TRANSFER OF SHARES AND CONTRIBUTION OF CAPITAL IN FDI ENTERPRISES

In the context of economic integration and strong capital flows, restructuring activities through the transfer of shares and contributed capital in FDI enterprises are taking place very vibrantly. This process is not merely a change of owners/members/shareholders on paper, but a complex legal intersection requiring strict compliance with the Law on Enterprises 2020 (amended in 2025) and the Law on Investment 2025. To ensure legality and avoid the risks of administrative application rejection or tax arrears collection, investors need to establish strict contractual terms and have a systematic implementation strategy.

Legal regulations on the transfer of shares and contributed capital in FDI enterprises

Transactions of transferring shares and contributed capital in FDI enterprises are governed by two parallel legal mechanisms:

First, internal regulations under the Law on Enterprises: For a multiple-member limited liability company, the law prescribes an “internal offering” mechanism to protect the interests of existing members. Specifically, a member wishing to transfer their contributed capital must prioritize offering it to the remaining members in proportion to their respective capital contribution ratios; and is only permitted to transfer it to a third party if the existing members do not purchase it in full within 30 days. For a joint stock company, in principle, shares are freely transferable through contracts, except for restrictions on founding shareholders within the first 03 years.

Second, the control mechanism under the Law on Investment 2025 (effective from March 1, 2026): When foreign investors participate in receiving the transfer of contributed capital in FDI enterprises, they must overcome barriers regarding market access conditions, national defense and security assurance, and land conditions under Article 21 of the Law on Investment 2025. In particular, foreign investors are required to carry out procedures for registering the purchase of contributed capital and shares (M&A registration) before updating changes in members if falling into the cases specified in Clause 3, Article 21: Transactions that increase the foreign ownership ratio in conditional business lines; having foreign investors (or economic organizations under Article 20) holding over 50% of the charter capital; or the target enterprise holding a Certificate of land use rights on islands, border communes/wards, coastal areas, or areas affecting national defense and security.

Conditions and requirements for the Assignment Contract

The contract is the backbone document of the entire transaction. When drafting a contract for the transfer of contributed capital in an FDI enterprise, the parties need to pay special attention to:

• Form and supporting documents: The contract must be made in writing. After signing, the parties must have documents proving the completion of the transfer, such as a Liquidation Minute of the assignment contract, or bank documents showing the completion of payment for the purchase of shares/contributed capital.
• Conditions Precedent: Due to the transaction involving foreign elements, the effectiveness clause of the contract and the payment schedule must be strictly tied to the enterprise receiving the M&A approval document from the investment registration authority.
• Tax risk allocation mechanism: The contract needs to clarify which party is responsible for tax declaration and payment, and simultaneously establish a “gross-up” or “tax escrow” mechanism to retain a certain amount of money to ensure that tax obligations are fully fulfilled.

Procedures for executing the transfer

The process of transferring shares/contributed capital in FDI enterprises goes through 3 key steps:

• Step 1 (M&A procedures): Submit the application to the investment registration authority. The standard processing time is 15 days from the date of receiving a valid application.
• Step 2 (Changing enterprise registration contents): According to Decree 168/2025/ND-CP, the application for changing members/shareholders is submitted to the provincial business registration authority (Department of Planning and Investment). The processing time is 03 working days if the application is valid, applying the new form system under Circular 68/2025/TT-BTC.
• Step 3 (Adjusting the IRC – if applicable): Applied if the transaction changes the contents on the Investment Registration Certificate (IRC). The standard processing time is 10 working days from the date of receiving a valid application

Relevant tax obligations

The obligation of tax declaration and payment is a core responsibility. If the transferor is an individual, the income from the transfer of contributed capital is subject to Personal Income Tax (PIT) at a tax rate of 20% on the taxable income (for the transfer of shares, it is 0.1% on the total transfer price per transaction). If the transferor is an organization, this revenue is subject to Corporate Income Tax (CIT), must be accounted for separately, and is not entitled to CIT incentives. Please note that capital transfer transactions are not subject to Value Added Tax (VAT).