Pre-emptive rights of existing shareholders over new shares issued by a joint stock company

It has never been clear whether an existing shareholder of a joint stock company (JSC) has pre-emptive rights over new shares issued by the JSC. However, in the past, under Decision 12/2007 of the Ministry of Finance on corporate governance rules applicable to public listed JSCs, “shareholders may refuse to exercise their priority right to purchase new shares. This right of refusal shall be clearly stated in the relevant resolution of the general meeting of shareholders.” Many legal practitioners have relied on this provision of Decision 12/2007 to take the view that in case a public listed company issues new shares to a strategic investor by way of private placement,

a collective waiver of pre-emptive rights recorded in the Shareholder resolutions of the target company approving the transaction is sufficient; and
there is no need for the target company to collect individual waiver from each individual shareholder regarding their potential pre-emptive over the new shares to be issued to the strategic investor.

This view was particularly helpful to parties who want to expedite the deal process.

Decision 12/2007 has now been repealed by Decision 121/2012, which does not contain the provision on collective waiver of pre-emptive rights. On the contrary, Decision 121/2012 just basically repeats the provision in the Enterprise Law, which serves as the basis for pre-emptive rights of existing shareholders. While the model charter attached to Decision 121/2012 still contains a provision similar to the provision under Decision 12/2007, the legal arguments for not obtaining individual waiver from each individual shareholder regarding their potential pre-emptive over the new shares to be issued to the strategic investor have clearly become weaker.

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Foreign investors purchasing assets of a Vietnamese company

Purchasing existing assets of a Vietnamese company may be an option for a foreign investor who wants to overcome the foreign ownership limit applicable to a public company or wants to avoid (or cheery pick) the liabilities associated with the target company. However, there are certain issues associated with an asset deal:

Usually, the foreign investor cannot directly own assets especially land use rights and buildings in Vietnam. Accordingly, the foreign investor would need to set up its own subsidiary in Vietnam (Buyer Sub) to acquire the target assets from the Vietnamese seller. And the asset transfer agreement needs to be entered into between the Vietnamese seller and the Buyer Sub. However, from the seller’s perspective, the Buyer Sub is not a company of substance at least until the Buyer Sub’s capital is fully paid up and as such the foreign investor may need to act as a party to the asset purchase agreement and to be liable for the Buyer Sub’s performance;
There is a risk that the foreign investor cannot set up the Buyer Sub as this may involve a discretionary investment evaluation process by the licensing authority. So even if the foreign buyer and the Vietnamese seller have agreed to a definitive agreement, the agreement cannot be completed until the Buyer Sub is set up. This is a risk that both the Buyer Sub and a target company have to consider when negotiating an asset deal;
An asset purchase agreement between the Buyer Sub and a target company being a contract between two companies in Vietnam is likely to be subject to Vietnamese governing law. In addition, it is more likely than not that land use right and buildings are part of the target assets. In such case, the asset purchase agreement (or at least the part relating to land use right and buildings) may be subject to jurisdiction of the Vietnamese courts;
An asset purchase agreement between the Buyer Sub and a Vietnamese seller being a contract between two companies in Vietnam will need to be settled in Vietnamese Dong under the foreign exchange regulations. As such, it may be difficult for the Vietnamese seller to fix the transfer price in US$;
If the transferred assets include assets the ownership of which is subject to registration such as trademarks, buildings and land use rights then the parties may need to enter into separate transfer instruments for the purpose of filing with the relevant authorities. Transfer instruments relating to real estate in Vietnam must usually be notarized. As such there is a risk that there is inconsistency between the notarized transfer instrument and the asset transfer agreement which are not notarised;
The transferred assets might involve numerous contracts and require third party’s consents. The Civil Code requires the transfer of rights to demand to be notified to the obligors. In addition, transfer of receivables will need to be registered with the National Department of Registration of Security Interests. The Civil Code requires the transfer of obligations to be consented by the obligee. Therefore, if the target company has substantial external debts and has granted security interest over its assets, it may be difficult to obtain consents from the target company’s lenders for the transfer of assets unless simultaneous or escrowed closing can be arranged to ensure that the lenders will be repaid.

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Vietnam investment regulations – Direct investment v.s. indirect investment

Under the Investment Law, direct investment means a form of investment whereby the investor invests its invested capital and participates in the management of the investment activity. On the other hand, indirect investment means a form of investment through the purchase of shares, share certificates, other valuable papers or a securities investment fund and through other intermediary financial institutions and whereby the investor does not participate directly in the management of the investment activity.

The confusing point here is what “participating in the management” of investment activity. If having purchased shares of a listed company in Vietnam, a foreign investor attends the shareholders meeting of such company and exercises its voting rights then arguably the investor has “participated in the management” of the company in Vietnam. A more relevant example is a foreign investor purchases a minority stake in a domestic joint stock company and nominates its personnel to hold position in the Board of Directors of such company. In such case, it is not clear if the investor could be deemed to have “participated in the management” of the company in Vietnam.

The consequences of being treated as a direct investment and an indirect investment may be material. If an investment is an indirect investment then the parties may not need to obtain an Investment Certificate and must settle the transaction in Vietnamese Dong through a VND capital contribution account. If an investment is a direct investment then the parties may need to obtain an Investment Certificate and could settle the transaction in foreign currency.

It would have been clearer if the Investment Law replaces the concept of “participating in the management” with “control”. In such case, an investor will be deemed to make a direct investment if it has “control” of the investment activity. In other cases, the investor will be deemed to make an indirect investment.

Vietnam Business Law Blog

Let Someone Have the Personal Data You Have: Is It Providing or Transferring?

about a day ago

The Personal Data Protection Law (PDPL) lists providing (cung cấp) and transferring (chuyển giao) as two forms of processing personal data, but defines neither.

Based on the ordinary meaning of those two terms, they mean much the same thing, and either can describe the same act: a business handing a data subject's personal data to another party. The context in which the PDPL uses those two terms does not help separate them either. Article 15.2(b) of the PDPL allows a business to provide data to another organization "when the data subject consents", and Article 17.1(a) of the PDPL also allows a transfer "when the data subject consents".

New Draft Real Estate Business Law: Potential Changes to Project Transfer Regulations

about a day ago

Vietnam’s National Assembly is currently considering a new Law on Real Estate Business to replace the Law on Real Estate Business 2023. One of the notable features of the draft law on real estate business (the Draft) is new regulations on the transfer of real estate projects.

This post discusses four key changes under the Draft and relevant implications.

1. Mortgaged projects can be transferred without a prior discharge

The Draft allows a mortgaged project to be transferred without first releasing the mortgage if the involved parties can reach an agreement. The Draft opens two routes for a mortgaged project to be transferred:

Decree 342/2026: New Rules on Goods Trading by Foreign-Invested Enterprises in Vietnam

about a month ago

The Government officially issued Decree 342/2026/ND-CP dated 3 September 2026, detailing the Commercial Law and the Law on Foreign Trade Management on the sale and purchase of goods and activities directly related to the sale and purchase of goods by foreign investors and foreign-invested enterprises (FIEs) in Vietnam (Decree 342/2026).

Effective from 18 October 2026, Decree 342/2026 replaces Decree 09/2018/ND-CP (Decree 09/2018), which has governed the Business License and Retail Outlet License regime since 2018. However, FIEs holding Business Licenses and Retail Outlet Licenses issued before 18 October 2026 may continue the licensed activities under their existing licences.

Children's Data Under Decree 330/2026: Has the Old Dual-Consent Rule Come Back?

about a month ago

Must a business obtain both the child's consent and the consent of the child's legal representative, a parent or guardian (dual consent), whenever it processes the personal data of a child aged 7 or over? Under the Personal Data Protection Law (PDPL), the answer is no. Dual consent is required only for processing that would disclose the child's private life or personal secrets. For other processing, the legal representative consents on the child's behalf, and the child's own consent is not required (Article 24.2 of the PDPL). However, Decree 330/2026 of the Government on administrative penalties for violations in the fields of cybersecurity and personal data protection (Decree 330/2026) seems to apply dual consent to a broader set of circumstances. Article 60.1(c) of Decree 330/2026 fines processing of the data of a child aged 7 or over without dual consent. That rule was taken from Decree 13/2023, which ceased to have effect on 1 January 2026.

New Foreign Exchange Rules for Foreign Investment in Vietnam

about 2 months ago

The State Bank of Vietnam (SBV) officially issued Circular 38/2026/TT-NHNN dated 31 July 2026 on foreign exchange management for foreign investment activities in Vietnam (Circular 38/2026). Effective from 18 August 2026, Circular 38/2026 replaces Circular 06/2019/TT-NHNN (Circular 06/2019) as amended by Circular 03/2025/TT-NHNN (Circular 03/2025), which has governed the direct investment capital account (DICA) regime since 2019. Circular 38/2026 also terminates Articles 11.3 and 11.4 of Circular 03/2025 on opening and use of VND-denominated accounts for conducting foreign indirect investment in Vietnam and amends Circular 16/2014/TT-NHNN on the use of foreign currency and Vietnamese dong accounts of residents and non-residents.

When Does CIT Arise on a Foreign Seller’s Share Transfer — At Signing or at Closing?

about 2 months ago

A typical share sale agreement (SPA) takes effect on signing. Closing, when the buyer and the seller exchange money and title to the shares, usually comes later, once conditions have been met. One might expect tax on the sale to be imposed when the shares are sold, that is, at closing. But where a foreign enterprise with no permanent establishment (Foreign Seller) in Vietnam sells shares in an unlisted Vietnamese company to a resident buyer, Article 5.2(a) of Circular 20/2026 provides that revenue is taxed when the initial capital-transfer contract takes effect. On the face of that Article, the SPA can be that contract, and signing can be when it takes effect. The fact that closing has not yet occurred might not, by itself, defer the tax. Until Circular 20/2026, that was not so.

Whether a JSC may issue new voting preference shares to founding shareholders after ERC issuance?

about 2 months ago

Similar to the Enterprise Law 2005 and the Enterprise Law 2014, the Enterprise Law 2020 is silent on whether founding shareholders may hold voting preference shares newly issued after the issuance date of the enterprise registration certificate (ERC), and only provides at Article 116.1 that the voting preference of founding shareholders is effective for three years from that date. This blog will examine different views on this issue.

On the one hand, one may support the view that founding shareholders are entitled to hold voting preference shares issued after ERC issuance date because:

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Vietnam investment regulations – Definition of “Foreign investors”

There are more than one definition of foreign investors (nhà đầu tư nước ngoài) under Vietnamese law:

Foreign investors are defined under the Investment Law to mean … “foreign organization or individual using capital in order to carry out an investment activity in Vietnam”. The definition under the Investment Law seems to suggest that only companies incorporated outside Vietnam can be regarded as foreign investors.
However, in subsequent decisions of the Prime Minister (Decision 88/2009 and Decision 55/2009), foreign investors also include enterprises established in Vietnam with more than 49% of capital contributed by “foreign parties” (bên nước ngoài). It is not clear if the term “foreign parties” are the same as “foreign investors” in the Prime Minister’s decision.
The Ministry of Finance on the other hand consider foreign investors to include “enterprises established in Vietnam with 100% foreign contributed capital”.
The latest document (Decree 102/2001) does not provide a definition of foreign investors but provides that companies incorporated in Vietnam of which foreign investors own more than 49% will be subject to the same investment and business conditions as those applicable to foreign investors.

In summary, there are overlapping and confusing definitions of “foreign investors” under Vietnamese law. However, it is reasonable to conclude that such term will cover, among others, companies incorporated outside of Vietnam and companies incorporated in Vietnam of which foreign investors own more than 49%.

Vietnam Business Law Blog

Let Someone Have the Personal Data You Have: Is It Providing or Transferring?

about a day ago

The Personal Data Protection Law (PDPL) lists providing (cung cấp) and transferring (chuyển giao) as two forms of processing personal data, but defines neither.

New Draft Real Estate Business Law: Potential Changes to Project Transfer Regulations

about a day ago

This post discusses four key changes under the Draft and relevant implications.