Two routes, two sets of procedures
When a foreign investor wants to take part in a Vietnamese company, the transaction is generally seen in one of two ways: buying shares or capital contribution in an existing company, or contributing capital to establish or expand one. Both end with the investor as an owner; but the time, the cost and the legal conditions of each route differ considerably.
What drives the choice
- The business lines: some sectors carry market-access conditions or caps on foreign ownership.
- The ownership ratio after the transaction: once it crosses a statutory threshold, the company may have to complete the registration of capital contribution or share purchase before closing.
- The legal position of the target: this determines how much due diligence is needed and how much risk is inherited.
The procedures usually involved
Where a share purchase takes foreign ownership above the threshold, the investor generally has to obtain approval for the registration of capital contribution or share purchase from the investment registration authority before funds are transferred and the change of shareholder is recorded. This bears directly on the timetable, so it needs to be factored in at the deal structuring stage.
Choose correctly from the outset
Taking the wrong legal route can delay a transaction by months or force the file to be amended repeatedly. Assessing market-access conditions and the approval procedure at the outset is the sensible move.
Read more about our market entry service or get in touch with TLA for advice.
