New law applying to foreign investors

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The National Assembly of Vietnam passed a new law titled ‘Law on Investment 2020’, effective from 1 January 2021. Some key points of the new law are outlined below.

MARKET ACCESS CONDITIONS APPLIED TO FOREIGN INVESTORS

Article 9 states that market access conditions applied to foreign investors specified in the list of business lines restricted to foreign investors includes:

l Ratio of the foreign investor’s charter capital in a business entity; l Investment form; l Scope of investment; l Capacity of the investors and partners participating in the investment activities; l 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 Vietnam is a signatory.

In addition, at point c, clause 1, Article 22, before establishing an economic organisation, the foreign investor must have an investment project, carry out the procedures for the issuance or modification of the Investment Registration Certificate, except in cases of establishing a small and mediumsized creative start-up enterprise and an investment fund for creative startups in accordance with the law on support for small and medium-sized enterprises.

CHANGEINTHERATIOOFHOLDING CHARTERCAPITALAPPLICABLE TOFOREIGNINVESTORS wHEN CONDUCTINGINVESTMENTACTIVITIES

In clause 1, Article 23, when establishing a business entity, 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: l Over 50 percent or more of its charter capital is held by a foreign investor or the majority of the general partners are foreigners if the business entity is a partnership; l Over 50 percent or more of its charter capital is held by a business entity mentioned in point a of this clause; l Over 50 percent or more of its charter capital is held by a foreign investor and a business entity mentioned in point a of this clause. (According to current regulations, the above ratio is 51 percent)

FOR INVESTMENT PROjECTS NOT SUBjECT TO INVESTMENT POLICY APPROVAL

For investment projects not subject to investment policy approval as specified in Articles 30, 31 and 32, the investor shall be granted an investment certificate if it satisfies the conditions specified in Article 38, specifically: l The investment project does not involve any banned business line; l There is a location for execution of the investment project; l The investment project is conformable with the planning as specified in point a, clause 3 Article 33 of this law; l The investment per m2 and per employee is not smaller than the minimum requirement;

Market access conditions applied to foreign investors are satisfied.