PROCEDURES FOR THE TRANSFER OF STAKES TO FOREIGN INVESTORS IN VIETNAMESE ENTERPRISES
Article by Legal Specialist at Dai Ha Thanh Law Firm - Vo Quynh Chi
In the growing trend of mergers and acquisitions and increasing interest from foreign investors in the Vietnamese market, the transfer of stakes in enterprises to foreign investors has become increasingly common. To ensure a smooth and lawful stakes transfer process, the parties involved must be thoroughly prepared in terms of legal provisions, internal corporate records, and an effective working process between the transferor enterprise and the transferee investor. All parties should have a clear understanding of and strictly comply with the legal procedures governing the transfer of stakes to guarantee the legality of the transaction and to mitigate potential disputes. Compliance with the procedures is not only an administrative formality, but also a strategic matter that significantly impacts the structure and operation of enterprises.
In this article, Dai Ha Thanh Law Firm is pleased to provide our valued clients with a detailed overview of the steps required to carry out the transfer of stakes in a Vietnamese enterprise to a foreign investor in accordance with Vietnamese law.
1. The transfer of stakes in a Vietnamese enterprise to a foreign investor
Pursuant to Clause 27, Article 4 of the 2020 Law on Enterprises, “Stake means the total value of assets that a member/partner has contributed or promises to contribute to a limited liability company/partnership. Holding means the ratio of a member/partner’s stake to the charter capital of the limited liability company/partnership”.
According to this provision, the transfer of stakes can be understood as the act of a company member transferring all or part of their ownership interest in the company to another party, through sale, donation, inheritance, or other legally recognized methods. It should be noted that the term “stake” in this context refers not to the original value of the asset contributed, but to the ownership interest of the member in the company at the time of the transfer.
From a legal perspective, the transfer of stakes constitutes a form of indirect investment, as provided in Clause 2, Article 21 of the 2020 Law on Investment, specifically under the investment form of capital contribution or purchase of shares or stakes.
2. Conditions for foreign investors to transfer stakes
According to Clause 2, Article 24 of the 2020 Law on Investment, foreign investors making investment by contributing capital, purchasing shares and purchasing stakes of business organizations must satisfy the following conditions:
“a) Satisfy market access conditions applied to foreign investors as prescribed in Article 9 of this Law;
b) Ensure national defense and security in accordance with this Law;
c) Comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.”
Furthermore, Clause 4 Article 65 Decree No. 31/2021/NĐ-CP provides additional conditions and rules for foreign investors engaging in contributing capital or purchasing shares or purchasing stakes:
“4. A foreign investor contributing capital or purchasing shares or stakes in a business organization established in Vietnam shall satisfy the conditions set out in Clause 2 Article 24 of the Law on Investment, including:
a) Market access conditions applied to foreign investors upon capital contribution, and purchase of shares and stakes in business organizations established in Vietnam as prescribed in Clause 3 Article 9 of the Law on Investment and Articles 15, 16 and 17 of this Decree;
b) Conditions concerning assurance of national defense and security and conditions for land use applied to a business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors in case such business organization has the certificate of rights to use land on the island, in border commune, ward or town and coastal commune, ward or town; other areas that affect defense and security, except for the business organization executing the investment project in an industrial park, export-processing zone, hi-tech zone or economic zone established under the Government’s regulations.”
Accordingly, foreign investors seeking to acquire stakes in a Vietnamese enterprise must satisfy the following conditions:
(1) Conditions regarding market access for foreign investors in case of conducting stakes transfer in enterprises operating in business lines that are either restricted, prohibited or subject to market access conditions in Vietnam.
(2) Conditions regarding assurance of national defense and security.
(3) Conditions regarding the receipt and use of land applied to enterprises that hold certificate of rights to use land located in border areas, coastal areas, or other areas affecting national defense and security.
3. Procedures for transferring stakes in enterprises to foreign investors
The procedures for transferring stakes to foreign investors shall be carried out in accordance with the procedures for investment in the form of capital contribution or purchase of shares or stakes as regulated in Article 26 of the 2020 Law on Investment, specifically as follows:
“1. Upon contributing capital, purchasing shares or purchasing stakes of a business organization, the investor shall satisfy conditions and follow procedures for change of members or shareholders in accordance with regulations of law applicable to each type of business organization.
2. A foreign investor shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization prior to change of members or shareholders in one of the following cases:
a) The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization conducting business in the restricted business lines;
b) The capital contribution or purchase of shares or stakes results in a foreign investor or business organization specified in Points a, b and c Clause 1 Article 23 of this Law holding over 50% of the charter capital of the business organization in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.
c) The foreign investor contributes capital, purchases shares or stakes of a business organization that holds a certificate of rights to use land on an island or in a border or coastal commune, or in another area that affects national defense and security.”
According to this regulation, it can be seen that the procedures for transferring stakes to foreign investors are classified into two cases:
3.1. Transfer of stakes not subject to Clause 2, Article 26 of the 2020 Law on Investment.
This may include the following situations: The foreign investor acquires stakes resulting in (1) no change in the ownership ratio in an enterprise operating in conditional business lines; or (2) a change in the ownership ratio to 50% or less in an enterprise operating in non-conditional business lines. In these cases, such enterprises do not hold certificates for land use rights for land located in areas affecting national defense and security.
In these cases, Clause 1 Article 66 of Decree No. 31/2021/ND-CP provides that “A business organization in which foreign investors invest in the form of capital contribution, purchase of shares or stakes shall follow procedures for registration of a change of members or shareholders in accordance with regulations of law on enterprises and other law corresponding to each type of business organization.”
Accordingly, the enterprise transferring stakes to foreign investors is required to carry out procedures for registering revisions to the certificate of enterprise registration. Depending on the transaction, the stake transfer may result in various changes, such as a change in charter capital, change of members, or conversion of the enterprise. For each specific case, the application dossier for revision of the enterprise registration certificate will vary accordingly.
3.2. Transfer of stakes subject to Clause 2 Article 26 of the 2020 Law on Investment.
Step 1: Submit application for registration of capital contribution or purchase of shares or stakes
The transferer enterprise shall submit the application for registration of capital contribution or purchase of shares or stake to the investment registration authority where the enterprises headquarter is located.
The application includes:
a) A registration form for capital contribution/purchase of shares/stakes (Form A.I.7 Circular No. 25/2023/TT-BKHĐT), which contains:
- Enterprise registration information;
- Business lines of the enterprise;
- List of owners, members, founding shareholders, and list of foreign investors (if any);
- Holding of charter capital by foreign investors before and after the transfer;
- Expected transaction value of the stake transfer agreement;
- Information about the enterprise’s investment project (if any).
b) Copies of legal documents of the transferring individuals or organizations and the enterprise with the transferee foreign investor.
c) A principal agreement on the stake transfer between the foreign investor and the enterprise, or between the foreign investor and the enterprise’s shareholder or member.
d) A copy of the certificate of land use rights of the enterprise (in cases specified in Point c, Clause 2, Article 26 of the 2020 Law on Investment).
Step 2: Acceptance and assessment by the investment registration authority
If the transferring enterprise holds a certificate of land use rights for land located in areas affecting national defense and security (as specified in Point c Clause 2 Article 26 of the 2020 Law on Investment), the investment registration authority shall receive the valid application and send a written request to the Ministry of National Defense and the Ministry of Public Security for their opinions on the fulfillment of legal conditions within 03 working days. The Ministries must respond within 07 working days from receipt of the request.
If no response is given within the stipulated period, it is deemed that the authorities do not object to the satisfaction of security and defense conditions.
Within 15 days from the date of receipt of a valid application, the investment registration authority shall evaluate whether the stake transfer satisfies the legal conditions and notify the enterprise based on the opinions of the Ministry of National Defense and the Ministry of Public Security.
Step 3: Registering revisions to the certificate of enterprise registration
After completing the procedures for registration of capital contribution, share acquisition, or stake acquisition, the enterprise must carry out procedures to amend its members or shareholders with the business registration authority in accordance with the Law on Enterprises applicable to each type of economic organization, within 10 days from the date of change.
4. Considerations in the implementation of the procedure
Regarding the party responsible for filing the application
According to Clause 2, Article 66 of Decree No. 31/2021/ND-CP: “The business organization in which foreign investors invest in the form of capital contribution, purchase of shares or stakes in the case specified in Clause 2 Article 26 of the Law on Investment shall submit 01 set of application for registration of capital contribution or purchase of shares or stakes to investment registration authority of the administrative division where the business organization’s headquarters is located”. Therefore, it is the enterprise that is responsible for submitting the application for registration of capital contribution or purchase of shares or stakes.
However, this provision may lead to ambiguity in determining the responsible party as Clause 2, Article 26 of the 2020 Law on Investment states that: “A foreign investor shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization prior to change of members or shareholders …”. Therefore, it is essential to pay attention to this discrepancy to avoid confusion regarding the responsible party. Proper delegation of authority must be ensured in accordance with the law, to prevent cases in which the authorized representative is not the responsible party, leading to rejection of the application.
Regarding application components
One of the mandatory documents in the application is a principle agreement on capital contribution or purchase of shares or stake between the foreign investor and the enterprise, or between the foreign investor and a member or shareholder of the enterprise.
In practice, for small-scale transactions or where there is a pre-existing business relationship between the parties, the parties may bypass signing a separate principle agreement and proceed directly to signing the transfer agreement. In such cases, the transfer agreement often includes a provision that completing the registration procedures is a condition for validity.
However, authorities may reject such transfer agreements as a substitute for the principle agreement on the grounds that, at the time of application submission, the transaction is still under review and the specific terms of the transfer have not yet been finalized. While this reasoning may be commercially unjustified, from an administrative perspective, failure to comply with formal requirements may result in the application being rejected.
Thus, enterprises should be aware that, even if the contract is lawful and the transaction is legitimate, improperly presented or structured documents that do not meet formal procedural requirements may still lead to refusal. It is advisable to anticipate government expectations and prepare the application accordingly to avoid unnecessary delays and costs.
Regarding the investment registration authority receiving the application
In addition to proactively researching the legal requirements and preparing a complete application, enterprises should consult with the local investment registration authority. This may help clarify practical issues that may arise, such as whether the transaction is subject to registration procedures, acceptable document formats, and required application components. Such consultation not only helps avoid mechanical or inconsistent interpretations across localities, but also plays an important role in reducing processing time, limiting additional costs, and avoiding repeated requests for supplementation.
References
1. https://thuvienphapluat.vn, referenced on June 25, 2025.
2. Nguyen Van Phuc, Nguyen Nhat Duong, Some difficulties in procedures for registering capital contribution, purchasing shares, and capital contributions of foreign investors, Legal Magazine, No. 3/2024, pp. 21–23.
3. Decree No. 31/2021/ND-CP dated March 26, 2021 guiding the implementation of the Investment Law (Decree No. 31/2021/ND-CP).
4. The Investment Law No. 61/2020/QH14 was promulgated by the National Assembly on June 17, 2020, effective from January 1, 2021.