Forms of inward investment in Vietnam
Vietnam is listed among developing countries in the world. The country is experiencing its industrialization and modernization associated with international economic integration, therefore, luring foreign investment capital is indispensable.
Once a foreign investor plans to invest in Vietnam, the foreign investor has a lot of concerns about legal problems, among other things, the form of investment. This article is about finding the answer to these problems.
Under 2014 Law on Investment, a foreign investor is permitted to invest through the following forms:
1. Establishment of an economic organization
In this investment form, a foreign investor will establish a company under the 2014 Law on Enterprise of Vietnam (including a limited liability company, a joint-stock company, and a partnership company) to implement, through this company, its expected investment business.
Article 22 of 2014 Law on Investment provides that “before the establishment of an economic organization, a foreign investor must have an investment project, carry out the procedures for issuance of an Investment Registration Certificate under article 37 of this Law and satisfy the following conditions:
(a) Having ratio of ownership of charter capital prescribed in clause 3 of this article;
(b) Investment forms, scope of activities, Vietnamese party(ies) participating in the implementation of investment activities and other conditions subject to international treaties of which the Socialist Republic of Vietnam is a member.”
Accordingly, the foreign investor must have an investment project, which is licensed by a competent authority through an Investment Registration Certificate when the foreign investor satisfies the conditions on, among other things, interest ownership ratio, form of investment, scope of activities and type of Vietnamese partners jointly investing in (if any). Then the foreign investor is permitted to establish a company under the law of Vietnam.
2. Capital contribution, purchase of capital contribution or shares to an economic organization in Vietnam
In this investment form, the foreign investor is not the founding member or shareholder of the invested company. This investment form is only carried out after the invested company is established. The investor will become the member or shareholder of the invested company after the investor contributes capital to or purchases shares/capital contribution to the invested company.
According to Article 25 of 2014 Law on Investment, the foreign investor is permitted to contribute capital to or purchase shares/capital contribution as follows:
1. A foreign investor may contribute capital to an economic organization in the following forms:
(a) Purchase of shares on the initial public offering or of additional shares issued by joint-stock companies
(b) Capital contribution to limited liability companies or partnerships
(c) Capital contribution to economic organizations other than those as shown above
2. A foreign investor may purchase shares or portion of capital contribution to an economic organization in the following forms:
(a) Purchase of shares in a joint-stock company from such company or its shareholders;
(b) Purchase of a portion of capital contribution of members of a limited liability company to become a member of such limited liability company;
(c) Purchase of a portion of capital contribution of a capital-contributing member of a partnership to become a capital contributing member of such partnership;
(d) Purchase of a portion of capital contribution of members of other economic organizations other than those as shown above
3. Business Cooperation Contract (BCC)
BCC is a signed contract between investors to co-operate in business and to share profit or products without establishing an economic organization. There are two basic types of BCC as follows:
- BCC signed between domestic investors will be subject to civil law
- BCC signed between domestic investors and foreign investors or between foreign investors, will need to licensed through an Investment Registration Certificate under Article 37 of Law on Investment.
The parties to a BCC shall establish a coordinating board to perform the BCC. The functions, duties, and powers of the coordinating board shall be agreed upon by the parties.
=> Find out more about Investment through Business Cooperation Contract
4. Private-Public Partnership (PPP)
PPP contract is between a competent authority and an investor or project enterprise. This contract is to perform a new investment project for new construction, or renovation, upgrading, expansion, management, and operation of infrastructure facilities or provision of public services.
Accordingly, under the 2014 Law on Investment, the foreign investor is permitted to invest in Vietnam through the 04 (four) investment forms, as shown above. Among these investment forms, the establishment of an economic organization, and the capital contribution, purchase of shares or capital contribution, are the most popular forms. Please refer to our detailed articles to have a deeper understanding of procedures for each investment form above.
There are many forms of investment that a foreign company can consider when invests in Vietnam. Companies could find out a reasonable investment form or contact with Bizlawyer to consult legal problems relating to inward investment in Vietnam!