Licensing of foreign capital ownership is a crucial process for managing and attracting foreign investment in Vietnam, ensuring that investment activities comply with the law. This regulation not only impacts enterprises but also influences the national economy. Below, NPLaw will examine the main legal issues related to licensing of foreign capital ownership.
I. Current situation of licensing of foreign capital ownership
The licensing of foreign capital ownership in Vietnam is currently undergoing development and improvement. Vietnam’s foreign investment attraction policies have achieved significant success; however, licensing of foreign capital ownership still faces certain challenges.
Foreign investors may own shares or capital contributions in Vietnamese economic organizations, but they must satisfy conditions on market access, national defense and security protection, and compliance with land regulations. Nevertheless, restrictions on foreign capital ownership still exist in certain sensitive sectors, particularly those related to national defense, security, and other strategic industries.
Additionally, the licensing process can sometimes be complex, requiring investors to have a clear understanding of legal provisions, leading to time-consuming procedures and potential difficulties for international investors. Nonetheless, Vietnam continues to create a favorable legal environment for foreign investment by reforming administrative procedures and improving the foreign capital ownership licensing mechanism.
II. Cases requiring licensing of foreign capital ownership
Pursuant to Article 25 of the Law on Investment 2020, foreign investors must obtain licensing of foreign capital ownership in the following cases:
Capital contribution to economic organizations:
- Purchase of newly issued shares or additional shares of a joint stock company;
- Capital contribution to a limited liability company (LLC) or partnership;
- Capital contribution to other economic organizations not covered by the above cases.
Purchase of shares or capital contributions of economic organizations:
- Purchase of shares in a joint stock company from the company or its shareholders;
- Purchase of capital contributions from members of an Limited Liability Company to become a member of the company;
- Purchase of capital contributions from partners of a partnership to become a capital-contributing partner;
- Purchase of capital contributions from members of other economic organizations not covered by the above cases.
III. Authorities responsible for licensing foreign capital ownership
1. Department of Planning and Investment, Ministry of Planning and Investment
The Department of Planning and Investment (of the province or city where the economic organization is headquartered) or the Ministry of Planning and Investment has the authority to receive and resolve registration procedures for capital contributions, share purchases, and acquisition of capital contributions by foreign investors in Vietnam, as stipulated in Article 26 of the Law on Investment 2020.
2. State Bank of Vietnam (for financial sector cases)
For cases where foreign investors contribute capital or purchase shares in Vietnamese credit institutions, or establish branches of foreign banks, the State Bank of Vietnam is the competent authority to issue, amend, supplement, and revoke operating licenses as prescribed in Article 27 of the Law on Credit Institutions 2024.
IV. Questions on licensing of foreign capital ownership
1. Are foreigners required to obtain licensing of foreign capital ownership to conduct business in Vietnam?
Pursuant to Clause 2, Article 26 of the Law on Investment 2020, foreign investors contributing capital, and purchasing shares or capital contributions in Vietnamese economic organizations must register for licensing of foreign capital ownership if they fall under the following cases:
- The foreign investor’s ownership ratio exceeds 50% of charter capital after the transaction;
- The target company engages in business sectors subject to conditions applicable to foreign investors;
- The target company uses land in areas affecting national defense and security.
Accordingly, foreigners wishing to do business in Vietnam must comply with procedures for licensing of foreign capital ownership as prescribed by law.
2. How long does it take to process licensing of foreign capital ownership?
According to Article 66 of Decree No. 31/2021/ND-CP, the licensing process takes 15 working days from the date of receipt of a valid dossier. Within this period, the investment registration authority (Department of Planning and Investment) shall issue a written approval allowing the foreign investor to contribute capital, purchase shares, or acquire capital contributions.
3. What are the fines for foreigners doing business in Vietnam without obtaining licensing of foreign capital ownership?
Pursuant to Article 46 of Decree No. 122/2021/ND-CP:
- A fine of 20,000,000 VND – 30,000,000 VND shall be imposed for: Contributing capital to establish an enterprise or registering capital contribution/share purchase in an improper form or without legal entitlement.
- A fine of 50,000,000 VND – 100,000,000 VND shall be imposed for: Conducting business in the form of an enterprise without enterprise registration.
Remedial measures: compulsory registration of enterprise establishment if conducting business without registration.
Accordingly, foreigners doing business in Vietnam without obtaining licensing of foreign capital ownership will be subject to administrative sanctions under Article 46 of Decree No. 122/2021/ND-CP.
4. Is there a limit on the number of enterprises a foreign investor may own in Vietnam?
Currently, Vietnamese law does not limit the number of enterprises a foreign investor may own. However, ownership is subject to the foreign ownership ratio, the investment sector, and market access conditions applicable to foreign investors under the Law on Investment 2020 (Article 9 – Market Access Conditions), WTO commitments, and international treaties to which Vietnam is a party.
Therefore, a foreign investor may own capital in multiple enterprises but must comply with maximum ownership ratios for each specific business sector as listed in the restricted market access sector list.
5. Conditions for licensing of foreign capital ownership
According to Article 24 of the Law on Investment 2020, foreign investors must satisfy the following conditions to obtain licensing of foreign capital ownership:
- Compliance with prohibitions on investment, conditional business sectors, and restrictions on ownership ratios;
- Capital contribution/share purchase must not adversely affect national defense and security;
- Compliance with land law provisions concerning conditions for land use rights acquisition.
Accordingly, to obtain licensing of foreign capital ownership, investors must fully comply with legal requirements on market access, national defense and security, and land laws to ensure lawful and effective investment.
V. Legal advisory services on licensing of foreign capital ownership
The above is an article by NPLaw on licensing of foreign capital ownership. With a team of experienced lawyers and legal specialists, NPLaw is always ready to accompany, consult, and support clients in legal matters relating to foreign capital ownership licensing. Should you require assistance on this or other legal issues, please contact NPLaw directly.
