Foreign investors may enter the Vietnam market through an equity acquisition of an existing Vietnamese enterprise (hereinafter referred to as “foreign equity acquisition”) in addition to setting up a foreign invested enterprise in Vietnam directly. Currently, Vietnam has not yet enacted any special laws or regulations on foreign equity acquisition. However, foreign investors have to comply with the requirements and procedures set forth in the Law on Investment, Law on Enterprise, Competition Law, and other laws and regulation of Vietnam when they conduct investment in Vietnam through equity acquisitions. The current procedures for a foreign equity acquisition in Vietnam are as follows:
Foreign Equity Acquisition Approval
A foreign equity acquisition approval from the provincial Department of Planning and Investment shall be obtained before the implementation of the equity acquisition under any of the following circumstances:
(1) The acquisition will result in an increase of foreign ownership ratio in a target company engaging in the business sectors restricted to foreign investment.
(2) The acquisition will result in an increase of foreign ownership ratio in the target company to more than 50%, including increase from less than or equal to 50% to over 50% and further increase from over 50%.
(3) The target company holds a certificate of land use right for the areas that may affect national defense and security (for example, islands, borders and coastal areas).
Antitrust Filing and Review
According to the Competition Law of Vietnam, a notification shall be filed to the competent authority (for example, the National Competition Commission) and obtain an approval before implementation of the relevant equity acquisition if the total assets, total turnover, transaction value or combined market share involved reach certain thresholds.
Registration of Equity Change
If the above procedures are not applicable, or upon the completion of all pre-approval procedures, the target company shall apply for the change of Enterprise Registration Certificate (ERC) with the enterprise registration office and apply for/change the Investment Registration Certificate (IRC) with the provincial Department of Planning and Investment accordingly (if applicable).
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Disclaimer
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
Joint stock companies (JSC) and limited liability companies (LLC) are two common types of companies in Vietnam. The main differences between JSC and LLC are as follows:Advantages of a JSC: A JSC can issue shares and be listed on the Vietnam stock exchange. It generally has higher reputation and financing capabilities, making it more suitable for large businesses or corporate groups.
Foreign invested enterprises (FIEs) registered in Vietnam are required to submit reports on investment activities to the relevant investment registration authorities on periodic basis in accordance with the Law on Investment of Vietnam and other laws and regulations.
A foreign invested company shall be dissolved under the following circumstances:The operation period specified in the company's charter expires without a decision on extension;The dissolution is decided by the shareholders of the company;The company fails to maintain statutory minimum number of members for six consecutive months without conversion;
A Foreigner has to apply for and obtain a valid work permit in order to work legally in the territory of Vietnam, except for the specific circumstances of work permit exemption as indicated by law. The foreigner is required to apply for a work visa or a temporary residence card to reside in Vietnam legally after obtaining a work permit. Foreigners with a temporary residence card can enter and exit Vietnam without a visa within the valid terms of their temporary residence card.
