When operating business in Vietnam, some foreign investors who are shareholders of joint stock companies have a demand to transfer capital contribution to others. This following article will detail the conditions and procedures for foreign investors to transfer their shares to others.

Legal documents refer to in the article

• Law on Enterprise 2014;
• Decree No.78/2015/NĐ-CP on enterprise registration;
• Law on Investment 2014.

Conditions that foreign investors have to fulfill

• Within 03 years from the issuance date of the Certificate of Business registration, founding shareholders may transfer their shares to other founding shareholders; they may transfer their ordinary shares to people other than founding shareholders if approved by the General Meeting of Shareholders. In this case, the transferring shareholders do not have the right to vote on the transfer of such shares.
• Restrictions to ordinary shares of founding shareholders shall be lifted after 03 years from the issuance date of the Certificate of Business registration. These restrictions shall not apply to the shares that founding shareholders obtain after business registration and the shares transferred by founding shareholders to people other than founding shareholders of the company.
• To foreign investors who are not founding shareholders, the shares transfering is not restricted by the above regulations.
• There are some notices on the type of shares: Voting preference shares must not be transferred to others. However, shares with preferred dividends and redeemable preferred shares can be transferred to others like ordinary shares.

Procedures for foreign investors to transfer shares

1. If foreign investor is founding shareholder

Within 03 years from the date of issuance of the Certificate of Business Registration, the foreign investor who is a founding shareholder who transfers part or all of the shares shall carry out procedures for notifying the change of business registration information at the Department of Planning and Investment where the company headquarter is located.

Application for notification of change of business registration information:

• Notification of change of business registration information;
• A list of information about founding shareholders after the change;
• A shares transfer contract or documents proving completion of the transfer;
• Decision of the General Meeting of Shareholders;
• Minutes of meetings of the General Meeting of Shareholders (transferring shareholders do not have the right to vote on the transfer);
• Identify paper (ID/Passport) of individual transferee or business license/certificate in case transferee is organization;
• Authorization letter (if company’s legal representative does not directly file and receive the result).
• Process duration: 03 working days from the day on which the satisfactory application is received.

If the transferees are foreign investors, they will have to do the formality to register for the purchase of shares in following cases:

• The joint stock company they invest in engages in conditional business lines;
• The share transferring leads to the result that transferee receives equal or more than 51% of company’s charter capital.

Application for registration of the  purchase of shares includes:

• A written for registration of capital contribution or purchase of shares/capital contributions, which specify information about the business organization to which investment is made; the holding of the foreign investor after making investment;
• A copy of the ID card or passport (if the investor is an individual); a copy of the Certificate of establishment or an equivalent paper that certifies the legal status of the investor (if the investor is an organization);
• Authorization letter in case the investor does not directly file and receive the result of this procedure.
• Duration: 15 working days from the day on which the satisfactory application is received.

When receiving the written approval for purchase of shares given by Department of Planning and Investment, transferee will attach this approval to the application for notification of change of business registration information mentioned above.

After three years from the date of issuance of the Certificate of Business Registration, the foreign investor may freely transfer shares without having to carry out registration procedures with the Department of Planning and Investment. However, foreign investors still need to declare and make payment for personal income tax from the shares transfering.

2. If foreign investor is not a founding shareholder

For foreign investor who is not a founding shareholders, the transfer of shares to other shareholders or non-shareholders does not need notifying to the Department of Planning and Investment. The transferor and transferee can write down the agreement between them and keep that document at company’s office, then company will change the shareholder information in the shareholder’s register. However, for foreign investors who receive shares, they still have to carry out the procedures for registration the purchase of shares as mentioned above.

Notices:

• The regulations related to shares transfering of founding shareholders mentioned in this article applied to the joint stock companies established after July 1^st, 2015 when the Law on Enterprise 2014 takes effect.
• With a joint stock company established prior to the effective date of the Law on Enterprise 2014 without renewing their Business Registration Certificate, the old certificate still contains the information of the founding shareholders. Therefore, after a period of 03 years from the date of issuance of the old certificate, founding shareholder transfering shares shall have to carry out procedures for notification of changes in business registration information. After completing this procedure, a new business registration certificate will be issued, which contains no information of founding shareholders.

Above is our advice on the issue. If you need more detailed advice as well as how to access this service, please contact Lawyer – Mr. Nguyen Duc Trong directly via hotline: 0912.35.65.75, 0912.35.53.53 or call Free Consultancy Center 1900.6575 or send a service request via email: info@hongbanglawfirm.com

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Hong Bang Law Firm.