FORMS OF INVESTMENT IN VIETNAM
When carrying out investment activities, investors are free to choose investment forms that are suitable for their needs and objectives. The selection of appropriate investment forms plays a very significant role in the implementation of effective investment project activities, bringing profits to investors. Therefore, it is necessary to know clearly the provisions of the law on the characteristics and conditions of each investment form.
The Law on Investment 2014 stipulates business investment means “the use of investment capital by investors to carry out business activities through the establishment of economic organizations; contribution of capital to, or purchase of shares or capital contributions at, economic organizations; or investment in the form of contract performance or investment project implementation”.
With the above investment regulations, investment forms in Vietnam recorded in this Law includes investment in the 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 PPP contract; investment in the form of BCC.
These provisions of the Law on Investment 2014 have been supplemented and changed in comparison with the 2005 Law on Investment. These forms are specified in the Law on Investment 2014 as follows:
I. Investment in the establishment of economic organizations
According to the Law on Investment 2014, investors may establish economic organizations in accordance with the law to carry out investment activities.
For foreign investors, before establishing an economic organization, the investor must have an investment project and shall carry out procedures to apply for an investment registration certificate in accordance with the Law on Investment 2014 and meet the following conditions:
- Having a charter capital holding rate prescribed in accordance with the 2014 Law on Investment;
- Complying with the form of investment, the scope of operation, Vietnamese partners in investment activities, and meeting other conditions prescribed in treaties to which the Socialist Republic of Vietnam is a contracting party.
After that, foreign investors shall implement investment projects through economic organizations established.
Foreign investors may own an unlimited charter capital in economic organizations, except in the following cases:
- The holding rates of foreign investors in listed companies, public companies, securities trading organizations, and securities investment funds must comply with the law on securities;
- The holding rates of foreign investors in state enterprises that are equitized or transformed in other forms must comply with the law on equitization and transformation of state enterprises;
- The holding rates of foreign investors in cases other than those prescribed above must comply with other relevant laws and treaties to which the Socialist Republic of Vietnam is a contracting party.
II. Investment in the form of contribution of capital to, or purchase of shares or capital contributions at, economic organizations
In addition to establishing an economic organization, investors are also entitled to contribute capital to, and purchase shares and capital contributions at, economic organizations.
Foreign investors making an investment in the form of capital contribution to, or purchase of shares or capital contributions at, economic organizations shall comply with regulations on the form and conditions of capital contribution, share purchase, capital contribution to economic organizations:
Foreign 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 prescribed at Points a and b of this Clause.
Foreign 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.
Capital contribution and share and capital contribution purchase by foreign investors must meet the conditions prescribed at Points a and b, Clause 1, Article 22 of the Law on Investment 2014.
III. Investment in the form of Public-private partnership investment contract (PPP contract)
This is a new form of investment stipulated in the Law on Investment 2014. Investors or project enterprises shall sign PPP contracts with competent state agencies to implement investment projects to build or renovate, upgrade, extend, manage and operate infrastructure works or to provide public services.
Detail sectors, conditions, and procedures for implementing investment projects in this form are stipulated in detail in Decree No 15/2015/ND-CP of the Government.
IV. Investment in the form of business cooperation contract (BCC)
A business cooperation contract (below referred to as BCC) means a contract signed between investors for business cooperation and profit or product distribution without establishing an economic organization. Parties to a BCC shall form a coordinating board to perform the BCC. The functions, tasks, and powers of the coordinating board shall be agreed upon by the parties.
BCCs signed between domestic investors must comply with civil law.
For BCCs signed between domestic investors and foreign investors or between foreign investors, the procedures for grant of investment registration certificates shall be carried out.
This form of investment is increasingly being chosen by domestic and foreign investors when implementing investment activities because the high point is not required to establish legal entities, investors and partners can make flexible agreements on rights and obligations through a contract, saving time and cost for the establishment and maintenance of a new legal entity.
The above are some overviews of the investment forms stipulated in the Law on Investment 2014. The choice of which investment form of the above forms depends on the needs, capabilities, and strategies of investors.
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