Capital contribution transfer to foreign companies is a complex transaction that requires in-depth understanding of relevant legal regulations. If you are exploring this issue, the following article will provide essential information to help you better understand the procedures, conditions, and important considerations.

I. Understanding capital contribution transfer to foreign companies

1. What is a capital contribution transfer to a foreign company?

A capital contribution transfer to a foreign company refers to an act whereby an individual or organization (the transferor) transfers ownership of part or all of its capital contribution in a Vietnamese enterprise to a foreign-invested enterprise (the transferee).

Such transactions often occur when foreign investors seek to participate in Vietnamese enterprises or when existing investors wish to divest their interests.

2. Forms of capital contribution transfer to foreign companies

Currently, the transfer of capital contributions to foreign companies may be conducted in the following forms:

  • Direct transfer through the execution of a capital contribution transfer agreement between the transferor and the transferee. Such a transfer must comply with the company’s charter and applicable legal provisions.
  • Transfer of ownership rights over the capital contributions through exchange agreements, donation agreements, other ownership transfer contracts under the law, or by inheritance.

Each form has its own characteristics and requirements, demanding that the involved parties fully understand them in order to conduct the transaction lawfully and effectively. 

II. Legal regulations on capital contribution transfer to foreign companies

1. Principles governing capital contribution transfer to foreign companies

According to Article 65 of Decree No. 31/2021/ND-CP, the principles for investment in the form of capital contribution, share purchase, or capital contribution purchase are as follows:

  • Domestic investors making capital contributions, share purchases, or capital contribution purchases  in established economic organizations in Vietnam shall comply with the conditions and procedures prescribed by the Law on Enterprises and relevant legislation for each type of economic organization.
  • Capital contributions, share purchases, or capital contribution purchases on the securities market shall comply with securities law.
  • For enterprises wholly owned by the State or representatives of State capital invested in enterprises, investment activities must comply with conditions and procedures under the law on management and use of State capital invested in production and business at enterprises, the law on management and use of public property, and other relevant legislation when investing or transferring capital contributions and shares.
  • Foreign investors making capital contributions, share purchases, or capital contribution purchases in established economic organizations in Vietnam must satisfy the conditions stipulated in Clause 2, Article 24 of the Law on Investment.
  • Foreign organizations or individuals acquiring shares or capital contributions in established economic organizations in Vietnam through exchange contracts, donation agreements, other ownership transfer contracts, or inheritance must satisfy the conditions set forth in Clause 4 of this Article and comply with the procedures applicable to foreign investors under the form of capital contributions, share purchases, or capital contribution purchases.

Thus, capital contributions transfers to foreign companies must comply with the above fundamental principles.

2. Conditions for capital contribution transfer to foreign companies

Pursuant to Clause 4, Article 65 of Decree No. 31/2021/ND-CP, foreign investors contributing capital, purchasing shares, or purchasing capital contributions in an economic organization must satisfy the following conditions:

  • Conditions on market access applicable to foreign investors when contributing capital, purchasing shares, or purchasing capital contributions in established economic organizations in Vietnam, as provided in Clause 3, Article 9 of the Law on Investment, and Articles 15, 16, and 17 of the Decree.
  • Conditions on national defense, security, and land use in cases where the economic organization receiving foreign investment has a Certificate of Land Use Rights in islands, border communes, wards, or townships, and coastal communes, wards, or townships, or in other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial zones, export processing zones, high-tech zones, or economic zones established under government regulations.

III. Questions on capital contribution transfer to foreign companies

1. Main considerations in capital contribution transfer to foreign companies

To ensure a prompt and lawful transfer process, the following conditions should be carefully noted:

  • Legal due diligence: Conduct thorough due diligence on the legal and financial status of the enterprise prior to the transfer.
  • Valuation of capital contributions: Ensure fair and transparent valuation of the capital contributions, preferably through professional valuation firms.
  • Taxes and fees: Comply with tax obligations and transaction-related fees.
  • Transfer agreement: Draft the agreement with clear provisions on price, payment method, duration, rights, and obligations of the parties.
  • Anti-money laundering compliance: Ensure the transaction adheres to anti-money laundering regulations.

Observing the above considerations will help ensure that capital contribution transfers are conducted safely, effectively, and with minimal legal risk.

2. By which methods may capital contribution transfer to foreign companies be conducted?

The transfer of capital contributions to foreign companies may be conducted through different methods depending on the nature of the transaction and applicable laws. Generally, it is executed through a capital contribution transfer agreement.

However, a foreign company may also acquire capital contributions via exchange contracts, donation agreements, other ownership transfer contracts, or inheritance as prescribed by law.

The choice of method must be carefully evaluated based on the parties’ objectives, company charter provisions, and expert legal advice to ensure compliance and optimize benefits.

3. May capital contributions involving real estate be transferred to foreign companies?

According to Clause 1, Article 28 of the Land Law 2024, recipients of land use rights include:

  • Economic organizations, and economic organizations with foreign-invested capital receiving capital contributions in the form of land use rights.

Accordingly, under current regulations, enterprises with foreign-invested capital are permitted to receive capital contributions in the form of land use rights.

IV. Legal consultancy and procedures on capital contribution transfer to foreign companies

The above article by NPLaw provides an overview of current regulations on capital contribution transfer to foreign companies. With a team of experienced lawyers and legal experts, NPLaw delivers professional and reliable legal services, ensuring optimal protection of clients’ lawful rights and interests. Should you require legal assistance, please contact NPLaw for consultation and support.