During the process of assisting foreign investors in carrying out procedures to register capital contribution purchase in Vietnam, Mr. Nguyen Le Ngoc Khanh (Ho Chi Minh City) noticed that the Departments of Planning and Investment had different interpretations and guidelines regarding Clause 2 of Article 26 of Investment Law No. 61/2020/QH14, specifically as follows:

Clause 2 of Article 26 of Investment Law No. 61/2020/QH14 stipulates:

"Article 26. Investment procedures in the form of capital contribution, share purchase, purchase of capital contribution

… 2. Foreign investors shall carry out procedures to register capital contribution, share purchase, purchase of capital contribution of economic organizations before changing members, shareholders if falling into one of the following cases:

a) Capital contribution, share purchase, purchase of capital contribution increases the ownership ratio of foreign investors in economic organizations conducting business sectors or industries accessing markets subject to conditions for foreign investors;

b) Capital contribution, share purchase, purchase of capital contribution leads to foreign investors, economic organizations specified in Points a, b, and c of Clause 1 Article 23 of this Law holding over 50% of the charter capital of the economic organization in cases: increasing the ownership ratio of charter capital of foreign investors from below or equal to 50% to over 50%; increasing the ownership ratio of charter capital of foreign investors when foreign investors already own over 50% of the charter capital in the economic organization;

c) Foreign investors contribute capital, purchase shares, purchase capital contribution of economic organizations with Certificates of land use rights on islands and communes, wards, border towns; communes, wards, coastal towns; other areas affecting national defense, security."

For example: The case of purchasing capital contributions often occurs in practice as follows:

(i) Company X is a single-member limited liability company, established under Vietnamese law and owned 100% by investor A of Australian nationality.

(ii) Business activities of company X do not fall into the list of sectors or industries accessing markets subject to conditions for foreign investors.

(iii) Company X does not have a Certificate of land use rights on islands and communes, wards, border towns; communes, wards, coastal towns; other areas affecting national defense, security.

(iv) Investor A transfers 100% of the capital contribution in company X to investor B, who is an investor from the same country and a member participating in international treaties with Vietnam on investment.

Considering, according to (ii) and (iii), the transfer transaction between A and B does not fall under Points a and c of Clause 2 of Article 26 of the Investment Law.

Continuing to consider (iv), since the ownership ratio of the foreign investment in company X is already 100%, transferring capital in company X from investor A to investor B will not increase the ownership ratio of charter capital of the foreign investor.

Therefore, the transfer transaction between A and B also does not fall under Point b of Clause 2 of Article 26 of the Investment Law.

However, some Departments of Planning and Investment in provinces including Hanoi and Ho Chi Minh City advise that: "Investors must carry out procedures to register capital contribution purchase in situations described in the example."

Company X is a single-member limited liability company, established under Vietnamese law and owned 100% by investor A of Australian nationality. Business activities of company X do not fall into the list of sectors or industries accessing markets subject to conditions for foreign investors. Company X does not have a Certificate of land use rights on islands and communes, wards, border towns; communes, wards, coastal towns; other areas affecting national defense, security.

Investor A transfers 100% of the capital contribution in company X to investor B, who is an investor from the same country and a member participating in international treaties with Vietnam on investment.

Mr. Khanh asked whether, in the example provided, investors must carry out procedures to register capital contribution purchase according to Article 26 of the Investment Law.

Regarding this issue, the Ministry of Planning and Investment responded as follows:

Clause 2 of Article 26 of the Investment Law stipulates: "Foreign investors shall carry out procedures to register capital contribution, share purchase, purchase of capital contribution of economic organizations before changing members, shareholders if falling into one of the following cases:

a) Capital contribution, share purchase, purchase of capital contribution increases the ownership ratio of foreign investors in economic organizations conducting business sectors or industries accessing markets subject to conditions for foreign investors;

b) Capital contribution, share purchase, purchase of capital contribution leads to foreign investors, economic organizations specified in Points a, b, and c of Clause 1 Article 23 of this Law holding over 50% of the charter capital of the economic organization in cases: increasing the ownership ratio of charter capital of foreign investors from below or equal to 50% to over 50%; increasing the ownership ratio of charter capital of foreign investors when foreign investors already own over 50% of the charter capital in the economic organization;

c) Foreign investors contribute capital, purchase shares, purchase capital contribution of economic organizations with Certificates of land use rights on islands and communes, wards, border towns; communes, wards, coastal towns; other areas affecting national defense, security."

According to the regulations of Clause 1 of Article 23 of the Investment Law, economic organizations must meet conditions and carry out investment procedures as regulated for foreign investors when investing in establishing other economic organizations; investing in contributing capital, purchasing shares, purchasing capital contribution of other economic organizations; investing under BCC contracts if that economic organization falls into one of the cases specified in Points a, b, and c of this Clause.

Therefore, when foreign investors contribute capital, purchase shares, purchase capital contribution of economic organizations leading to falling into one of the cases specified in Points a, b, or c of Clause 2 of Article 26 of the Investment Law mentioned above, investors must carry out procedures to register capital contribution, share purchase, purchase of capital contribution.

Regarding this matter, Section 2 of Chapter II of Decree No. 31/2021/ND-CP regulates sectors, industries accessing markets for foreign investors.

According to the regulations of Clause 1 of Article 16 of this Decree, the list of sectors, industries restricted in market access applies to:

"a) Foreign investors as regulated in Clause 19 of Article 3 of the Investment Law;

b) Economic organizations as regulated in Points a, b, and c of Clause 1 of Article 23 of the Investment Law when investing in establishing other economic organizations; investing in contributing capital, purchasing shares, purchasing capital contribution of other economic organizations; investing under BCC contracts."

Clause 3 of Article 17 of this Decree stipulates: "For sectors, industries accessing markets subject to conditions for foreign investors as regulated in Section B Appendix I of this Decree, foreign investors must meet market access conditions published according to the regulations of Article 18 of this Decree."

Therefore, in cases where foreign investors receive the transfer of 100% capital contribution within economic organizations from foreign investors (of different nationalities), they must meet the market access conditions for foreign investors as regulated above.