Do FDI companies need approval to contribute capital to another company?

Currently, FDI enterprises in Vietnam are expanding their business network by contributing capital and purchasing shares in other Vietnamese-owned companies. In such cases, is it necessary to obtain approval for capital contribution? Please follow the article below by Kỳ Vọng Việt Law Firm.

1. Legal Provisions
Clause 1, Article 23 of the 2020 Investment Law clearly stipulates cases in which investment procedures must be carried out in the form of capital contribution, share purchase, or capital contribution purchase:

a) A foreign investor holds more than 50% of the charter capital or a majority of general partners are foreign individuals in the case of a partnership company.

b) An economic organization as specified in point (a) holds more than 50% of the charter capital.

c) A foreign investor and an economic organization as specified in point (a) jointly hold more than 50% of the charter capital.

2. Legal Analysis
According to the above regulations, an FDI company, as a foreign-invested enterprise, when contributing capital or purchasing shares in another company, must comply with the investment procedures for capital contribution and share purchase. This is commonly referred to as the procedure for obtaining approval for capital contribution and share purchase.

Example: Company A (100% Korean-owned) is headquartered in Hanoi. Company A purchases 50% of the shares of Company B (100% Vietnamese-owned) headquartered in Hung Yen. In this case, Company B must complete the approval procedure for capital contribution and share purchase as required by investment law. Once the investment procedure is completed, Company B will become a company with a shareholder that is a foreign-invested enterprise.

The above legal consultation is for legal dissemination and research purposes. The cited regulations may no longer be in effect at the time you read this article. Please contact us at Hotline: 0919 821 403 for the most accurate legal advice. Sincerely, thank you!