In the context of global economic integration, Vietnam has increasingly emerged as an attractive destination for foreign investors. Apart from establishing new legal entities (greenfield investment), a flexible and increasingly popular method is foreign investment through capital contribution, share purchase, or equity acquisition. This form of investment allows foreign investors to participate in or expand their presence in Vietnam by directly acquiring ownership in an existing enterprise.
This article provides a comprehensive legal analysis of the regulatory framework, conditions, procedures, practical challenges, and highlights the role of legal advisory services. La Défense – a professional law firm in Vietnam – outlines key solutions to help investors optimize strategies and safeguard their legitimate interests.
Legal Framework
Foreign investment in the form of capital contribution, share purchase, or equity acquisition is primarily regulated by:
- Law on Investment 2020 (Law No. 61/2020/QH14);
- Decree No. 31/2021/ND-CP guiding the Law on Investment;
- Law on Enterprises 2020 (Law No. 59/2020/QH14);
- Relevant sector-specific laws (Law on Securities, Law on Credit Institutions, Land Law, etc.);
- Vietnam’s international commitments under WTO, CPTPP, EVFTA, and other free trade agreements.
The legal framework ensures the principle of national treatment for foreign investors, except in cases involving the Negative List for Market Access where restrictions apply.
Key Features of Capital Contribution, Share Purchase, or Equity Acquisition
Compared with establishing a new company, this form of investment has several distinct features:
First, foreign investors do not need to build from scratch; instead, they acquire direct ownership in an existing enterprise. This allows them to immediately leverage the company’s market presence, customer base, and business network.
Second, the legal procedures are generally simpler than setting up a new investment project, particularly when the foreign ownership ratio does not exceed certain thresholds under Vietnamese law.
Third, the method offers flexibility. Investors can participate at different levels, from minority financial investors to majority shareholders with full control and management rights.
Forms of Investment
Under the Law on Investment 2020, foreign investors may invest by:
- Contributing capital to a Vietnamese enterprise through the purchase of newly issued shares in a joint stock company or additional capital contribution in a limited liability company.
- Purchasing existing shares of shareholders in a joint stock company.
- Acquiring equity interests (capital contribution) of members in a limited liability company or partnership.
- Contributing capital into other types of business entities as provided by law (e.g., investment funds or specialized organizations).
Each form requires specific legal procedures, documentation, and results in corresponding rights and obligations for the investor.
Market Access Conditions
Not all sectors in Vietnam are open equally to foreign investment. The law establishes two groups:
- Prohibited sectors: such as narcotics, prohibited chemicals, explosives, prostitution, or certain rare wildlife.
- Conditional sectors: where foreign ownership is restricted or subject to conditions regarding ownership ratios, investment forms, business scope, or Vietnamese partner requirements (e.g., logistics, telecommunications, retail distribution, transportation).
Foreign investors must also comply with ownership ratio thresholds. If the capital acquisition increases foreign ownership above 50% of the charter capital, or the enterprise operates in a conditional business sector, additional registration and approval procedures are required.
Procedures for Capital Contribution, Share Purchase, or Equity Acquisition
The process generally includes four key steps:
Step 1: Registration of Capital Contribution or Share Purchase
Foreign investors must register with the Department of Planning and Investment (DPI) in cases where:
- The acquisition results in foreign ownership exceeding 50% of the charter capital;
- The enterprise operates in a conditional sector;
- The enterprise holds land in sensitive areas related to national defense or security.
Step 2: Appraisal of the Application
Within 15 working days from receipt of a valid dossier, the DPI will issue a written approval or rejection.
Step 3: Amendments to the Enterprise’s Registration
Upon approval, the enterprise must update its corporate registration with the Business Registration Office to record the new shareholders or members.
Step 4: Post-acquisition Compliance
Foreign investors must open a Direct Investment Capital Account (DICA) at an authorized bank, transfer capital through this account, and comply with reporting obligations to the relevant authorities.
Documentation Required
A standard dossier for registration usually includes:
- Application form for capital contribution/share purchase (as per the Ministry of Planning and Investment’s template).
- Certified and legalized copies of the investor’s passport or incorporation certificate.
- Share transfer agreement or capital contribution commitment.
- Report on foreign ownership ratio after the transaction.
- Revised charter of the enterprise (if applicable).
Documents must be translated into Vietnamese and notarized according to local requirements.
Practical Challenges
Although the law provides clear procedures, foreign investors often encounter challenges in practice:
- Inconsistent interpretation of laws across provinces, leading to delays in approval.
- Complex approval process in conditional business sectors requiring multiple authorities’ opinions.
- Foreign exchange regulations: all capital contributions must be transferred via a DICA; non-compliance risks rejection or penalties.
- Financial capacity verification: some investors face difficulties proving lawful funding sources.
- Internal agreements with local partners: poorly drafted share purchase agreements may cause disputes over management rights or profit distribution.
Role of La Défense in Advisory Services
La Défense provides full-scope legal services to ensure compliance and safeguard investors’ rights in every transaction:
- Advising on investment strategy and market access conditions;
- Conducting legal due diligence on target companies, including sector-specific restrictions, land use rights, and tax obligations;
- Drafting and reviewing share purchase agreements, shareholders’ agreements, and corporate charters;
- Filing and representing clients before competent authorities to obtain necessary approvals;
- Supporting post-closing compliance such as foreign exchange, banking, and reporting requirements.
Our approach combines legal expertise with business insight, helping foreign investors structure transactions efficiently and mitigate risks.
Frequently Asked Questions (FAQ)
- Can foreign investors own 100% of a Vietnamese company?
Yes, except in restricted or conditional sectors where foreign ownership is limited. - Is prior approval always required?
No. Approval is only required when foreign ownership exceeds 50%, in conditional sectors, or for enterprises with land in sensitive areas. - How long does it take to process?
Usually 15 working days from submission of a valid dossier. - How must capital be contributed?
All contributions must be made through a Direct Investment Capital Account at an authorized Vietnamese bank. - How can La Défense support investors?
We provide end-to-end services: due diligence, documentation, regulatory approvals, contract drafting, and post-transaction compliance.
Foreign investment in Vietnam through capital contribution, share purchase, or equity acquisition is one of the fastest and most efficient routes for foreign investors to access the Vietnamese market. This method allows immediate participation in existing businesses while avoiding the burdens of setting up new entities.
However, to fully leverage the benefits and minimize risks, investors must strictly follow legal requirements on market access, foreign exchange, documentation, and corporate governance. With La Défense’s extensive legal expertise and practical experience, foreign investors can be assured that every transaction is transparent, compliant, and aligned with long-term strategic goals.