Foreign investment in private and public companies

Foreign investment in both Thailand and Vietnam is subject to certain restrictions. In Thailand, private and public companies are subject to the same foreign investment restrictions, whereas in Vietnam, private and public companies are subject to different restrictions.

1. Thailand

Under Thai law, there are two types of limited companies:

(1) private limited company; and
(2) public limited company.

The former is regulated by the Civil and Commercial Code of Thailand, and the latter is regulated by the Public Limited Company Act B.E. 2535 (1992). Therefore, the conditions and requirements applicable to these two types of companies differ. Key differences are outlined in the table below.

Of the two, a private company is usually the preferred option, except where the relevant business can only be conducted by a public company (e.g. banking), as the private company can be established relatively quickly and easily.

Both private and public companies can be wholly owned by foreigners. In such case, they will be considered “foreigners” under the Foreign Business Act B.E. 2549 (1999) (the “FBA”), and thus restricted from engaging in certain businesses as set forth in the FBA. For purposes of the FBA, Section 4 defines a “foreigner” as follows:

(a) A natural person who is not a Thai national;
(b) A juristic person not registered in Thailand;
(c) A juristic person registered in Thailand at least 50 percent of whose share capital (i.e. paid-in capital) is held by persons set out in (a) or (b) above, and a limited partnership or a registered ordinary partnership whose managing partner or manager is not of Thai nationality; or
(d) A juristic person registered in Thailand at least 50 percent of whose share capital is held by any of the entities set out in (a), (b), or (c) above.

In light of the requirements above, both private and public companies are generally subject to the foreign investment restrictions under the FBA.

2. Vietnam

Under Vietnamese law, a private company constitutes a public company if it is subject to either of the following circumstances:

(a) Having paid-up charter capital (“charter capital” means the total value of assets that have been contributed or promised by the members/partners/owners when the limited liability company or partnership is established, or the total nominal value of the sold or subscribed shares when a joint stock company is established) of at least 30 billion VND, and in which at least 10% of the voting shares are held by at least 100 investors who are not major shareholders, with each holding less than 5% of the voting shares of the company; or
(b) Having successfully made an initial public offering of its shares.

In the event of (a), the public company must register its shares for trading on the Unlisted Public Company Market (UPCoM), which is a centralized market for the sale and purchase of shares of public companies. After being registered on UPCoM for at least two years, if that public company meets the applicable conditions, it may choose to list its shares on the Ho Chi Minh Stock Exchange (HOSE) or Hanoi Stock Exchange (HNX), which are other centralized markets for the sale and purchase of shares of public companies, but with higher requirements and greater liquidity.

In the event of (b), the public company may choose to either register its shares for trading on UPCoM, or list its shares on HOSE or HNX if it satisfies the respective listing conditions.

The Vietnamese government plans for HOSE to be the sole market for trading listed shares by December 31, 2025.

With respect to foreign investment, the Law on Investment of Vietnam (which regulates investment activities in Vietnam and offshore investment from Vietnam; it also sets forth a legal framework to guarantee the lawful rights and interests of investors, encourages investment and provides investment incentives) provides two lists of businesses conducted by Vietnamese companies that are restricted from foreign investment (regardless of whether a greenfield or brownfield investment). One is a list of businesses which foreign investors are prohibited from investing in, and the other is a list of businesses in which foreign investment is conditional. In regard to the latter, the various thresholds and requirements of the following conditions for foreign investment must be satisfied:

(i) ratio of foreign ownership;
(ii) forms of investment;
(iii) scope of investment operations;
(iv) capacity of investors and other parties participating in investment activities; and
(v) other conditions pursuant to domestic laws and international treaties.

Both foreign investors who are individuals with foreign nationality or organizations established in accordance with foreign law and foreign invested companies are subject to the foregoing restrictions. In this regard, the Law on Investment stipulates that foreign invested companies are Vietnamese companies with more than 50% their charter capital is held by one or more foreign investors and/or by one or more other Vietnamese companies more than 50% of whose charter capital of their charter capital is held by one or more foreign investors.

Conditions (i)-(v) above apply to private companies depending on the specific businesses in which they engage. However, generally speaking, only the restriction on foreign ownership ratio applies to public companies. When subscribing for newly-issued shares in a private placement tranche, there are certain requirements on investor capacity, and a lock-up period applies. (Typically, a lock-up period is at least one or three years, depending on whether the investor is a professional or strategic investor. It is important for investors to monitor lock-up periods because they affect the capacity of the investors to exit after investing in the target company.)

The licensing procedures for investment in a private company and a public company also differ (except with respect to merger filings, which may be necessary for both types of companies if the relevant transaction meets the regulatory conditions). The Department of Planning and Investment is the agency that is primarily responsible for managing investment activities. A variety of approvals may be required for investment in a private company, such as acquisition approval (for brownfield investments), an investment registration certificate, and/or an enterprise registration certificate. Investment in public companies is generally handled by the State Securities Commission, except for certain areas (such as credit institutions and insurance companies) over which other agencies have authority. Approval from the State Securities Commission prior to a transaction may be necessary in certain cases, such as approval for conducting a tender offer (i.e., a bid to purchase some or all of the shareholders’ stock in a public company in the event that the acquisition of shares leads to the shareholding ratio of the relevant investor exceeding statutory thresholds) or approval for trading at a purchase price which exceeds the associated trading band.

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