Instructions on procedures for changing foreign shareholders

Procedures for changing foreign shareholders requires the joint stock company to comply with the correct procedures and documents according to the law. Following the correct procedures not only ensures the legality of the transfer transaction but also helps businesses avoid legal risks. The article below will provide detailed instructions on how to perform this procedure.

When does a joint stock company make a notification to change shareholders who are foreign investors?

Unlisted joint stock companies need to make a notification to change shareholders who are foreign investors when there is a change in foreign shareholders. According to the provisions of Clause 3, Article 31 of the Law on Enterprises 2020, the company must notify the Business Registration Authority in writing within 10 days from the date of change. This regulation applies to cases of share transfer between existing shareholders and new foreign investors.

Notifying changes to foreign shareholders when there is a change is a mandatory obligation of businesses to ensure transparency in investment activities. The notice must include all information required by law about both the transferor and the transferee, including information about the share ownership ratio before and after the transfer.

For conditional business sectors or sectors with limited market access for foreign investors, businesses must also comply with separate regulations on foreign ownership ratio according to the Law on Investment and specialized legal documents.

Procedures for changing foreign shareholders

The process of implementing procedures for changing foreign shareholders needs to comply with the provisions of law, from preparing documents, submitting documents to working with competent authorities to avoid unnecessary risks. Specifically:

Documents need to be prepared

When carrying out procedures for changing foreign shareholders, enterprises need to prepare complete documents as prescribed in Article 58 of Decree 01/2021/ND-CP. Documents notifying changes to foreign shareholders must ensure legality and complete information. Careful preparation of documents will help the notification process go smoothly, avoiding the need for multiple additions and modifications.

According to legal regulations, the dossier for notification of change of shareholders who are foreign investors includes the following documents:

• Notice of change in business registration content signed by the legal representative of the enterprise.
• The list of shareholders who are foreign investors has been changed accordingly Sample in Appendix I-8 issued with Circular 01/2021/TT-BKHDT. The list of shareholders who are foreign investors must include the signature of the shareholder whose share value changes; it is not required to have the signature of the shareholder whose share value does not change.
• Share transfer contract or documents proving the completion of the transfer.
• Copies of the individual’s legal documents in case the transferee is an individual.
• Copies of the organization’s legal documents, copies of the individual’s legal documents for the authorized representative and a copy of the document appointing the authorized representative in case the transferee is an organization.
• Document from the Investment Registration Authority approving capital contribution and share purchase by foreign investors (if this procedure must be carried out according to the provisions of the Law on Investment).

Important note: For shareholders who are foreign organizations, copies of the organization’s legal documents must be consular legalized in accordance with Vietnamese law.

Implementation process

The process of implementing procedures for changing foreign shareholders follows the specific steps specified in Article 58 of Decree 01/2021/ND-CP. Businesses need to clearly understand each step to ensure compliance with legal regulations. The implementation process is designed to ensure transparency and legality of share transfer transactions.

According to regulations, the procedure for changing foreign shareholders includes the following steps:

Step 1: Enterprises submit dossiers to notify changes in business registration content to the Business Registration Office where the enterprise is headquartered. The submission of documents must be made within 10 days from the date of change for shareholders who are foreign investors.

Applications can be submitted by the following methods:

• Submit directly (for localities that still receive direct applications);
• Submit online via the National Business Registration Portal https://dangkyquamang.dkkd.gov.vn/ (currently, some localities only accept online applications);
• Submit via postal service.

Step 2: The Business Registration Office receives the application and gives a Receipt to the business. This receipt is the basis to prove that the enterprise has fulfilled its notification obligation according to regulations.

Step 3: Within 03 working days from the date of receiving the notice, the Business Registration Authority is responsible for reviewing the validity of the dossier and updating information about shareholders who are foreign investors in the National Business Registration Database.

If the enterprise needs, the Business Registration Office will issue a Certificate of change in business registration content to the enterprise.

In case the dossier is not valid, the Business Registration Authority will notify the enterprise in writing of the content that needs to be amended or supplemented to complete the dossier.

If refusing to amend or supplement information according to the content of the notice of change in business registration, the Business Registration Authority must notify the enterprise in writing and clearly state the reason for refusal.

What should a joint stock company do after implementing  procedures for changing foreign shareholders?

After completing procedures for changing foreign shareholders, the joint stock company also needs to fulfill a number of additional obligations according to the law. These obligations ensure the openness and transparency of corporate information. Full compliance with post-procedural obligations helps businesses avoid legal risks and administrative sanctions.

According to the provisions of Clause 2, Article 32 of the Law on Enterprises 2020, when changing the content of business registration, the corresponding changes must be publicly announced on the National Business Registration Portal. Therefore, joint stock companies must publish the list of shareholders who are foreign investors after the change on the National Electronic Information Portal.

In addition, businesses need to update this change in the company’s Shareholder Register as prescribed in Article 122 of the Law on Enterprise 2020. Updating the shareholder register must record full information about new shareholders, number and type of shares owned, and date of share registration.

For business lines with conditions or restrictions on foreign ownership, businesses also need to comply with reporting and information disclosure procedures according to specialized laws.

Frequently asked questions about changing foreign shareholders

Below are some frequently asked questions, please refer to:

How long is the processing time for documents to change foreign shareholders?

According to regulations, the Business Registration Authority is responsible for reviewing the validity of the dossier and updating information about shareholders who are foreign investors within 03 working days from the date of receiving the valid notice. The total time from submitting the application to completing the procedure usually lasts from 3-7 working days, depending on the completeness of the application and additional requests (if any).

How will businesses be punished if they do not notify changes in foreign shareholders?

Enterprises that do not notify changes to foreign shareholders within the prescribed time limit may be subject to administrative penalties of 10-15 million VND according to the provisions of Decree 122/2021/ND-CP. In addition, businesses may also be subject to remedial measures forcing them to carry out procedures for notifying changes in business registration content.

Can foreign shareholders own shares in all business lines?

No. According to the provisions of the Law on Investment, there are industries in which business investment is prohibited, conditional industries or industries with limited market access for foreign investors. These industries are specifically regulated in specialized legal documents and the List of conditional business and investment industries. Enterprises need to carefully review investment conditions before transferring shares to foreign shareholders.

Is it necessary to notarize a share transfer contract for a foreign investor?

The law does not require notarization of share transfer contracts. However, notarization will increase legality and protect the rights of parties in transfer transactions, especially in international transactions. For foreign investors, notarization also makes the process of proving legal ownership in Vietnam more convenient.

Is it necessary to carry out investment procedures before carrying out procedures for changing foreign shareholders?

Depends on each specific case. According to Article 26 of the Law on Investment 2020, foreign investors must carry out procedures for approval of capital contribution and share purchase before changing members and shareholders in the following cases:

• Increase the ownership rate of foreign investors in economic organizations doing business in conditional market access sectors;
• Increase foreign ownership ratio from below 50% to above 50%;
• Foreign investors contribute capital and buy shares in economic organizations with land use rights certificates in islands, communes, wards, border towns and other areas that affect national defense and security.

How to determine the maximum foreign ownership ratio in an enterprise?

The maximum foreign ownership ratio is determined based on the business line of the enterprise. For industries that do not have specific regulations on foreign ownership, foreign investors can own up to 100% of the charter capital. For industries with regulations limiting foreign ownership, businesses need to comply with regulations in international treaties, the Law on Investment and specialized legal documents.

Is the procedure for changing foreign shareholders different from changing domestic shareholders?

The procedure for changing foreign shareholders is more complicated than changing domestic shareholders in some aspects. Specifically, the application needs to be supplemented with legal documents of foreign shareholders that have been consular legalized; In many cases, written approval from the Investment Registration Authority is required for capital contribution and share purchase; At the same time, they must comply with regulations on foreign ownership ratio in each specific business field.

Consulting services on procedures for changing foreign shareholders at Long Phan Consulting Company

Long Phan Consulting Company provides consulting services on procedures for changing foreign shareholders with a team of experienced experts. We have supported many businesses in successfully implementing this procedure, ensuring compliance with legal regulations.

Consulting services on procedures for changing foreign shareholders at Long Phan Consulting Company include the following contents:

• Review investment conditions for foreign investors in the company’s business field;
• Consulting on the maximum allowed foreign capital ownership ratio in the enterprise;
• Support in preparing complete documents to notify changes to shareholders who are foreign investors;
• Drafting necessary documents and documents according to regulations;
• Carry out application procedures at the Business Registration Office;
• Monitor the progress of processing documents and update information for businesses;
• Support explanations and additional documents at the request of state agencies (if any);
• Receive results and hand them over to the business.

With the support of Long Phan Consulting Company, businesses will be guaranteed to properly and fully implement procedures for changing foreign shareholders, avoiding legal risks that may arise.

Conclude

Procedures for changing foreign shareholders require caution and strict compliance with legal regulations. If you need detailed support or advice on this procedure, please contact Long Phan Consulting Company via the hotline 1900636389 for quick and professional support from our experienced team.