A joint venture — an enterprise co-founded by foreign investors and Vietnamese partners — is a popular investment form when investors want to leverage local networks, market knowledge, and resources. But how much capital is enough to “control” the company? And does capital ratio equal absolute power?
This article analyzes capital ratios and control rights in joint ventures under the Law on Investment 2025 (No. 143/2025/QH15, effective March 1, 2026) and the Law on Enterprises 2020 (No. 59/2020/QH14).
1. What is a joint venture? Under which enterprise form?
Vietnamese law does not define the “joint venture company” as a distinct enterprise type. In practice, a joint venture is an investment form — foreign and Vietnamese investors jointly contribute capital to establish an economic organization, usually a multi-member limited liability company or a joint-stock company.
2. Capital ratios: is there a general cap?
No. The law sets no general maximum or minimum capital ratio for foreign investors in a joint venture — the ratio is negotiated by the parties. A foreign investor may hold 30%, 49%, 51%, or 99% depending on the deal.
However, three limits deserve attention:
Limit 1 — Conditional market-access sectors
Under Article 8 of the Law on Investment 2025, certain sectors apply foreign ownership caps (set out in Appendix I of Decree 96/2026/ND-CP and Vietnam’s WTO/FTA commitments). As an illustration, sectors such as logistics, telecommunications, and education may limit foreign ownership ratios — investors must check sector-specific conditions before finalizing the ratio.
Limit 2 — The 50% charter capital threshold
Under Point b, Clause 3, Article 21 of the Law on Investment 2025, foreign investors must complete a registration procedure when a capital contribution, share or stake acquisition results in holding more than 50% of an economic organization’s charter capital — including increases while already above 50%.
Consequence of crossing 50% (Clause 1, Article 20): an economic organization with foreign investors holding over 50% of charter capital becomes subject to investment conditions and procedures as a foreign investor for subsequent investment activities.
Limit 3 — Land in sensitive areas
Under Point c, Clause 2, Article 21, capital contributions must also satisfy land law on conditions for receiving land use rights on islands, border communes/wards/special zones, coastal communes/wards, and areas affecting national defense and security.
3. Does capital ratio equal control?
Not entirely. Capital ratio determines voting power, but actual control depends heavily on the company charter and governance structure. Key control instruments:
Instrument 1 — Voting rights proportional to capital
Under Point b, Clause 1, Article 49 of the Law on Enterprises 2020, Members’ Council members hold votes proportional to their capital contributions — unless the charter provides otherwise (Clause 2, Article 47 allows charters to allocate voting rights differently from capital ratios).
Instrument 2 — Decision approval thresholds
Under Article 59 of the Law on Enterprises 2020, Members’ Council decisions pass at specified voting ratios; material matters (charter amendments, reorganization, dissolution) require higher ratios. An investor below 50% can still veto material decisions if the charter sets a high approval threshold (e.g., 75%).
Instrument 3 — Board seats and key personnel
The charter may define the composition of the Members’ Council / Board of Directors, rights to nominate the Chairperson and General Director, and financial control positions — “soft control” no less important than capital ratio.
Instrument 4 — Veto rights and deadlock mechanisms
Parties may agree in the charter: a list of matters requiring both sides’ consent (regardless of capital ratio), plus deadlock resolution mechanisms such as buy-out rights.
4. Joint venture negotiation checklist for foreign investors
- ☐ Check the market-access conditions of the intended business lines (any foreign ownership cap?);
- ☐ Decide the target ratio and assess the 50% threshold (registration duty + legal consequences);
- ☐ Design the company charter: board seats, voting thresholds, veto rights, deadlock mechanics;
- ☐ Agree a joint venture contract (alongside the charter): contribution commitments, contribution schedule, breach penalties, dispute resolution;
- ☐ Prepare legal dossiers: consular legalization of the foreign investor’s papers, capital-contribution registration (where required under Article 21).
Frequently asked questions
Can 49% control the company?
Possibly, with a well-designed charter: a 75% threshold for material decisions (giving you veto power at 49%), Members’ Council seats, and General Director nomination rights. Conversely, 51% with a thin charter can still lose practical control to management.
Must the Vietnamese partner hold a minimum ratio?
No general rule requires it. Except in conditional sectors capping foreign ownership (where the remainder naturally belongs to the Vietnamese side), parties negotiate freely.
Negotiating a joint venture in Vietnam? Contact us for advice on capital structuring and charter design.
Reviewed by the FLAW AI Legal Council and submitted to the owner for approval. This article is for reference only and does not constitute legal advice for your specific case.