.

- Occupation limitations: Foreign investors can only operate in occupations that have regulated market access.

III. Legal regulations on the transition of capital of a Vietnamese company to a company with foreign investments

1. Dossier to transition the capital of a Vietnamese company to a company with foreign investments

The dossier to transition a Vietnamese company to a company with foreign investments includes:

- Company Statute (if any);

- Proposal for enterprise registration (if any);

- List of foreign members/shareholders (if any);

- Meeting memorandum to change the contents of the enterprise registration(if any);

- Decision to change the contents of the enterprise registration;

- A transfer agreement for the entire or part of the capital contributions or shares;

- Notification of changes to the contents of the enterprise registration;

- Notification of eligibility for capital contribution, purchase of shares;

- Copy or consular legalization of passport/business license of foreign investor;

- Copy of identification card/identity card/passport of Vietnamese (in case of joint capital contribution with Vietnamese);

- Authorization text for the person who carried out the registration procedure (if any).

2. Procedure for the transition of capital of a Vietnamese company to a company with foreign investments

The procedure for transitioning the capital of Vietnamese companies to companies with foreign investments consists of the following steps:

- Request for the approval of the Department of Planning and Investment for foreign investors to contribute capital and buy shares of the company.

- Execute the procedure for changing the contents of the enterprise registration due to changes in the charter capital.

- Request the issuance of an adjusted investment policy and an adjusted investment registration certificate due to a change in the project investment capital.

IV. Answering questions relating to the transition of the capital of Vietnamese companies to companies with foreign investments

1. Is it necessary to change the business registration when transitioning capital from a Vietnamese company to a company with foreign investments?

Yes, when transitioning capital from a Vietnamese company to a company with foreign investments, the enterprise needs to execute procedures to change the contents of the business registration.

2. Which agency receives the transition of capital of a Vietnamese company to a company with foreign investments?

The dossier to transition the capital of a Vietnamese company to a company with foreign investments must be submitted to the Business Registration Office of the Department of Planning and Investment of the province/city where the company is headquartered.

3. Is it necessary to evaluate the assets contributed when transitioning enterprises of Vietnamese currency converted to foreign currency?

Pursuant to Enterprise Law 2020, capital assets may be the Vietnam Dong, freely convertible foreign currencies, gold, the value of land use rights, the value of intellectual property rights, technology, secret technique, or other assets that can be valued in Vietnam Dong. Contributed capital assets that are not the Vietnam Dong, freely convertible foreign currencies, or gold will need to be evaluated by members, founding shareholders, or professional evaluation organizations valued and represented in the Vietnam Dong. Therefore, when transitioning capital from a Vietnamese company to a company with foreign investments, the contributed capital assets do not necessarily have to be valued from the Vietnam Dong to foreign currencies. Instead, all contributed capital assets, including foreign currencies, must be valued and represented in Vietnam Dong.

V. Counseling services and execution of procedures related to the transition of capital of Vietnamese companies to companies with foreign investments

These are the details about the transition of capital of Vietnamese companies to companies with foreign investments that NPLAW sent to fellow readers. If fellow readers have any concerns that need further answers, please contact NPLAW at the following contact details: