A foreign company acquiring a Vietnamese company is one of the common methods used when foreign enterprises wish to invest in Vietnam, as compared to establishing a new company, the legal procedures for acquisition are relatively simpler.

I. Legal basis

• Investment Law 2020
• Enterprise Law 2020

II. Forms of investment by individuals and organizations in Vietnam

Pursuant to Article 25 of the Investment Law 2020, investors may contribute capital to an economic organization through the following methods:

• Contributing capital by purchasing shares in the initial or additional issuance of a joint-stock company.
• Contributing capital to a limited liability company or a partnership.
• Contributing capital to other economic organizations not falling under the cases specified in the preceding points.

In addition, investors may also acquire shares or capital contributions of an economic organization through the following methods:

• Acquiring shares from the company or its shareholders in a joint-stock company.
• Acquiring the capital contributions of members in a limited liability company to become a member of that company.
• Acquiring the capital contribution interest of a partner in a partnership for the purpose of becoming a partner of that partnership.
• Acquiring the capital contribution interest of a member in any other economic entity, other than in the circumstances provided for in the preceding points.

III. Conditions for foreign investors to acquire capital contributions

For a foreign investor to contribute capital to an economic organization, the foreign investor must satisfy the following conditions as prescribed in Article 24 of the Investment Law 2020:

• Ability to access the market as prescribed in Article 9 of this Law.
• Compliance with regulations on ensuring national defense and security.
• Compliance with land law regulations, including conditions for obtaining land use rights and conditions for using land in special areas such as islands, border communes, and coastal zones.

The transfer of capital contributions or shares to foreign individuals shall not be based on the type of enterprise—whether a joint-stock company, a single-member limited liability company, or a multi-member limited liability company—but shall be classified as either a Vietnamese enterprise or an enterprise with foreign ownership.

For Vietnamese enterprises,when intending to transfer capital contributions or shares to foreign investors, it is mandatory to determine, based on the relevant business lines, whether there exist any regulations restricting or conditioning the transfer of capital contributions or shares to foreign individuals or entities, and what the maximum permissible foreign ownership ratio (or the maximum ratio of capital contributions/shares allowed to be transferred to foreign investors) is. If the enterprise operates in unconditional business lines and the transferred ownership ratio is below 51%: The enterprise is only required to carry out the procedure for amendment of the Certificate of Enterprise Registration. In other cases, when a member or shareholder transfers capital contributions or shares to a foreign investor, procedures for registration of capital contribution, share purchase, or acquisition of capital contributions must first be carried out with the Department of Finance. Only after completing this step may the enterprise proceed with the procedures for amending the Enterprise Registration Certificate (to reflect changes of the owner, members, or shareholders).

For enterprises with foreign ownership, when transferring capital contributions or shares to foreign investors in enterprises with foreign elements, it is also necessary to consider the relevant business lines and the proposed transfer ratio, as certain business sectors do not permit foreign participation, while others impose restrictions on the percentage of foreign ownership. In this case, when a member or shareholder (whether Vietnamese or foreign) intends to transfer capital contributions or shares to another foreign investor, the enterprise must first carry out procedures to amend the investor information on the Investment Registration Certificate. Only after completing this step may it proceed with the procedures for changing the members/shareholders on the Enterprise Registration Certificate.

IV. Procedures for foreign investors to acquire a Vietnamese company

Step 1: The foreign investor must register to purchase shares or capital contributions in the Vietnamese company

The transfer of a company to a foreign individual implies that such individual will hold 100% of the company’s charter capital; therefore, this procedure must be completed prior to carrying out the transfer.

Dossier to be prepared:

• The written notification of registration for capital contribution, share purchase, or acquisition of capital contributions must include the following information: details of the economic organization in which the foreign investor intends to contribute capital, purchase shares, or acquire capital contributions; and the percentage of charter capital to be owned by the foreign investor after the capital contribution, share purchase, or acquisition.
• A copy of the Identity Card, Citizen Identification Card, or Passport for investors who are individuals; a copy of the Certificate of Incorporation or other equivalent documents confirming legal status for investors who are organizations.
• A notarized copy of the Enterprise Registration Certificate of the Vietnamese economic organization.

Procedures to be followed:

• The foreign investor shall submit the application to the Department of Finance.
• Within 15 working days from the date of receipt of a valid application, the Business Registration Authority shall issue a Notice confirming that the conditions for capital contribution, share purchase, or acquisition of capital contributions have been satisfied, as well as the Vietnamese enterprise involved.
• After receiving approval for the capital contribution or share purchase, the transferring company may proceed with the subsequent procedures.

Step 2: The foreign investor proceeds to acquire shares or capital contributions in the Vietnamese enterprise

In the case of transferring a company to a foreign investor, the Vietnamese company shall open a direct investment capital account. The investor shall transfer the capital through the direct investment capital account.

Members and shareholders transferring capital shall declare and pay taxes on the transfer in accordance with the personal income tax and corporate income tax laws, as applicable.

Step 3: Submit the amended Enterprise Registration Certificate to the Foreign Economic Department – Department of Finance.

Dossier to be prepared by the Vietnamese enterprise and the foreign investor:

• Notice of amendment to the business registration;
• Notice of change of owner (applicable to single-member limited liability companies);
• Notice of change of legal representative;
• Decision on the company’s amendments;
• Minutes of the meeting regarding the company’s amendments (for joint-stock companies and limited liability companies);
• Transfer agreement and supporting documents evidencing the completed transfer, certified by the company’s legal representative;
• List of contributing members; List of foreign shareholders;
• Notarized copy of the foreign investor’s passport;
• Charter (for single-member limited liability companies).

Procedures to be followed:

• The enterprise shall submit one set of the application to the Business Registration Authority.
• Within three working days from the date of receipt of a valid application, the Business Registration Authority shall issue a new Enterprise Registration Certificate to the enterprise.

V. Conclusion

The acquisition of a Vietnamese enterprise by a foreign investor constitutes an effective investment channel, enabling a shorter market entry time, optimized costs, and the rapid utilization of the existing business ecosystem. However, the M&A process requires the enterprise to fully comply with the legal regulations on investment, enterprise operations, taxation, foreign exchange, and market access conditions applicable to foreign investors.

During the transaction process, the investor must pay attention to correctly classifying the type of target enterprise, assessing whether the business lines are conditional, determining the maximum ownership ratio, and preparing the application for capital contribution purchase in accordance with the proper sequence, including: obtaining approval for the capital contribution purchase, completing the transfer, and updating the Enterprise Registration Certificate.

A thorough understanding of the legal regulations and procedures for acquiring an enterprise not only helps the investor shorten the transaction timeline but also ensures legal safety and minimizes risks during investment in Vietnam. Investors are advised to seek guidance from advisory firms well-versed in Vietnamese law to ensure that the M&A transaction is conducted efficiently, legally, and effectively.

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