Foreign Ownership Ratio in Enterprises in Vietnam

Currently, Vietnam has joined many global economic organizations with open commitments to foreign investors in Vietnam. As a result, foreign enterprises, organizations, and individuals consider Vietnam as a potential investment market. However, the overlapping and conflicting legal system in many documents also makes it difficult for foreign enterprises and individuals when they intend to invest in Vietnam. This article outlines the legal provisions regarding the foreign investor's capital ownership ratio in enterprises when investing in Vietnam.

1. Legal Basis:

• Enterprise Law 2020

• Investment Law 2020

• Securities Law 2019

• Decree 155/2020/ND-CP

  
  

2. How do foreign enterprises invest in Vietnam?

According to Clause 19, Article 3 of the Investment Law 2020, a foreign investor is an individual with foreign nationality or an organization established under foreign laws conducting investment activities in Vietnam.

Based on Article 21 of the Investment Law 2020, foreign investors can carry out investment activities in Vietnam in the following forms:

• Investment to establish economic organizations.

• Investment to contribute capital, purchase shares, or purchase capital contributions.

• Implementation of investment projects.

• Investment in the form of BCC (Business Cooperation Contract).

• Other forms of investment and types of economic organizations as regulated by the Government.

  
  

3. Foreign Investor's Capital Ownership Ratio in Vietnamese Enterprises:

Point a, Clause 3, Article 9 of the Investment Law 2020 stipulates:

"3. Market access conditions for foreign investors specified in the list of sectors and industries with restricted market access for foreign investors include: a) The foreign investor's ownership ratio in the charter capital of the economic organization."

Thus, one of the conditions for foreign investors contributing capital to a Vietnamese enterprise is to meet the required ownership ratio of charter capital.

According to Clauses 7, 8, and 9, Article 17 of Decree 31/2020/ND-CP, market access conditions (including ownership ratio requirements) are applied according to international investment treaties.

Clause 10, Article 17 of Decree 31/2020/ND-CP stipulates the restriction on the foreign ownership ratio under international investment treaties as follows:

• In cases where multiple foreign investors contribute capital, buy shares, or purchase capital contributions into an economic organization and are subject to one or more international investment treaties, the total foreign ownership ratio in that economic organization must not exceed the highest ownership ratio specified in an international treaty that sets a foreign investor ownership limit for a specific sector or industry.

• In cases where foreign investors from the same country or territory contribute capital, buy shares, or purchase capital contributions into an economic organization, the total ownership ratio of all such investors must not exceed the foreign ownership ratio limit as prescribed by the international investment treaty applicable to those investors.

• For public companies, securities companies, fund management companies, or securities investment funds, and investment companies, if the securities law provides different foreign ownership ratios, then the securities law provisions shall apply:

  • For public companies, the foreign ownership ratio is 50% (according to Article 139 of Decree 155/2020/ND-CP).

  • For securities companies, securities investment companies, securities investment funds, the foreign ownership ratio can go up to 100% (according to Article 77 of the Securities Law 2019).

• In cases where the economic organization operates in multiple sectors, and the international investment treaties have different foreign ownership ratios for each sector, the foreign ownership ratio in the organization must not exceed the lowest limit for the sector with the most restrictive foreign ownership ratio.

Thus, the foreign ownership ratio is determined based on international treaties applicable to the investment sectors.

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