On 12 November 2015, after months of delay, the Government has finally issued Decree No. 118/2015/ND-CP (“New Decree”) on detailing and guiding the implementation of certain provisions of the Law on Investment.

Set out below are major worth-noting points in this New Decree:

Investment conditions for foreign investors

Investment conditions for foreign investors are defined as conditions that foreign investors must satisfy when investing in conditional business sectors applicable for foreign investors pursuant to Vietnam’s laws, ordinances, decrees and international treaties on investment.

These conditions include:

  • Conditions on foreign ownership of charter capital in an economic organization;
  • Conditions on investment form;
  • Conditions on scope of investment activities;
  • Conditions on a Vietnamese partner participating in investment activities; and
  • Other conditions pursuant to laws, ordinances, decrees and international treaties on investment.

The above conditions must be satisfied when foreign investors:

  • Making investment to establish an economic organization;
  • Contributing capital, purchasing shares, capital contribution portion in an economic organization;
  • Investing in the form of business cooperation contract;
  • Receiving investment projects transferred from another investor or other cases of receiving transferred investment projects; or
  • Amending or supplementing investment business lines or sectors of foreign invested economic organizations.

Conditional business sectors applicable for foreign investors as well as the corresponding conditions are not included in the New Decree but will be published on the National information gate on foreign investment. For business sectors whose conditions are not specified anywhere in Vietnam’s WTO Commitments and other international treaties on investment or not yet committed (“Uncommitted Sectors”), the investment registration authority must seek approval of the Ministry of Planning and Investment and other specialized ministries on the foreign investment.

It is worth noting that the New Decree recognizes ‘licensing precedent’, meaning where foreign investment in Uncommitted Sectors has been approved and such Uncommitted Sectors have been published on the National information gate on foreign investment, any later foreign investors making investment in the same Uncommitted Sectors will no longer need the approval of the specialized managing ministry.

Licensing procedures on investment registration and enterprise registration by foreign investors

Instead of go through 2 different steps, namely (1) applying for issuance of an Investment Registration Certificate; and (2) applying for issuance of an Enterprise Registration Certificate when establishing an enterprise in Vietnam, foreign investors now can apply for these two certificates at the same time. Specifically:

  • Foreign investors submit the applications for issuance of an Investment Registration Certificate and an Enterprise Registration Certificate to the investment registration authority;
  • Within 01 working day from the receipt of the applications, the investment registration authority sends the application for enterprise establishment registration to the Business Registration authority for review and notifying the investment registration authority of its decision;
  • If there is any request for amendments or supplements to either the application for investment registration or enterprise establishment, the investment registration authority will provide the investors a single response within 5 working days from the receipt of the applications.

The coordination regime between the investment registration authority and the business registration authority will be detailed by the Ministry of Planning and Investment later.

Securing the implementation of an investment project

Investors that are granted, or leased land by the Government, or allowed by the Government to change the land use purpose, with certain exceptions, must make a deposit from 1-3% of the total investment capital recorded in a document approving the investment plan or in the Investment Registration Certificate based on a progressive basis, in particular:

  • For capital part of up to VND300 billion, the deposit rate is 3%;
  • For capital part from VND300 billion to VND1,000 billion, the deposit rate is 2%;
  • For capital part from VND1,000 billion, the deposit rate is 1%.

M&A procedures

There is explicitly no requirement of application for Investment Registration Certificate in acquisitions of target companies by foreign investors.

However, foreign investors must register its acquisition of the target company if:

  • They contribute capital to, purchase shares or capital contribution portion of an economic organization doing business in conditional sectors which are applicable for foreign investors;
  • The capital contribution, shares and capital contribution portion result in F1, F2 and F2’ mentioned in the graph above holding 51% or more of the target company:
    • Increasing foreign ownership rate from below 51% to more than 51%; and
    • Increasing the existing foreign ownership rate of 51% to a higher ownership rate.

After completion of the acquisition, the target company must carry out procedures to change its members or shareholders at the business registration authority.

For investment of foreign investors other than F1, F2 and F2’, the target company only needs to carry out procedures to change its members or shareholders at the business registration authority without the foreign investors having to register the acquisition transaction with the investment authority.