The capital transfer by foreign enterprises in Vietnam is subject to strict legal regulations to ensure compliance with prescribed conditions and procedures, as well as the protection of the lawful rights and interests of all parties involved. The following article provides comprehensive guidance on the entire process, applicable conditions, and potential legal risks, thereby enabling enterprises to conduct transactions in a safe, transparent, and lawful manner. 

I. Understanding of issues relating to capital transfer by foreign enterprises

In the context of international economic integration, capital transfer activities by foreign enterprises in Vietnam have become an important form of investment, while simultaneously posing numerous potential legal risks.

Issues concerning procedures, conditions, and the rights and obligations of the parties involved in capital transfer transactions must be thoroughly understood in order to ensure transparency, legality, and the prevention of disputes. Thus, foreign enterprises and investors should take such considerations when conducting capital transfers in Vietnam.

II. Understanding capital transfer by foreign enterprises

To fully comprehend the mechanism and impact of capital transfers by foreign enterprises, it is necessary to examine forms of implementation and the effects of such transactions on subsidiaries and related parties. 

1. Why do foreign enterprises wish to transfer capital in Vietnam?

Foreign enterprises commonly seek to transfer capital in Vietnam for several principal reasons:

  • Investment restructuring: Enterprises may wish to reallocate capital to other projects or markets with higher returns.
  • Achievement of financial objectives: Capital transfer enables capital recovery, profit optimization, and the mitigation of financial risks.
  • Adjustment of business strategies: Divestment may facilitate cooperation with new partners or alignment with global strategic directions.
  • Reduction of legal and governance risks: In cases of legal, managerial, or market-related difficulties, capital transfer may serve as a safer solution.

These reasons reflect both business objectives and the necessity of complying with Vietnamese legal regulations to ensure transparent, lawful, and effective transactions.

2. What forms of capital transfer are available to foreign enterprises?

Pursuant to Clause 1, Article 25 of the Law on Investment 2020, foreign investors may transfer capital in Vietnam through the following forms:

  • Purchase of shares issued for the first time or additional shares of a joint-stock company, thereby becoming shareholders and participating in corporate governance in proportion to their ownership interests.
  • Capital contribution to a limited liability company or a partnership, increasing charter capital and enjoying rights in accordance with the capital contribution agreement.
  • Capital contribution to other economic organizations not falling under the above categories, complying with regulations on business lines, ownership ratios, and investment registration procedures.

These forms provide foreign investors with flexibility in participating in the Vietnamese market, while ensuring compliance with statutory limitations on ownership and corporate management.

3. Can capital transfer by foreign enterprises affect the operations of subsidiaries?

The transfer of capital by foreign enterprises in Vietnam may significantly affect the operations of subsidiaries, specifically:

  • Changes in control: If a substantial ownership capital is transferred, control and strategic orientation of the subsidiary may change, impacting business policies, personnel decisions, and development plans.
  • Impact on management structure: Although the subsidiary remains an independent legal entity, the new ownership structure may influence decision-making authority and the rights of existing shareholders.
  • Increased risks of conflicts: The entry of a new major shareholder may cause conflicts of interest between current management and new shareholders, potentially affecting operational efficiency.

Capital transfers by foreign investors may result in significant changes to control and operations of subsidiaries; therefore, all parties must carefully consider the implications and fully comply with applicable legal procedures.

III. Legal regulations governing capital transfer by foreign enterprises

Capital transfers by foreign enterprises in Vietnam are governed by a comprehensive legal framework designed to protect the rights and obligations of relevant parties while maintaining the stability of subsidiary operations.

1. What does Vietnamese law provide regarding capital transfer by foreign enterprises?

Capital transfer activities by foreign enterprises (also referred to as capital contribution, share purchase, or acquisition of capital contributions in Vietnam) are primarily regulated under the Law on Investment 2020 to ensure transparency, legality, and the protection of stakeholders’ interests. 

Specifically:

  • Article 24 provides that foreign investors have the right to contribute capital and purchase shares or capital contributions in economic organizations, subject to market access conditions, national defense and security requirements, and land law regulations, particularly in sensitive areas.
  • Article 25 stipulates permissible forms of capital transfer, including the purchase of firstly issued or additional shares of joint-stock companies; capital contribution to limited liability companies or partnerships; and capital contribution to other economic organizations not falling within the foregoing categories.
  • Article 26 (as guided by Point 3, Section I of Official Letter No. 8909/BKHĐT-PC) requires foreign investors to register with the investment registration authority where foreign ownership exceeds 50%.

These provisions establish a clear legal framework facilitating transparent and lawful capital transfers while safeguarding the interests of both investors and recipient enterprises.

2. Which authority is competent to approve capital transfers by foreign enterprises?

Pursuant to Article 66 of Decree No. 31/2021/ND-CP, an economic organization in which a foreign investor contributes capital or purchases shares must submit an application for capital transfer registration to the investment registration authority where the Vietnamese enterprise has its headquarters.

The investment registration authority (Department of Finance) is competent to review and approve capital transfer transactions by foreign investors, including cases involving increases in ownership ratios beyond permitted thresholds.

3. What are the consequences of non-compliance with capital transfer regulations?

Under Vietnamese law, unlawful capital transfers may result in the following consequences:

  • Administrative sanctions: Pursuant to Article 16 of Decree No. 122/2021/ND-CP, foreign investors may be fined from 100 million VND to 200 million VND for implementing capital transfers without satisfying statutory conditions.
  • Mandatory restitution of capital or proceeds: Investors may be required to return capital, assets, or benefits derived from unlawful transfers.
  • Adjustment of the Investment Registration Certificate: Under Decree No. 31/2021/ND-CP, violations related to investment registration may result in mandatory amendments to the Investment Registration Certificate or the imposition of remedial measures.

Non-compliance may lead not only to financial sanctions, transaction invalidation, and loss of ownership rights, but also to serious reputational damage and adverse impacts on future investment activities.

In cases where violations cause serious damage, individuals involved may be subject to criminal liability under the Criminal Code 2015 (as amended in 2017), including offenses such as fraud (Article 174) or misappropriation of property (Article 175). Although Article 222 of the Criminal Code regarding violations of bidding regulations does not directly apply to capital transfers, it reflects a general principle that serious violations of economic regulations may be subject to criminal prosecution.

Accordingly, legal risks extend beyond administrative sanctions and may escalate to criminal liability where violations result in substantial harm.

4. What conditions must be satisfied for the successful capital transfer by foreign enterprises?

Pursuant to Article 24 of the Law on Investment 2020, foreign investors contributing capital, purchasing shares, or acquiring capital contributions in economic organizations must satisfy the following conditions:

  • Market access conditions, in compliance with Article 9 of the Law on Investment regarding permitted business lines and sectors for foreign investors.
  • National defense and security requirements, ensuring no adverse impact on national security or public order.
  • Land-related conditions, particularly compliance with regulations on land use rights in islands, border areas, and coastal regions.

Only upon full satisfaction of these conditions will capital transfers be lawful, approved by the investment registration authority, and legally effective, thereby minimizing legal risks for both foreign investors and Vietnamese enterprises.

IV. Questions regarding capital transfer by foreign enterprises

1. Can foreign enterprises transfer capital in all sectors?

Pursuant to Article 9 of the Law on Investment 2020 (as guided by Section 2, Chapter II of Decree No. 31/2021/ND-CP), market access rights of foreign investors depend on the “restricted business sectors list”. Certain sectors are entirely prohibited, while others are permitted subject to specific conditions prescribed under Decree No. 31/2021/ND-CP.

Accordingly, foreign enterprises may not transfer capital in all sectors, but only in those not prohibited or conditionally permitted, provided that all legal requirements are fully satisfied.

2. What is the capital transfer procedure for foreign enterprises in Vietnam?

Pursuant to Article 26 of the Law on Investment 2020 and Article 66 of Decree No. 31/2021/ND-CP, the capital transfer procedure generally involves the following steps:

  • Step 1: Determination of applicable conditions, including whether the transaction increases foreign ownership in conditional business sectors, exceeds 50% of charter capital, or involves land in border, coastal, or island areas, or sectors affecting national defense and security.
  • Step 2: Preparation of registration dossiers, including applications for capital contribution or acquisition, enterprise information, business lines, shareholder or member lists, ownership ratios before and after the transaction, transaction value, and investment project information, if any.
  • Step 3: Submission of dossiers to the investment registration authority where special cases apply; otherwise, implementation of shareholder or member changes in accordance with enterprise law.
  • Step 4: Review and approval by the investment registration authority, including assessment of legal conditions and issuance of approval or refusal decisions.
  • Step 5: Completion of post-approval procedures, including registration of ownership changes with the business registration authority and updating enterprise registration and related legal obligations.

Such procedures ensure lawful, transparent transactions in compliance with ownership ratios, business sector regulations, and national defense and security requirements.

3. What legal risks may arise in capital transfer transactions?

Main legal risks include:

  • Regulatory compliance risks arising from failure to properly register capital contributions or acquisitions, potentially resulting in invalid transactions or administrative sanctions.
  • Sectoral restriction risks associated with investing in conditional business sectors without meeting market access requirements.
  • Ownership ratio risks where statutory ownership limits are exceeded without approval.
  • Land, national defense, and security risks related to investments in sensitive areas without competent authority approval.
  • Contractual and shareholder rights risks due to insufficient agreements, potentially leading to disputes or litigation.

Identifying and managing these risks is essential to ensure lawful capital transfers and to avoid administrative, civil, and investment management consequences.

4. What are the latest regulations on capital transfer by foreign enterprises?

Applicable legal regulations updates include:

  • Under Article 1 of Decree No. 69/2025/ND-CP, foreign investors in credit institutions must comply with ownership limits and adjust ownership ratios within six months if thresholds are exceeded.
  • Under Article 14 of Decree No. 01/2014/ND-CP, foreign strategic investors must commit not to transfer shares for at least five years, and where ownership exceeds 10% of charter capital, transfers are restricted for three years from the acquisition date.
  • Under Article 11 of Circular No. 03/2025/TT-NHNN, investors holding more than 50% but less than 51% of capital must open a direct investment capital account rather than an indirect investment account.
  • Under Article 3 of the Law on Corporate Income Tax 2025, income from capital transfer by foreign investors is taxed based on transfer value rather than solely on profits.
  • Article 66 of Decree No. 31/2021/ND-CP requires registration of capital contributions or acquisitions in cases specified under Clause 2, Article 26 of the Law on Investment.

5. Where can foreign enterprises obtain legal support for capital transfers?

Foreign enterprises may seek legal assistance from:

  • Reputable Vietnamese law firms specializing in investment and M&A.
  • Independent lawyers or legal consultants experienced in foreign investment, capital contribution, share acquisition, and capital transfer.
  • Professional advisory organizations providing services in contract drafting, registration procedures, and compliance with Vietnamese law.
  • Specialized legal services enabling enterprises to ensure compliance, reduce risks, and safeguard their interests throughout capital transfer transactions.

V. Are you seeking reputable legal counsel for capital transfer matters involving foreign enterprises?

For enterprises and foreign investors intending to conduct capital transfers in Vietnam, selecting a reputable law firm such as NPLaw is of paramount importance. With extensive experience in investment, M&A, capital contribution, investment registration, and capital transfer transactions, NPLaw provides comprehensive solutions at every stage from contract review and investment registration to transaction structuring and execution.