CONDITIONS FOR FOREIGN INVESTORS TO PURCHASE SHARES IN CREDIT INSTITUTIONS IN VIETNAM

Legal situation: Dear Lawyer, I am an individual investor from Singapore, and I am planning to invest in Vietnam. Specifically, I am interested in acquiring a 10% stake in the charter capital of a credit institution. Could you please provide guidance on the conditions and procedures I need to follow in order to achieve this? Thank you.

FDVN’s Opinion: Thank you for trusting and sending your question to FDVN Law Firm ("FDVN"). After researching the relevant legal provisions, we would like to present our opinion as follows:

Based on Articles 6 and 7 of Decree 01/2014/ND-CP regarding foreign investors purchasing shares in a credit institution in Vietnam.

- Foreign investors may acquire shares under the following circumstances:

- Foreign investors purchase shares of shareholders of joint-stock credit institutions.

- Foreign investors purchase shares in cases where joint-stock credit institutions sell shares to increase charter capital or sell treasury shares.

- Foreign investors purchase shares in cases where credit institutions transform the legal form into joint-stock credit institutions.

Thus, according to the above legal provisions, you must comply with the forms of share ownership as prescribed by law to ensure your investment is legitimate. In this case, for ease and efficiency, you may consider purchasing shares of shareholders of joint-stock credit institutions.

The foreign investor shareholding ratios are regulated as follows:

1. The holding of a foreign individual shall not exceed 5% of charter capital of a Vietnamese credit institution.

2.  The holding of a foreign organization shall not exceed 15% of charter capital of a Vietnamese credit institution except for the case specified at Clause 3 this Article.

3. The holding of a foreign strategic investor shall not exceed 20% of charter capital of a Vietnamese credit institution.

4. The holding of a foreign investor and the concerned persons of such a foreign investor shall not exceed 20% of charter capital of a Vietnamese credit institution.

5. Total shareholding level of foreign investors shall not exceed 30% of charter capital of a Vietnamese commercial bank. Total shareholding level of foreign investors at a Vietnamese non-banking credit institution shall comply with legislation applicable to public companies and listed companies.

Considering your intent, as a foreign individual investor, your shareholding ratio cannot exceed 5% of the charter capital of a Vietnamese credit institution. If you would like to own 10% of Vietnamese credit institution’s charter capital, you must be an institutional foreign investor and meet the conditions specified in Article 9 of Decree 01/2014, which include:

- Being ranked by international prestige credit-rating organizations from the stable level or equivalent or higher level.

- Having full financial source to purchase shares which is defined under a financial statement audited independently of year preceding year of submission of dossier and a lawful capital source for share purchase as prescribed by law.

- The share purchase does not cause influence to the safety, stability of the Vietnamese credit institution system; does not create exclusivity or limit the competition in the Vietnamese credit institution system.

- Not violating seriously law on monetary, banking, securities and securities market of country where foreign investor is headquartered and law of Vietnam within 12 months until submission of dossier of share purchase.

- Having total assets at least equivalent to 10 billion U.S. dollar for foreign investors being banks, financial companies, or finance-leasing companies or having the minimum charter capital equivalent to 1 billion U.S. dollar for foreign investors being other organizations in the year preceding the year of submission of dossier of share purchase.

According to Tuan Thi - FDVN Law Firm

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