Decree expands foreign ownership ratio

The Decree amends a lot of provisions, particularly provisions on the foreign ownership ratio that is extended on the Vietnamese securities market. Foreign ownership ratio is the total ownership ratio of shares, capital contribution portions with voting rights of all foreign investors and economic organisations having foreign investors holding 51 per cent or more of charter capital in any one public company, securities business organisation or securities investment fund.

Under the Decree, foreign investor means an individual having foreign nationality, or an organisation established under foreign laws and doing investment and business in Viet Nam.

1. Foreign ownership ratio in public companies

(a) In case international treaties of which Viet Nam is a member provide specific provisions on foreign ownership ratio, these specific provisions apply;

(b) For public companies operating in business lines and sectors for which the laws have specific provisions on the foreign-ownership ratio, these specific provisions apply. For public companies operating in business lines and sectors, in which there have been conditions applicable to foreign investor, but there have been no specific provisions on foreign ownership ratio, the maximum foreign ownership ratio is 49 per cent.

(c) For public companies operating in multi-business lines and multi-sectors; and there have been other regulations on foreign-investor ownership applicable to each business line and sector, the maximum foreign ownership ratio in these companies do not exceed the lowest level of a business line or sector provided in the regulations on foreign ownership, except for international treaties that have some other provisions;

(d) For public companies not falling in the above cases, the foreign ownership ratio is not limited, except the company charter has other provisions.

2. Foreign ownership ratio in equitised State owned enterprises

For State owned enterprises conducting public offers of shares in order to equitise, the foreign ownership ratio must comply with the laws on equitisation. In case the laws on equitisation do not provide any specific provisions on the foreign ownership ratio, the foreign ownership ratio must comply with the ratio provided in the above Section 1.

3. Bond investment

(a) Foreign investors are entitled to conduct unrestricted investment in Government bonds, Government guaranteed bonds, local authority bonds and enterprise bonds, except the laws or the issuing organisations have some other provisions;

(b) In the case of issuance of convertible bonds, the issuing organisation must ensure that the foreign ownership ratio on the date of converting to shares or purchasing the shares must comply with the provisions in above Sections 1 and 2.

4. Fund certificates

Foreign investors are entitled to conduct unrestricted investment in certificates of securities investment funds, shares of securities investment companies, shares without voting rights of public companies, derivative securities, and depository receipts, except if the charter of issuing organisation has other provisions. Except for open funds, securities investment funds having foreign ownership ratio of 51 per cent or more must comply with requirements and procedures for investment under the regulations on contributing capital, purchasing securities, or capital contribution portions of economic organisations by foreign investors.

5. Ownership of charter capital of a securities business organisation

Foreign investors are entitled to establish, purchase shares or capital contribution portions to own an unlimited amount of the charter capital of a securities business organisation as follows:

a) Only a foreign investor as an organisation satisfying requirements of owning 100 per cent of the capital of a securities business organisation are entitled to purchase in order to own 100 per cent of the charter capital of a securities business organisation; and to establish a 100 per cent foreign-owned securities business organisation. The foreign investor as an organisation that does not meet these requirements or as an individual can only own less than 51 per cent of charter capital of securities business organisation.

b) Compliance with provisions applicable to a securities company that shareholders or capital contributing members owning 10 per cent or more of the charter capital in any one securities company together with their affiliated persons (if any) must not own more than 5 per cent of the charter capital in any other securities company; and provisions applicable to a fund management company that shareholders or capital contributing members owning 10 per cent or more of the charter capital in any one fund management company together with their affiliated persons (if any) must not own more than 5 per cent of the charter capital in any other securities company.

The Decree takes effect on September 1, 2015, and replaces Prime Minister Decision No. 55/2009/QD-TTg (15 April 2009) on the ratio of foreign investor's participating on the Viet Nam securities market.

(Source:MAI COUNSEL)