Legal ground: Law on Investment 2020

Business investment is that the investor invests capital to carry out business activities through the establishment of the economic organization; equity investment, stock purchase and capital contribution of the economic organization; investment in the form of contracts or implementation of investment projects.

According to the Law on Investment 2020, there are 4 forms of foreign investment in Vietnam:  Investment in the establishment of a business entity; Investment in the form of capital contribution or purchase of shares or stakes; Execution of an investment project; Investment in the form of a business cooperation contract.

 I. INVESTMENT IN ESTABLISHMENT OF A BUSINESS ENTITY

Before establishing a business entity, the foreign investor must :

1. Have an investment project and follow the procedures for issuance or adjustment of an investment registration certificate, except for establishment of a small and medium-sized star-up enterprise and a  startup investment fund in accordance with regulations of the Law on Small and Medium-sized Enterprises

2. Satisfy market access conditions applied to foreign investors:

Market access conditions applied to foreign investors are the same as those applied to domestic investors, except for the case that the business line which will be invested by foreign investors is on the List of business lines restricted to foreign investors, including: Business lines not allowed in market access; Business lines allowed in market with conditions. (details with Appendix I issued with Decree No. 31/2021/NĐ-CP)

Market access conditions applied to foreign investors specified in the List of business lines restricted to foreign investors include:

2.1 Holding of charter capital by the foreign investor in a business entity;

2.2 Investment method;

2.3 Scope of investment;

2.4 Capacity of the investor; partners participating in the investment activities;

2.5 Other conditions specified in the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government and international agreements to which the Socialist Republic of Vietnam is a signatory.

II.INVESTMENT IN THE FORM OF CAPITAL CONTRIBUTION OR PURCHASE OF SHARES OR STAKES

1. Forms

1.1 A foreign investor may contribute capital to a business entity in the following forms:

1.1.1 Purchase of shares of joint-stock companies through the initial public or additional issuance;

1.1.2 Contribution of capital to limited liability companies and partnerships;

1.1.3 Contribution of capital to other business entities not mentioned in Point a and Point b listed above

1.2  A foreign investor may purchase shares or stakes of a business entity in the following forms:

1.2.1 Purchase of shares in a joint-stock company from such company or its shareholders;

1.2.2 Purchase of stakes of members of a limited liability company to become a member of such limited liability company;

1.2.3 Purchase of stakes of a capital contributing member of a partnership to become a capital contributing member of such partnership;

1.2.4 Purchase of stakes of members of other economic entities not mentioned in Points a, b and c listed above.

2. Conditions

2.1 satisfy market access conditions applied to foreign investors as prescribed in Article 9 of Law on Investment 2020;

2.2 ensure national defense and security in accordance with Law on Investment 2020;

2.3 comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.

III. EXECUTION OF AN INVESTMENT PROJECT

1. When establishing a business entity, when making investment by contributing capital, purchasing shares or purchasing stakes of a business entity or when making investment under a business cooperation contract in one of the following cases, the foreign investor must satisfy the conditions and follow investment procedures applied to foreign investors:

1.1 Over 50% of its charter capital or more is held by a foreign investor(s) or the majority of the general partners are foreigners if the business entity is a partnership;

1.2 Over 50% of its charter capital or more is held by a business entity(ies) mentioned in Point 1.1 above;

1.3 Over 50% of its charter capital or more is held by a foreign investor(s) and a business entity(ies) mentioned in Point 1.1 above;

2. Business entities other than those mentioned in Points 1.1, 1.2 and 1.3 Clause 1 shall satisfy conditions and follow investment procedures applied to domestic investors when establishing a business entity, when making investment by contributing capital, purchasing shares or purchasing stakes of a business entity or when making investment under a business cooperation contract.

3. If a foreign-invested business entity that is established in Vietnam has a new investment project, procedures for executing such investment project shall be followed without having to establish a new business entity.

IV.INVESTMENT UNDER BUSINESS COOPERATION CONTRACTS

Business cooperation contract (BCC Contract) is a contract signed between  a Vietnamese investor with a foreign investor, between dosmetic investors or between foreign investors.in order to cooperate in profit sharing and product sharing without establishing an economic organization.

Parties to a business cooperation contract shall establish a steering board to execute BBC. Functions, tasks, powers of the steering board shall be agreed by the parties.

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