TRANSFER OF 100% FOREIGN-OWNED COMPANIES

TRANSFER OF 100% FOREIGN-OWNED COMPANIES

Currently, with the strong development of the Vietnamese economy, investment projects are attracting a large number of foreign investors. As a result, the demand for capital transfers between businesses is increasing, especially for companies with 100% foreign investment. The transfer of a 100% foreign-owned company refers to the process by which a foreign investor transfers all or part of their contributed capital or shares to another party. However, this capital transfer can pose many risks for both the business and the investor. So, let’s follow the article below to understand the issues related to the transfer of 100% foreign-owned companies.

Conditions for Transferring Companies with Foreign Investment Capital

The conditions for transferring a company with foreign investment capital depend on the type of business structure of that company, which includes two forms:

• Transfer of Joint-Stock Companies
• Transfer of Limited Liability Companies

Transfer of Joint-Stock Companies

Regarding the subject matter, according to Clause 3, Article 120 of the Enterprise Law 2020: “Within 3 years from the date the company is granted a Business Registration Certificate, the common shares of founding shareholders can be freely transferred to other founding shareholders and can only be transferred to non-founding shareholders with the approval of the General Meeting of Shareholders. In this case, the founding shareholder intending to transfer their common shares shall not have voting rights regarding the transfer of those shares.”

The transfer can be executed through a contract or a transaction on the stock market. When transferring via a contract, the transfer documents must be signed by both the transferor and the transferee or their authorized representatives.

Transfer of Limited Liability Companies

Regarding the subject matter when transferring a Limited Liability Company, according to Clause 3, Article 51 of the Enterprise Law 2020: “Within 15 days from the date of receiving the request from a member specified in Clause 1 of this Article, the company must buy back the capital contribution of that member at market price or at a price determined according to the principles set forth in the company’s charter, unless the two parties agree on a price. Payment can only be made if, after fully paying for the bought-back capital contribution, the company still pays all debts and other property obligations.”

As for the conditions, members of a Limited Liability Company can transfer part or all of their capital contribution.

Documents and Procedures for Transferring 100% Foreign-Owned Companies

The procedure for transferring a 100% foreign-invested company is carried out through the following specific steps:

Step 1: Register the purchase of capital contributions if the transferee is a foreign investor.

Step 2: Change the content of the business registration on the Business Registration Certificate: Change of ownership. The acquiring investor may also combine to implement additional changes such as changing the representative, headquarters address, business lines, etc.

Step 3: Adjust the information about the investor and related details on the Investment Registration Certificate in case the company has been granted an Investment Registration Certificate.

Step 1: Registering the Purchase of Capital Contributions of a 100% Foreign-Owned Company

The registration documents for purchasing capital contributions of a 100% foreign-owned company include:

1. Registration Document: This includes information about the enterprise, business sectors, a list of owners, members, founding shareholders, foreign investor shareholders (if any), the percentage of foreign ownership before and after, the anticipated transaction value, and information about the investment project (if any).
2. Copies of Legal Documents: This includes the legal documents of the contributing organization, purchasing shares, or capital contributions and the economic organization with foreign investors contributing capital, purchasing shares, or capital contributions: Business license or equivalent documents and the passport of the authorized person managing the capital in Vietnam.
3. Principle Agreement Document: This is the document detailing the agreement between the foreign investor and the economic organization regarding capital contribution, share purchase, or capital contribution purchase, or between the foreign investor and the shareholders or members of that economic organization.
4. Copy of Land Use Rights Certificate: This is for the economic organization with foreign investors contributing capital, purchasing shares, or capital contributions, if that organization has a Land Use Rights Certificate in islands, border communes, urban districts, and coastal communes; or in other areas affecting national defense and security, except for organizations implementing investment projects in industrial zones, export processing zones, high-tech zones, and economic zones established according to regulations.
5. Power of Attorney: Authorizing a representative to carry out the procedures.

Where to submit the documents: Department of Planning and Investment where the economic organization is headquartered.

Processing time: If the capital contribution or share purchase by the foreign investor meets the ownership percentage and investment form requirements, within 15 days from the date of receiving the complete dossier, the Department of Planning and Investment will notify in writing. If the documents do not meet the requirements, the Department of Planning and Investment will notify in writing and specify the reasons.

Step 2: Registering the Change of Ownership of a 100% Foreign-Owned Company

After receiving the Notice of Approval for the purchase of capital contributions, the investor must prepare the documents to change the content on the Business Registration Certificate:

1. Notice of Change of Ownership: This should be signed by the old owner or the legal representative of the old owner and the new owner or the legal representative of the new owner.
2. Copies of Legal Documents: A copy of the legal documents of the individual if the transferee is an individual, or a copy of the legal documents of the organization, along with a copy of the legal documents of the individual for the authorized representative, and a copy of the document appointing the authorized representative in the case where the transferee is an organization.

For foreign organizational owners, the copy of the organization’s legal documents must be consular legalized.

1. Copy of Amended Company Charter: This should reflect any changes.
2. Transfer Agreement: A copy of the capital contribution transfer agreement or documents proving the completion of the transfer.
3. Approval Document from the Investment Registration Authority: This is required for foreign investors and economic organizations with foreign investment where the procedures for capital contribution, share purchase, or capital contribution purchase must be registered in accordance with the Investment Law.
4. Power of Attorney: Authorizing a representative to carry out the procedures.

In addition to the above documents, if the company is also changing other business registration contents, it must submit a corresponding set of documents related to those changes.

Step 3: Adjusting the Investment Registration Certificate

This step is carried out when the company has been granted an Investment Registration Certificate. The documents required to adjust the Investment Registration Certificate are as follows:

1. Request for Adjustment of Investment Project: A formal document requesting the adjustment.
2. Report on Project Implementation: A report detailing the current status of the investment project.
3. Decision of the Owner: A decision from the owner to adjust the Investment Registration Certificate.
4. Capital Transfer Agreement: A copy of the agreement for the transfer of capital.
5. Copies of Legal Documents: This includes a copy of the legal documents of the individual if the transferee is an individual, or a copy of the legal documents of the organization, along with a copy of the legal documents of the individual for the authorized representative, and a copy of the document appointing the authorized representative in the case where the transferee is an organization.

For foreign organizational owners, the copy of the organization’s legal documents must be consular legalized.

• Notarized Copy of the Issued Investment Registration Certificate: A certified copy of the Investment Registration Certificate that has been issued.
• Notarized Copy of the Business Registration Certificate: A certified copy of the Business Registration Certificate reflecting the changes in ownership.
• Power of Attorney: Authorizing a representative to carry out the procedures.

Where to submit the documents: Department of Planning and Investment where the economic organization is headquartered.

Processing time: 15 working days from the date the Department of Planning and Investment receives the complete and valid documents.

Siglaw Law Firm

Phone: (+84) 961 366 238

Email:

• vphn@siglaw.com.vn
• vphcm@siglaw.com.vn

Headquarters: No.44/A32-NV13, Gleximco A, Le Trong Tan street, An Khanh, Hoai Duc, Ha Noi, Vietnam.

Southern branch: A9.05 BLOCK A, SkyCenter Building, 5B Pho Quang Street, Ward 2, Tan Binh District, Ho Chi Minh City, Vietnam.

Central branch: 177 Trung Nu Vuong, Hai Chau District, Da Nang City

Facebook: https://www.facebook.com/hangluatSiglaw