Determining the applicable foreign ownership limit: Why do enterprises still face uncertainty?

Determining the Foreign Ownership Limit (FOL) has long ceased to be a technical issue for public companies. For many businesses, FOL can determine the ability to attract strategic investors, expand international capital, or even influence future capital raising plans. However, this is also one of the contents that makes businesses confused in the process of complying with the current securities law[1].

Vietnam's stock market has witnessed many large enterprises actively reviewing their business lines to expand their foreign ownership rate.

FOL is more than just a number

Many businesses still consider FOL to be merely the percentage of shares that foreign investors are allowed to hold. In fact, the meaning of FOL is a lot broader.

For listed enterprises or public companies, the FOL determines the size of foreign capital that can be accessed. A business that maintains a low foreign ownership ratio may miss the opportunity to attract strategic investors or international investment funds. On the contrary, expanding foreign room can help increase stock liquidity, improve business valuation and expand the ability to raise capital.

Vietnam's stock market has witnessed many large enterprises actively reviewing their business lines to expand their foreign ownership rate. Cases such as Vinamilk or Sabeco have attracted great attention from the market when taking the necessary legal steps to redefine the foreign ownership limit[2]. These cases show that FOL review is not only a compliance activity but also a strategic decision, which can directly affect the ability to attract international capital flows and corporate value in the capital markets.

Why are businesses still facing difficulties?

If you look at the current regulations, many people may think that determining FOL is quite simple. As a general rule, enterprises will be entitled to apply the foreign ownership ratio corresponding to the business line with the lowest rate among the industries in which the enterprise is operating. However, when it comes to reality, the process of re-determination is not simple.

Enterprises registering many business lines

In the process of development, many businesses are constantly adding business lines to serve the needs of expanding operations or meeting the requirements of partners. However, this addition is often done without fully assessing the impact on foreign ownership limits.

It is possible to imagine a situation that is quite common in practice. A public company that operates primarily in the field of food and beverage production, which is an industry that does not restrict foreign ownership. However, in the process of development, the enterprise registered to add retail distribution of goods, logistics services and commercial advertising. When conducting a review to open a "foreign room" to 100%, the enterprise discovered that some industries in the registration list may be subject to different market access conditions for foreign investors.

At that time, the determination of FOL is no longer the story of the main business line but becomes a problem of reviewing the entire list of registered industries, including those that enterprises have not yet implemented or have little in practice.

Conflicts between regulatory sources

Another cause of embarrassment for businesses is the simultaneous existence of multiple regulatory sources regulating the same issue.

When determining FOL, enterprises often have to consider the Law on Investment, the Law on Securities, specialized laws, international treaties to which Vietnam is a signatory, and commitments to open the market in the WTO or free trade agreements.

In some cases, these regulatory sources are not completely consistent with each other. For example, an industry may not be restricted in the WTO schedule of commitments but is governed by specialized regulations with specific conditions for foreign investors. On the contrary, there are also cases where specialized regulations have not been fully updated according to the new international commitments that Vietnam has joined.

This makes businesses have to carry out a complex legal review process to determine which regulations are prioritized to apply in each specific case. Simply by misinterpreting or omitting a relevant regulation, the results of FOL determination can change completely.

In fact, the biggest difficulty for enterprises does not lie in determining the foreign ownership rate of 49%, 50% or 100%, but in determining which legal case the enterprise is in to apply that ratio. In other words, FOL is not merely a problem of calculating the ownership ratio, but first of all a legal classification problem.

Inadequacies from data and management practices

In fact, many businesses still face difficulties due to the discrepancy between legal documents and data that are being recorded at regulatory agencies.

There are cases where enterprises have changed their business lines but have not updated correspondingly in securities-related records. There are also cases where the business lines registered on the Enterprise Registration Certificate are different from the industries announced or used to determine foreign rooms in the past.

These seemingly small differences can lead to businesses and regulators coming up with different interpretations of the applicable foreign ownership ratio.

Another situation that often arises is that enterprises have for many years announced the maximum foreign ownership rate at 49% according to historical practice. However, when reviewing according to the new regulations, the enterprise realized that the current business lines are actually no longer subject to market access restrictions for foreign investors. In this case, continuing to maintain the 49% ratio may cause businesses to inadvertently limit their access to foreign capital and reduce the attractiveness of stocks to international investors.

Source: Petrolimex

Decree 245/2025/ND-CP and important transition period

One of the notable points recently is the Government's promulgation of Decree 245/2025/ND-CP amending and supplementing a number of regulations related to the determination of foreign ownership ratio.

Accordingly, enterprises are allowed more time to review, redefine and announce the foreign ownership ratio in accordance with the new regulations. This is not merely a procedural regulation but also an important "legal transition window" for businesses.

It is worth noting that many enterprises have not previously reviewed the legal basis of the current foreign ownership ratio. In many cases, the rate of 49% is maintained simply because this is the foreign room level that has been established many years ago or according to the data being recorded on the stock trading system. The transitional regulations in Decree 245/2025/ND-CP therefore not only have procedural significance but also create pressure on enterprises to reassess the suitability of the foreign ownership ratios being announced.

For many years, many businesses have maintained foreign rooms according to traditional rates without comprehensively reviewing the legal basis of that ratio. When the new regulation takes effect, enterprises need to review the entire list of business lines, the company's charter, the resolution of the general meeting of shareholders, information disclosure data and relevant documents to ensure that the foreign ownership ratio is accurately determined.

What should businesses do?

In the context of an increasingly complex and constantly changing legal framework, businesses need to shift from the mindset of "determining foreign rooms when required" to a proactive management mindset.

The first thing that needs to be done is to review all registered business lines and compare them with market access conditions for foreign investors. Next, enterprises need to check the consistency between business records, company charters, information disclosure data and information being recorded at relevant management agencies.

At the same time, the Board of Directors needs to re-evaluate the foreign ownership strategy of the enterprise, including maintaining, expanding or adjusting foreign rooms to suit the development orientation in the medium and long term.

Decree 245/2025/ND-CP is creating an important transition period for public companies to review the foreign ownership ratio applied to them. However, the challenge is not only the implementation of a new information disclosure procedure but also the re-evaluation of the entire legal basis of the foreign ownership ratios that are being maintained in practice.

The embarrassment of many businesses today shows that determining FOL has never been a simple calculation. In the context of enterprises increasingly operating in multiple industries, the legal system is increasingly intertwined between investment regulations, securities, specialized laws and international commitments, the correct identification of FOL is actually a legal and corporate governance problem.

Enterprises that proactively review and determine the correct foreign ownership ratio will not only minimize compliance risks but also make better use of opportunities to access international capital flows in the new development phase of Vietnam's capital market.

Lawyer Nguyen Van Phuc

HM&P Law Firm