After a period of temporary suspension of implementation due to the Covid-19 epidemic, Vietnam’s tourism industry has gradually restarted and is expected to develop strongly. This industry is also considered an area attracting a huge number of foreign investors. As a reference source to foreign investors who have an objective view of the legal procedure when participating in the market through the purchase of shares and capital contribution, TTVN points out the number of important notes as follows.

1. Considerations for investors before engaging in share transfer or capital contribution transactions.

Pursuant to Clause 24, Section B, Appendix I on the List of industries and sectors with restricted market access for foreign investors, tourism services are conditional market access industries for foreign investors. Therefore, according to the provisions of Vietnamese law and international treaties to which Vietnam is a contracting party, foreign investors purchasing shares or contributed capital of a tourism service business should pay attention to conditions are as follows:

1. Foreign-invested service providers are only allowed to provide services of bringing international tourists to Vietnam (inbound) and domestic travel for tourists entering Vietnam as part of the service of bringing tourists into Vietnam;
2. Not allowed to provide services to bring tourists from Vietnam to abroad (outbound);
3. Tour guides in foreign-invested enterprises must be Vietnamese citizens;
4. Pursuant to Clause 2, Article 31 of the Law on Tourism No. 09/2017/QH14, conditions for international travel service business include:

• • is an enterprise established according to the provisions of the law on enterprises;
  • depositing international travel service business at a bank;
  • the person in charge of the international travel service business must have a college degree or higher in travel, in case of graduation from another major, a certificate of international tourism operation is required.

In addition, foreign investors must carry out the procedures for registering to purchase shares or contributed capital of Vietnamese enterprises before changing members or shareholders according to the provisions of Article 26 of the Law on Investment No. 61/2020/QH14 and Article 66 of Decree No. 31/2021/ND-CP. Accordingly, the investor submits 01 set of registration documents to purchase shares or contributed capital to the investment registration agency where the Vietnamese enterprise is headquartered. Registration documents include:

1. A written registration for purchase of shares or contributed capital includes the following contents (according to Form A.I.7 issued together with Circular No. 03/2021/TT-BKHĐT): information on enterprise registration of a Vietnamese enterprise that has foreign investors are expected to purchase of shares or contributed capital; line of business; list of owners, members, founding shareholders, list of owners, members, shareholders being foreign investors (if any); the rate of ownership of charter capital of foreign investors before and after purchasing shares or contributed capital in Vietnamese enterprises; the expected transaction value of the contract to purchase of shares or contributed capital; information about the investment project of the Vietnamese enterprise (if any);
2. Copies of legal papers of individuals or organizations purchasing shares or contributed capital and Vietnamese enterprises having foreign investors purchasing shares or contributed capital;
3. Written agreement in principle on the purchase of shares or contributed capital between a foreign investor and a Vietnamese enterprise which has foreign investors purchase shares or contributed capital; or between a foreign investor and a shareholder or member of that Vietnamese enterprise;
4. A copy of the certificate of land use rights of a Vietnamese enterprise in which foreign investors purchase shares or contributed capital in case that Vietnamese enterprise has a certificate of land use right in a border island, commune, ward or town and coastal commune, ward and town; or other areas affecting national defense and security, except economic organizations implementing investment projects in industrial parks, export processing zones, high-tech zones, economic zones were established under the Government’s regulations (under the provisions of Point b, Clause 4, Article 65 of Decree No. 31/2021/ND-CP).

Within 15 days from the date of receipt of a valid application, the investment registration agency considers the satisfaction of conditions for purchasing shares or contributed capital as prescribed in Clause 2, Article 24 of the Law on Investment No. 61/2020/QH14 and Clause 4, Article 65 of Decree No. 31/2021/ND-CP and notifies for investors. The written notice shall be sent to foreign investors and Vietnamese enterprises having foreign investors purchase shares or contributed capital.

In case a Vietnamese enterprise which has a foreign investor purchasing shares or contributed capital has a certificate of land use rights in a border island, commune, ward or town and coastal commune, ward or town; or other areas affecting national defense, security, the satisfaction of conditions for purchasing shares or contributed capital of investors is considered by the investment registration agency and based on opinions of the Ministry of National Defense and the Ministry of Public Security (according to Clause 4, Article 66 of Decree No. 31/2021/ND-CP).

2. During share transfer or capital contribution transactions for investors.

Pursuant to the Ordinance on Foreign Exchange No. 06/2013/UBTVQH13 and Circular No. 06/2019/TT-NHNN of the State Bank of Vietnam, the payment of investment capital transfer transactions involving foreign investors must be made through the foreign investment capital account of the transferring enterprise.

Specifically, in case the transfer of shares or contributed capital results in a foreign investor owning 51% or more of the enterprise’s charter capital, the payment for this transaction must be made through the direct investment capital account. Vietnamese enterprises must open a foreign direct investment capital account at a bank in Vietnam for this purpose, which can be in Vietnamese Dong or in a foreign currency, depending on the currency used to contribute capital to the business.

On the other hand, in case the transfer of shares or contributed capital results in a foreign investor owning less than 51% of the charter capital of the enterprise, the payment for this transaction is made through the indirect investment capital account. Indirect investment capital in foreign currency must be converted into Vietnamese Dong to make investments through this account.

After obtaining the approval decision allowing foreign investors to purchase shares or contributed capital in Vietnamese enterprises, foreign investors shall sign contracts on transfer of shares or contributed capital and perform payment obligations as agreed in the contract to the transferring enterprise or organization or individual to complete the transaction.

Afte share transfer or capital contribution transactions for investors.

After the foreign investor is approved to purchase shares, contributed capital according to the provisions of Clauses 3 and 4, Article 66 of Decree No. 31/2021/ND-CP and the transfer transaction between the parties is completed, Vietnamese enterprise shall carry out procedures for changing members and shareholders at the business registration agency in accordance with the law on enterprises and other laws corresponding to each type of economic organization (according to Articles 52, 58 of Decree No. 01/2021/ND-CP). The rights and obligations of foreign investors as members and shareholders of a Vietnamese enterprise shall be established upon completion of the procedures for the change of members or shareholders.

Contact us if you need further advice.

Note: This article is for informational purposes only and it is not a legal advice. The content of the article represents its own of TTVN Legal, it subject to change without prior notice.