Question: Our company is a foreign-invested economic organization and is conducting a share transfer transaction. According to regulations, our company is not required to register for share acquisition. However, when executing the transaction at the bank, we were asked to provide the approval letter for share acquisition from the Department of Planning and Investment. In this case, can our company apply for this approval letter? If so, what is the procedure to obtain it?
Answer
Based on the information provided by your company, we would like to offer the following assessment:
1. When is it necessary to register for share acquisition?
According to Clause 2, Article 26 of the Law on Investment 2020, foreign investors are required to register for share acquisition or capital contribution before changing members or shareholders in the following cases:
a) The contribution of capital, purchase of shares, or acquisition of contributed capital increases the foreign investors’ ownership ratio in an economic organization that operates in a business sector subject to market access conditions applicable to foreign investors;
b) The contribution of capital, purchase of shares, or acquisition of contributed capital results in a foreign investor or an economic organization as specified in Points a, b, and c, Clause 1, Article 23 of this Law holding more than 50% of the charter capital of the economic organization in the following cases: Increasing the foreign investor’s ownership ratio from below or equal to 50% to above 50%; Increasing the foreign investor’s ownership ratio when they already hold more than 50% of the charter capital of the economic organization;
c) The foreign investor contributes capital, purchases shares, or acquires contributed capital in an economic organization that holds a land use rights certificate for land located on islands, border communes, wards, townships, coastal areas, or other areas affecting national defense and security.
In your case, if your company is not required to register for share acquisition under Clause 2, Article 26 of the Law on Investment 2020, you may not need to obtain approval from the Department of Planning and Investment (Currently the Department of Finance). However, the bank may request this document as part of their internal procedures or to ensure compliance with relevant regulations.
2. Why does the bank require the approval letter?
The answer is yes. Although it is not mandatory, the company may submit a written request to the Department of Planning and Investment (Currently the Department of Finance) for confirmation that it is not subject to the share acquisition registration requirement, or to obtain a confirmation letter of approval. The purpose should be clearly stated as serving the bank's requirement for processing the transaction.
3. Can the company apply for the approval letter?
The answer is yes. Although it is not mandatory, your company can still submit an application to the Department of Planning and Investment (DPI) to obtain the approval letter, making it easier to proceed with the transaction at the bank.
4. Application Dossier
To obtain the approval letter, your company needs to prepare the following documents:
- Application for capital contribution, share acquisition, or capital contribution acquisition;
- Copies of legal documents of the individuals or organizations contributing capital, acquiring shares, or capital contributions, as well as the economic organization receiving the foreign investor’s capital contribution, shares, or capital contributions;
- Agreement document on capital contribution, share acquisition, or capital contribution acquisition between the foreign investor and the economic organization receiving the investment;
- Declaration document (attached with a copy) of the Land Use Rights Certificate of the economic organization receiving the foreign investor’s capital contribution, shares, or capital contributions.
Legal basis: Clause 2, Article 66 of Decree No. 31/2021/ND-CP.
5. Procedures and Timeline
As stipulated in Clauses 3 and 4, Article 66 of Decree No. 31/2021/ND-CP:
- Within 15 working days from the date of receiving a complete and valid application, the investment registration authority will review the conditions for capital contribution, share acquisition, or capital contribution acquisition and notify the investor. The approval document will be sent to both the contributing and receiving parties.
- If the economic organization receiving foreign investment holds a Land Use Rights Certificate for land located on islands, border communes, wards, townships, coastal areas, or other areas affecting national defense and security, the estimated processing time is 25 working days from the date of receiving a complete and valid application. The investment registration authority will review and assess national defense and security conditions for foreign investors before issuing a decision.
For reference: https://sblaw.vn/services/
