Tiếng ViệtIn the context of accelerating restructuring and international fundraising, capital contribution and share acquisition from foreign investors have become a strategic choice for many Vietnamese enterprises. A successful transaction not only brings capital, technology, and modern governance but also unlocks plans for establishing or expanding FDI enterprises in Vietnam.
However, this is a cross-border transaction subject to multiple layers of regulation: sectoral conditions, ownership limits, share transfer procedures, tax obligations, and foreign exchange management. To avoid risks of transaction invalidation or prolonged disputes, enterprises should engage FDI legal advisors from the structuring and negotiation stages.
In this article, LexConsult & Partners will provide a comprehensive analysis of the legal framework and procedures for share transfers from foreign investors, while highlighting potential risks and legal solutions to help enterprises conduct transactions safely, transparently, and in compliance with the law.
1. Understanding Capital Transfer and Share Acquisition from Foreign Investors
In practice, many enterprises and individuals often confuse two forms of transactions:
– Foreign investors contributing capital directly into a Vietnamese enterprise (inbound transaction);
– Vietnamese individuals or entities acquiring shares or capital contributions from foreign investors (outbound transaction).
The second case – acquiring shares from a foreign investor – is not merely a civil agreement but is considered a cross-border transaction, governed simultaneously by the Law on Investment 2020, the Law on Enterprises 2020, and foreign exchange management regulations.
According to the law, all transfers of capital contributions from foreign investors in non-listed companies (limited liability companies or non-public joint stock companies) must be conducted through a Direct Investment Capital Account (DICA) opened at a licensed commercial bank. Payments made in cash or through personal bank transfers are not legally recognized.
This means that the transferee cannot simply sign a contract and treat it as an “internal arrangement.” To be legally recognized as the owner of the capital, the enterprise must demonstrate that funds have been routed properly through the DICA and complete the required legal procedures with the business registration authority.
2. Legal Conditions for Acquiring Capital Contributions from Foreign Investors
The transfer of capital contributions from foreign investors is not always automatically approved. The transferee must meet several important legal conditions:
2.1. Conditional Business Sectors and Ownership Restrictions
Even if the transferee is a Vietnamese investor, where the business sector falls under the list of restricted market access for foreign investors (as set out in Appendix I of Decree No. 31/2021/NĐ-CP), the transfer must be reassessed.
For example: a company operating in the education services sector, which was previously subject to foreign ownership restrictions, may transfer shares from a foreign investor to a Vietnamese buyer, but the relevant conditions must still be reviewed.
For a more comprehensive overview of market access restrictions and establishment requirements, see also: Establishing an FDI Enterprise in Vietnam 2025: Conditions, Procedures & Legal Strategies.
2.2. Compliance with Transfer Requirements by Enterprise Type
Multi-member Limited Liability Company (LLC): The transfer of capital contributions must comply with Articles 52 and 53 of the Law on Enterprises 2020, specifically:
– Consent of the remaining members is required;
– Written notice must be given to the company and registration of member changes must be filed with the Business Registration Authority.
Joint Stock Company (JSC):
– For founding shareholders within the first three years, restrictions under Article 120 of the Law on Enterprises apply;
– Transfer must be registered with the Vietnam Securities Depository (for public companies) or updated in shareholder records (for non-listed companies).
2.3. Compliance with Foreign Exchange Management Regulations
Pursuant to Circular No. 06/2019/TT-NHNN dated 26 June 2019, all capital transfer transactions involving foreign elements must be conducted through a Direct Investment Capital Account (DICA) opened at a licensed commercial bank.
Vietnamese investors acquiring shares from foreign investors must make payments through this account. Personal transfers, cash payments, or payments outside the banking system are not legally permitted.
3. Procedures for Share Acquisition from Foreign Investors in Vietnam
To ensure that the acquisition of shares from a foreign investor is legally valid, the transferee must comply with the following steps:
Step 1: Verify investment conditions and ownership structure
The transferee must review:
– Whether the business sector is subject to market access restrictions;
– The current shareholder structure and the foreign investor’s ownership ratio;
– The legal status of the enterprise: whether it is in operation, has outstanding tax liabilities, or is involved in disputes.
Step 2: Prepare transfer dossier and capital/share transfer agreement
Depending on the type of enterprise, the dossier generally includes:
– A capital/share transfer agreement with clearly defined terms;
– Minutes of meeting and resolution of the Board of Directors (BOD) or Members’ Council (if applicable);
– Documents and bank statements evidencing lawful payment, proving completion of payment via the investment capital account;
– Application dossier for changes to enterprise registration information.
Step 3: Register/notify changes with the Business Registration Authority
– For a limited liability company (LLC): registration of member changes is required;
– For a joint stock company (JSC): registration is not required, but shareholder information must be updated and complete internal records must be maintained.
Step 4: Fulfill tax obligations upon capital transfer
Pursuant to Circular No. 111/2013/TT-BTC, capital transfer transactions generate taxable income:
– The foreign investor is subject to personal income tax (if an individual) or corporate income tax (if a legal entity);
– The Vietnamese transferee is responsible for declaring, withholding, and paying taxes on behalf of the foreign transferor (if duly authorized).
4. Legal Risks in Share Acquisition Transactions from Foreign Investors
When conducting capital transfer or share acquisition from foreign investors, Vietnamese enterprises may face significant risks if they fail to comply fully with legal requirements. Below are common risks and corresponding solutions:
| Legal Risk | Cause | Consequence | Solution |
|---|---|---|---|
| Transaction declared invalid | Payment not made via a Direct Investment Capital Account (DICA); failure to register procedures with the Department of Planning and Investment (now Department of Finance). | Ownership not legally recognized; transaction annulled. | Comply with foreign exchange management regulations and fully register required legal procedures. |
| Disputes over share transfer agreement | The share transfer agreement does not clearly define responsibilities, obligations, and management rights. | Shareholder disputes arise; the foreign investor may continue to claim control or profit rights. | Draft a comprehensive agreement; review annexes and post-transfer arrangements. |
| Tax arrears & administrative penalties | Failure to properly declare or fulfill tax obligations upon capital transfer. | Enterprise subject to fines, tax arrears, reputational and financial damage. | Consult accountants and lawyers to ensure accurate tax declaration and compliance. |
5. Practical Notes and Legal Advisory on Acquiring Capital Contributions from Foreign Investors
Acquiring shares from foreign investors represents a strategic opportunity for Vietnamese enterprises to access capital, technology, and expand into new markets. However, alongside these opportunities come significant legal risks. Key considerations include:
– Review business sectors: Ensure the enterprise does not operate in a sector restricted to foreign investors under Decree No. 31/2021/NĐ-CP. If violated, the transaction may be refused or declared invalid;
– Complete registration or notification procedures: Comply with the process of updating members/shareholders with the Department of Planning and Investment (now Department of Finance) to avoid administrative sanctions under Decree No. 122/2021/NĐ-CP;
– Draft clear capital/share transfer agreements: Include detailed provisions on payment conditions, rights and obligations of the parties, and dispute resolution mechanisms, in compliance with the Law on Enterprises and the Law on Investment 2020;
– Assess impact on ownership structure and voting rights: Prevent unintended loss of corporate control when shareholding ratios change post-transfer;
– Consult FDI lawyers and tax experts: Ensure full compliance with legal requirements, optimize tax obligations, and mitigate risks in cross-border transactions.
In essence, capital contribution and share acquisition from foreign investors present great opportunities but also serve as a “compliance test.” Proper preparation from the outset—reviewing conditions, contracts, payment flows, and tax declarations—will determine the success or failure of the transaction and subsequent FDI expansion plans.
To ensure transparency, safety, and maximum benefits, the FDI legal advisory team at LexConsult & Partners is ready to provide comprehensive support: from structuring advice, drafting and reviewing contracts, handling procedures, to advising on FDI company establishment when required.
Lexconsult & Partners – Your Trusted Legal Partner for FDI Enterprises in Vietnam.
📞 Hotline: 0938 657 775
📧 Email: info@lexconsult.com.vn
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