Necessary legal regulations on granting an expansion license for foreign ownership

In the context of increasingly deep international economic integration, expanding foreign ownership has become a critical element in many enterprises’ strategies to attract investment and develop operations in Vietnam. However, the application process for an expansion license of foreign ownership is not a simple procedure but involves many strict legal regulations.

Below, NPLAW analyzes the important legal regulations to note when granting approval for expanding foreign ownership in Vietnam.

I. Current situation of granting expansion licenses of foreign ownership

In recent years, the demand for foreign ownership in Vietnam has grown significantly. Both strategic and financial investors seek to expand or participate in Vietnamese enterprises, particularly in high-profit potential sectors such as real estate, technology, finance, and other services. Vietnamese enterprises also recognize that the participation of foreign investors not only increases capital growth but also brings many opportunities for cooperation and access to international markets.

II. Legal provisions on granting expansion licenses of foreign ownership

1. In what cases can foreign investors be granted an expansion license of foreign ownership?

According to point a, Clause 3, Article 9 of the Law on Investment 2020, one of the conditions for foreign investors when contributing capital to Vietnamese enterprises (i.e., expanding foreign ownership) is to comply with the ratio of charter capital ownership.

In addition, Clauses 7, 8, and 9 of Decree No. 31/2021/ND-CP stipulate principles on the application of market access restrictions for foreign investors as follows:

- Foreign investors from countries or territories that are not WTO members, investing in Vietnam, shall apply market access conditions as prescribed for investors from WTO member countries, unless Vietnamese law or international treaties between Vietnam and such country/territory stipulate otherwise;

- Foreign investors subject to investment treaties that provide more favorable market access conditions than Vietnamese law shall apply the market access conditions under such treaties;

- Foreign investors subject to multiple investment treaties with different provisions on market access may choose to apply the market access conditions under one of those treaties for all business lines. Once the investor chooses to apply the market access conditions of an investment treaty (including treaties newly signed or amended after it takes effect), they shall implement all rights and obligations under such a treaty.

Thus, market access conditions (including ownership ratio conditions) shall be implemented according to international investment treaties.

2. Authority to implement procedures for granting expansion licenses of foreign ownership

When a foreign investor expands foreign ownership by contributing capital, purchasing shares, or purchasing capital contributions, they must implement registration procedures under Article 26 of the Law on Investment 2020.

According to Clause 2, Article 66 of Decree No. 31/2021/ND-CP, an economic organization with a foreign investor contributing capital, purchasing shares, or purchasing capital contributions under Clause 2, Article 26 of the Law on Investment, shall submit 01 set of registration documents to the investment registration authority where the economic organization is headquartered.

Thus, the authority to grant an expansion license for foreign ownership lies with the investment registration authority where the enterprise is located.

3. Procedures for granting expansion licenses of foreign ownership

Under Article 66 of Decree No. 31/2021/ND-CP, the procedures are as follows:

- The economic organization with a foreign investor contributing capital, purchasing shares, or purchasing capital contributions under Clause 2, Article 26 of the Law on Investment submits 01 set of registration documents to the investment registration authority where the enterprise is headquartered.

- Within 15 days from the date of receiving a valid dossier, the investment registration authority shall review compliance with the conditions on contributing capital, purchasing shares, or purchasing capital contributions under Clause 2, Article 24 of the Law on Investment, and Clause 4, Article 65 of this Decree, and notify the investor. The notification is sent to the foreign investor and the economic organization.

- After the foreign investor is approved to contribute capital, purchase shares, or purchase capital contributions, the economic organization shall implement procedures to change members or shareholders at the business registration authority under the Law on Enterprise and other relevant regulations.

III. Questions on granting expansion licenses of foreign ownership

1. Do investors need to meet capital conditions when expanding foreign ownership in enterprises?

In some cases, foreign investors must meet capital requirements when expanding foreign ownership in Vietnamese enterprises. For conditional business lines with restricted foreign market access, investors must satisfy statutory or minimum capital conditions, such as in banking, insurance, securities, foreign-invested universities, travel services, etc.

2. Time limit for implementing procedures for granting expansion licenses of foreign ownership

According to Clause 3, Article 66 of Decree No. 31/2021/ND-CP, the time limit for the investment registration authority to review compliance with the conditions on capital contributions, share purchases, and contributed capital purchases is 15 days from the date of receiving a valid dossier.

3. What are the fines for expanding foreign ownership without notification?

Expanding foreign ownership in an enterprise without implementing notification procedures is subject to fines under Article 59 of Decree No. 122/2021/ND-CP, with fines ranging from 10,000,000 VND to 15,000,000 VND.

4. Can a foreign investor expand foreign ownership in multiple enterprises simultaneously?

Foreign investors may implement procedures to expand foreign ownership in multiple enterprises at the same time, provided they fully comply with the applicable legal conditions in Vietnam.

5. In what cases may foreign investors be denied granting expansion licenses of foreign ownership?

Foreign investors may be denied granting expansion licenses of foreign ownership in cases such as:

- Exceeding maximum ownership ratios: When ownership exceeds permitted limits in sectors with foreign ownership restrictions (e.g., banking, insurance, telecommunications);

- Non-compliance with sector requirements: If the enterprise operates in prohibited or restricted sectors for foreign investors;

- Incomplete legal procedures: Dossier is incomplete, invalid, or non-compliant with licensing processes;

- Violations concerning national security: If the expansion may affect national security or sensitive matters;

- Failure to meet financial capacity requirements: Investor fails to prove sufficient financial capacity to maintain and develop the enterprise.

IV. Legal consultancy services related to granting expansion licenses of foreign ownership

The above is the detailed information provided by NPLaw to support clients concerning licensing foreign ownership expansion. Should clients have any questions regarding the above issues or other legal matters, please contact NPLaw for our lawyers to directly advise and guide you.