Foreign investor shareholders play a critical role in attracting capital and fostering Vietnam’s economic development. Legal regulations governing foreign shareholders ensure transparency, fairness, and the protection of rights and interests for all parties. At the same time, they establish control over ownership ratios and investment conditions, thereby promoting international cooperation and enhancing the competitiveness of domestic enterprises. Below, NPLaw invites our valued readers to explore the legal issues related to foreign investor shareholders.
I. Definition and legal status of foreign investor shareholders
A foreign investor shareholder in a joint stock company in Vietnam refers to any foreign individual or organization that engages in a joint stock company in Vietnam through contributing capital or purchasing shares.
In terms of legal status, foreign investor shareholders have the same rights and obligations as domestic shareholders. These include the right to vote in general meetings of shareholders, receive dividends, transfer shares, and request information about the company. However, they are also subject to specific legal provisions regarding maximum ownership ratios in restricted sectors, as well as regulations on capital transfers, foreign exchange, and international commitments to which Vietnam is a member.
II. Legal provisions on foreign investor shareholders
1. Rights and obligations of foreign investor shareholders
According to Articles 115 to 119 of the Law on Enterprise 2020, foreign investor shareholders are entitled to the following rights and subject to the following obligations:
- For holders of common shares:
+ Attending and voting at the General Meeting of Shareholders;
+ Receiving dividends and having pre-emptive rights in newly issued shares;
+ Transferring shares and accessing company records;
+ Receiving a portion of remaining assets upon dissolution or bankruptcy;
+ Requesting to convene a General Meeting of Shareholders and inspecting the company’s operations (if holding at least 5% of total shares);
+ Nominating candidates to the Board of Directors or Supervisory Board (if holding at least 10% of total shares);
+ Exercising other rights as stipulated in the company’s Charter.
- For holders of preferred shares:
+ Voting preference shares: Obtaining more voting ballots but typically restricting share transfers;
+ Dividend preference shares: Being entitled to higher or fixed dividends without voting rights;
+ Redeemable preference shares: Being subject to request the company to redeem shares without voting rights.
- Obligations of shareholders:
+ Contributing capital in full and on time;
+ Not unilaterally withdrawing capital from the company;
+ Complying with the company’s Charter and decisions;
+ Keeping confidentiality of business information;
+ Fulfilling other obligations as stipulated by law and the company’s Charter.
Accordingly, foreign investor shareholders in Vietnamese joint stock companies are entitled to the same rights and subject to the same obligations as domestic shareholders under the Law on Enterprise 2020.
2. Specific legal issues regarding foreign shareholding in Vietnamese enterprises
Specific legal issues related to foreign investment in the form of shareholders in Vietnam include:
+ Compliance with maximum ownership ratios in Vietnamese companies as stipulated by law;
+ Fulfillment of market access conditions under the Law on Investment 2020 and international treaties to which Vietnam is a signatory;
+ Completion of legal procedures for registering investment and purchasing shares or capital contributions, including notification and registration of changes in shareholder information.
3. Main notes for foreign shareholders
When becoming a shareholder in a Vietnamese company, foreign investors should take note of the following:
- While foreign investors may hold shares in Vietnamese companies, they must comply with sector-specific ownership limits for foreign shareholders;
- The transfer of shares by foreign investors must conform to Vietnamese laws, especially in sectors with restricted foreign ownership;
- Certain sensitive sectors such as national defense, security, and telecommunications may impose special restrictions on foreign shareholders to safeguard national interests;
- Depending on the ownership ratios and applicable laws, foreign investors’ voting rights may be subject to limitations.
III. Questions regarding foreign investor shareholders
1. Where can foreign investor shareholders obtain legal support in Vietnam regarding their rights and obligations?
Foreign investors may seek legal assistance through:
- Law firms and international legal consultancies with offices in Vietnam;
- Associations of foreign-invested enterprises or foreign chambers of commerce that provide legal advisory referrals and support.
2. Are obligations to comply with the Company Charter of foreign shareholders different from those of domestic shareholders?
Both foreign and domestic shareholders are equally bound by the company’s Charter, which serves as the internal governing document. The Charter outlines the rights and obligations of shareholders, corporate governance structure, operational procedures, decision-making principles, profit distribution, and shareholder meeting protocols.
3. What factors influence the maximum allowable ownership ratio of foreign investors in certain sectors?
Several factors determine the foreign ownership ratio in specific industries, including:
- The list of sectors with restricted market access (Article 9, Law on Investment 2020);
- Market access conditions based on investor nationality (Clauses 7, 8, 9, Article 17, Decree No. 31/2021/ND-CP);
- Sector-specific ownership ratios (Clause 10, Article 17, Decree No. 31/2021/ND-CP);
- Ownership limits in public companies (Clause 1, Article 139, Decree No. 155/2020/ND-CP).
In summary, the maximum foreign equity ownership in Vietnamese companies depends on legal factors such as the business sector, international treaties, the investor's nationality, and Vietnam’s international commitments.
4. Do foreign shareholders have any rights and obligations that differ from domestic shareholders in joint stock companies in Vietnam?
While foreign shareholders retain full rights associated with common and preferred shares and must fulfill the obligations under Articles 115–119 of the Law on Enterprise 2020, they are additionally subject to:
- Market access restrictions;
- Investment registration and capital contribution procedures;
- Industry-specific foreign ownership ratios;
- Foreign exchange regulations.
Thus, although foreign and domestic shareholders generally share the same rights and obligations, foreign investors must observe additional legal requirements and restrictions related to their industry, ownership ratios, and financial compliance.
5. What are the procedures and legal conditions for a foreign investor to become a shareholder in a Vietnamese joint stock company?
Under Article 24 of the Law on Investment 2020, foreign investors are permitted to acquire shares, provided that:
- They comply with the list of sectors with restricted market access (issued under Decree No. 31/2021/ND-CP);
- For conditional sectors, ownership is limited or requires a Vietnamese partner;
- Capital contributions are prohibited if they pose risks to national security or defense, especially in sensitive locations such as islands, borders, coastlines, or military zones;
- Transfer of land use rights in areas affecting national defense and security is prohibited for economic organizations with foreign ownership.
According to Article 26 of the Law on Investment 2020, the process for becoming a shareholder includes the following steps:
Step 1: Determining whether investment registration is required.
Foreign investors must register capital contributions and share purchases if any of the following applies:
- The contributions and purchases increase ownership ratios in a conditional business sector;
- It results in more than 50% foreign ownership;
- The target company holds land use rights in sensitive areas such as islands, borders, coastal regions, or areas critical to national defense and security.
Step 2: Preparing a dossier (if registration is required).
As prescribed in Article 66 of Decree No. 31/2021/ND-CP, required documents include:
- Application for capital contribution/share purchase;
- Notarized copies of legal documents of the investor;
- Capital contribution/share transfer agreement;
- Investment policy approval (if applicable);
- Enterprise registration certificate of the investee company (if established);
- Other documents upon request by the Department of Planning and Investment.
tep 3: Submitting the dossier.
The dossier must be submitted to the Department of Planning and Investment where the company is headquartered. Processing time is approximately 15 working days.
IV. Legal advisory services for foreign investor shareholders
The foregoing is a comprehensive overview by NPLaw on legal issues relating to foreign investor shareholders. With a team of seasoned lawyers and legal consultants, NPLaw is always ready to accompany, advise, and assist clients with all legal matters concerning foreign investors holding shares in Vietnamese companies.
