The foreign ownership ratio (limit) in public companies is a legal regulation designed to control the shareholding ratio of foreign investors. These regulations aim to ensure economic security, protect sensitive sectors, and maintain the stability of Vietnam’s stock market. Below, NPLaw invites readers to explore the legal aspects related to foreign ownership ratios in public companies.

I. The role of foreign ownership ratios in public companies

Regulations on foreign ownership ratios in public companies play an essential role in safeguarding economic security and maintaining domestic enterprises’ control over sensitive sectors or those impacting national defense and security.

At the same time, these rules help selectively implement international commitments, ensure transparency and fairness in the securities market, and facilitate reasonable foreign investment inflows. Ownership limits also allow the State to control foreign capital flows, prevent market manipulation, and protect domestic investors’ interests from external volatility.

II. Legal regulations on foreign ownership ratios in public companies

1. How is the foreign ownership ratio in public companies defined?

The foreign ownership ratio in public companies refers to the maximum percentage of charter capital (or stocks) that foreign investors are allowed to hold in a Vietnamese public company under applicable Laws.

2. How is the maximum foreign ownership ratio in public companies determined?

According to Clause 1, Article 139 of Decree No. 155/2020/ND-CP, the maximum foreign ownership ratio in public companies is determined as follows:

- If the company operates in sectors subject to foreign ownership restrictions under international treaties to which Vietnam is a party, such treaties shall prevail;

- If specialized laws specify foreign ownership ratios, such provisions shall apply;

- If the company operates in sectors named in the market access restriction list for foreign investors, the ratio follows such a list. If the list does not specify a ratio, the maximum foreign ownership is 50% of charter capital;

- For public companies not falling under the above cases, there is no foreign ownership restriction;

- If the company operates in multiple sectors with different foreign ownership ratios, the lowest ratio among such sectors shall apply;

- If the company itself decides on a foreign ownership ratio lower than the permissible maximum, such ratio must be approved by the General Meeting of Shareholders and specified in the company’s charter.

Thus, the maximum foreign ownership in public companies is determined based on international treaties, specialized laws, the market access restriction list, or the company’s internal decision (if lower than the allowed maximum).

3. Notes on foreign ownership ratios in Vietnam’s securities market

- When a state-owned enterprise undergoes equitization and is listed or registered for trading on the stock market, the foreign ownership ratio is governed by laws on equitization. If such laws do not specify, Clause 1, Article 139 of Decree No. 155/2020/ND-CP applies.

- Foreign investors are permitted unlimited investment in instruments such as: government bonds, government-guaranteed bonds, municipal bonds, corporate bonds, fund certificates, shares of securities investment companies, derivatives, covered warrants, and depositary receipts, unless otherwise provided by relevant laws.

- When issuing shares, convertible bonds, bonds with warrants, ETF certificates, covered warrants, or depositary receipts, the issuer must ensure that after such activities, the foreign ownership ratio does not exceed the limits specified in Clauses 1 and 2, Article 139 of Decree No. 155/2020/ND-CP.

- If a public company exceeds the statutory foreign ownership limit, it may not allow further increases in such ratio. Unless otherwise provided by law, foreign investors and foreign-invested economic organizations holding more than 50% foreign capital may only sell shares, not purchase additional shares, until the ownership returns to a compliant level. However, they may still receive dividends in shares or purchase shares in rights offerings to existing shareholders.

III. Some questions about foreign ownership ratios in public companies

1. Within how many days must a public company notify its maximum foreign ownership ratio after being confirmed as a public company by the State Securities Commission?

According to Clause 1, Article 141 of Decree No. 155/2020/ND-CP, once the State Securities Commission confirms the registration of a public company, the company must notify its maximum foreign ownership ratio within 07 working days from the date of confirmation.

Thus, public companies must notify within 07 working days from the date the State Securities Commission certifies the completion of public company registration.

2. Why are foreign ownership ratios in public companies necessary?

Setting foreign ownership ratios in public companies is essential for many important reasons related to economics, law and national security, specifically:

- Certain sectors directly affect national defense, security, natural resources or critical infrastructure, making it necessary to restrict foreign ownership to prevent external control and influence;

- Vietnam has joined many free trade agreements, some of which open certain sectors to foreign investment while restricting others. Specifying ownership ratios helps comply with related international commitments;

- Ownership ratios facilitate easier supervision and management of investment activities by state regulatory bodies;

- These ratios do not aim to restrict investment but serve as a tool to control the appropriate level of participation, creating a stable and secure investment environment for both domestic and international investors.

In short, foreign ownership ratios in public companies help ensure economic-security balance, legal compliance, and maintain a stable and transparent investment climate.

3. Is the maximum foreign ownership ratio in public companies engaged in real estate business in Vietnam 50% or 100%?

According to point c, Clause 1, Article 139 of Decree No. 155/2020/ND-CP, if the real estate sector is listed as a sector with conditional market access for foreign investors without a specified ownership ratio, the maximum foreign ownership is 50% of charter capital.

Therefore, for public companies operating in the real estate business, the maximum foreign ownership ratio is 50%.

IV. Legal advisory services on foreign ownership ratios in public companies

The above is an article by NPLaw on foreign ownership ratios in public companies. With a team of experienced lawyers and legal experts, NPLaw is always ready to accompany, advise, and support clients on legal issues related to foreign ownership in public companies. If you require assistance on this or other legal matters, please contact NPLaw using the information below: