Business investment contributes largely to economic development. The Law regulates specifically about forms of investment. Choosing the best form of suitable investment will provide investors with favorable conditions for generating business profits. Let’s find out this issue with Lawyer X through the following scenario: “Dear sir! I would like to find out what specific forms of investment in Vietnam comprise? General regulations on these forms of investment? Thereby I can choose suitable forms of investment for myself. Thanks for your advice!”
Legal grounds
Vietnam Law on Investment 2020
Forms of investment
Business investment means the use of investment capital by investors to carry out business activities. Investor means an organization or individual carrying out business investment activities. Investors include domestic investors, foreign investors and foreign-invested economic organizations.
Investors can conduct business investment activities in the following forms:
- Investment in establishment of economic organizations
- Investment in the form of contribution of capital to, or purchase of shares or capital contributions at, economic organizations
- Investment in the form of BCC
- New forms of investment and economic organizations according to the Government’s regulations.
General regulations on forms of investment
Investors establish economic organizations according to the following regulations:
+ Domestic investors establish economic organizations in accordance with the law on enterprise and the law applicable to each type of economic organization.
+ Foreign investors establishing economic organizations must satisfy the market access conditions for foreign investors specified in Article 9 of the Investment Law 2020.
+ Before establishing an economic organization, a foreign investor must have an investment project and shall carry out procedures for granting or adjusting the investment registration certificate, except for the case of setting up a small and medium-sized innovative start-ups and innovative start-up investment fund in accordance with the law on supporting small and medium-sized enterprises.
Since the date of issuance of the Business Registration Certificate or another document of equivalent legal validity, the economic organization established by the foreign investor is the investor implementing the investment project as prescribed in the Investment Registration Certificate.
*Implementation of investment activities by foreign-invested economic organizations
– Economic organizations must meet the conditions and shall carry out investment procedures according to regulations applicable to foreign investors when making investment in establishment of economic organizations; contribution of capital to, or purchase of shares or capital contributions at, economic organizations; or investment in the form of BCC, if falling into one of the following cases:
+ Having 51% or more of their charter capital held by a foreign investor(s), or having a majority of their general partners being foreign individuals, for partnerships;
+ Having 51% or more of their charter capital held by an economic organization(s) having 51% or more of their charter capital held by a foreign investor(s), or having a majority of their general partners being foreign individuals, for partnerships;
+ Having 51% or more of their charter capital held by a foreign investor(s) and an economic organization(s) having 51% or more of their charter capital held by a foreign investor(s), or having a majority of their general partners being foreign individuals, for partnerships;.
– Economic organizations not falling into the above cases shall comply with investment conditions and procedures as prescribed for domestic investors when investing in establishing other economic organizations; investment in the form of capital contribution, share purchase, purchase of capital contributions of other economic organizations; investment in the form of BCC contract
– In case a foreign-invested economic organization already established in Vietnam has a new investment project, it may carry out procedures to implement such project without having to establish a new economic organization.
Investment in the form of contribution of capital to, or purchase of shares or capital contributions at, economic organizations
– Investors are entitled to contribute capital to, and purchase shares and capital contributions at, economic organizations.
– Foreign investors making investment in the form of capital contribution to, or purchase of shares or capital contributions at, economic organizations shall comply with the following conditions, regulations:
+ Market access conditions for foreign investors specified in Article 9 of the Investment Law 2020
+ Ensuring national defense and security according to the provisions of the Investment Law 2020
+ Regulations of land law on conditions for receiving land use rights, conditions for using land in islands, communes, wards, border towns, coastal communes, wards and townships.
*Forms of contribution of capital to, and purchase of shares and capital contributions at, economic organizations
– Investors may contribute capital to economic organizations in the following forms:
+ Purchasing initially or additionally issued shares of joint stock companies;
+ Contributing capital to limited liability companies and partnerships;
+ Contributing capital to other economic organizations not falling in to the above cases
– Investors may purchase shares or capital contributions at economic organizations in the following forms:
+ Purchasing shares of joint stock companies from such companies or their shareholders;
+ Purchasing capital contributions of members of limited liability companies to become members of such companies;
+ Purchasing capital contributions of capital-contributing members in partnerships to become capital-contributing members of such partnerships;
+ Purchasing capital contributions of members of other economic organizations not falling into above cases
* Procedures for investment in the form of capital contribution or share or capital contribution purchase
Investors contributing capital, buying shares or purchasing capital contributions from economic organizations must satisfy the conditions and carry out procedures for changing members and shareholders according to the provisions of law corresponding to each type of economic organizations.
– Foreign investors shall carry out procedures for registration of capital contribution, purchase of shares or purchase of contributed capital of an economic organization before changing members or shareholders if they fall into one of the following cases:
+ The contribution of capital, purchase of shares, purchase of contributed capital increases the foreign investors’ ownership ratio in economic organizations engaged in business in industries and professions with conditional market access for foreign investors;
+ The contribution of capital, purchase of shares, purchase of contributed capital results in the holding of more than 50% by foreign investors and economic organizations specified at points a, b and c, Clause 1, Article 23 of the Law on Investment 2020. charter capital of economic organizations in the following cases: increasing the rate of ownership of charter capital of foreign investors from less than or equal to 50% to over 50%; increase the rate of ownership of charter capital of foreign investors when foreign investors already own more than 50% of charter capital in economic organizations;
+ Foreign investors contribute capital, purchase shares or purchase capital contributions from economic organizations that have certificates of land use rights in islands and border communes, wards and townships; coastal communes, wards and towns; other areas affecting national defense and security.
– Investors not falling into the above case shall carry out procedures for changing shareholders or members in accordance with relevant laws when contributing capital, buying shares or purchasing capital contributions from economic organizations. In case investors wish to register for capital contribution, share purchase or capital contribution purchase from economic organizations, investors shall comply with the provisions of Clause 2, Article 26 of the Law on Investment 2020.
Investment in the form of BCC
– BCCs signed between domestic investors must comply with the civil law. For BCCs signed between domestic investors and foreign investors or between foreign investors, the procedures for grant of investment registration certificates prescribed in Article 38 of the Law on Investment 2020.
– Parties to a BCC shall form a coordinating board to perform the BCC. Functions, tasks and powers of the coordinating board shall be agreed by the parties.
*Contents of a BCC
– A BCC must have the following principal contents:
+ Names, addresses and competent representatives of contractual parties; transaction address or address of the project implementation site;
+ Objectives and scope of business investment activities;
+ Contributions of contractual parties and distribution of business investment results between the parties;
+ Contract performance schedule and duration;
+ Rights and obligations of contractual parties;
+ Modification, transfer and termination of the contract;
+ Liabilities for breaches of contract, method of dispute settlement.
In the course of performing a BCC, contractual parties may agree to use assets created from their business cooperation to establish enterprises in accordance with the law on enterprises. Parties to a BCC contract have the right to agree on other contents which must not be contrary to law.
Related article:
- Procedures for setting up an insurance business in Vietnam
- Conditions for foreigners to establish a company in Vietnam
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We hope this article is useful for you to answer the question about: “What are rights and obligations of a general partner in Vietnam”. If you need any further information, please contact LSX Law firm: at +84846175333 or Email: [email protected]
Frequently asked questions
BCC contracts signed between domestic investors comply with the provisions of civil law.
Investors may contribute capital to economic organizations in the following forms:
+ Purchasing initially or additionally issued shares of joint stock companies;
+ Contributing capital to limited liability companies and partnerships;
+ Contributing capital to other economic organizations not falling in to the above cases
Yes! Foreign investors establishing economic organizations must satisfy the market access conditions for foreign investors specified in Article 9 of the Investment Law 2020.
Conclusion: So the above is Forms of investment permitted in Vietnam under current regulations. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
