3 July 2015

Removal of Foreign Ownership Cap for Public Companies

On 26 June 2015, the Government of Vietnam passed Decree No. 60/2015/ND-CP (“Decree 60”).

  • Decree 60 amends and supplements several articles of Decree No. 58/2012/ND-CP dated 20 July 2012 providing details and implementation guidelines on several articles of the Law on Securities and Amended Law on Securities (“Decree 58”).
  • It comes into force on 1 September 2015, and will replace the amended articles of Decree 58 and supersede all provisions under Decision No. 55/2009/QD-TTg dated 15 April 2009 of the Prime Minister on percentage participation of foreign investors in securities market of Vietnam (“Decision 55”).

We discuss below the key changes in foreign ownership percentage in securities market of Vietnam. Consistent with Vietnam’s international treaty commitments and for the purpose of attracting more foreign indirect investment into the securities market of Vietnam, Decree 60 has removed the limitation on foreign ownership in the securities market.

Types of SecuritiesExisting
(Decision 55)
From 1 Sept 2015 (Decree 60)
Shares in a public joint stock company49% (except as otherwise provided in the specific regulations)Unlimited, except for the following circumstances:

  • Where other percentage is provided in the charter of the company
  • Where other percentage is provided in international treaties to which Vietnam is a member
  • Where other percentage is provided in specific regulations  regarding certain businesses (e.g. 30% in commercial banks)
  • 49%: for companies conducting businesses in conditional sectors for foreign investors but no specific regulations on foreign ownership percentage are applied

The lowest percentage for foreign ownership among different percentages applied for different business activities: for companies conducting multi-businesses with different prescribed foreign ownership percentage restriction

Certificates of a public investment fund49%Unlimited, except for other percentage as provided in the charter of the public investment fund
Shares of public securities investment companies49%Unlimited

The 49% limitation on foreign shareholding applies to public companies only. Non-public companies are not subject to this general restriction and are regulated largely by investment laws applicable to each business sector. Many have argued that this limitation is inconsistent with Vietnam’s commitments to international treaties in particular Vietnam’s WTO commitments. The lifting of this restriction is long awaited and is expected to attract a new flow of foreign capital to Vietnam’s stock markets.

Please contact David Lim, Managing Partner of ZICO Law Vietnam or Lien Nguyen, Senior Associate for all enquiries regarding this legal update.