Vietnam - Highlights Of Draft Law With Amendments, Supplements To The Law On Investment And The Law On Enterprises.

Legal News & Analysis - Asia Pacific - Vietnam - Regulatory & Compliance

7 May, 2019

 

Currently in the proposal stage, a draft law of amendments and supplements to the Law on Investment and Law on Enterprises is expected to be presented to the National Assembly with the aim of facilitating and simplifying matters in relation to the business environment and investment procedures. If passed, the draft law will be effective from 1 July 2020. Highlights of this draft are as follows:

Amendments, supplements to the Law on Investment

 

No. Law on Investment 2014 Draft law
1 M&A Approval
M&A approval must be obtained by foreign investors before contributing capital, purchasing shares or part of capital contribution in an economic organisation operating in conditional business investment industries applicable to foreign investors. M&A approval must be obtained by foreign investors before contributing capital, purchasing shares or part of capital contribution in an economic organisation operating in conditional business investment industries applicable to foreign investors if such contribution or purchase causes an increase of the ownership ratio of foreign investors.

Further, M&A approval must also be obtained by foreign investors before contributing capital, purchasing shares or part of capital contribution in an economic organisation using the land area on island and commune, ward, township, boundary, coastal area or other areas affecting defence and security.

2 Security for project performance
The investor must provide an escrow deposit as security for performance of the project for land that is allocated, leased out or granted permits by the State for conversion of the land use purpose. An escrow deposit or a bank guarantee must be provided by the investor as security for performance of the project for land that is allocated, leased out or granted permits by the State for conversion of the land use purpose.
3 Principles for application of investment incentives
Investment incentives are applied to certain projects and entities. Application of investment incentives with respect to a project or entity must be implemented on the basis of the project implementation result of the investor.  Further, if the investment project satisfies conditions for enjoying different investment incentive rates, then the highest investment incentive rate will be applied.
4 Special investment incentives
The National Assembly shall decide on whether to apply any special investment incentives in cases where it is necessary to encourage development of an especially important industry or a special economic – administrative unit. The Prime Minister shall decide on whether to apply a special investment incentive rate which is not higher than 150% of the highest rate prescribed by the law to encourage development of an especially important industry, area or project.
5 Periodical reporting regime
Investors and economic organisations engaged in investment projects are required to report to the competent authorities of the status of implementation of the investment project on a monthly, quarterly and annual basis. The requirement of monthly reports is abolished.

 

Amendments, supplements to the Law on Enterprises

 

No. Law on Investment 2014 Draft law
1 Report of change of information about enterprise managers
An enterprise must report to the business registration office if there is any change of information about:
  • any member of the Board of Management
  • any member of the Inspection Committee or any inspector
  • director or General Director.
This requirement is abolished.
2 Company seal
The enterprise is obligated to notify the business registration office of the sample seal before use. This requirement is abolished.
3 Division and separation of enterprises
Division and separation of enterprises are only implemented in cases as provided under the law. Division and separation of enterprises are implemented in cases as provided under the law or”in cases subject to decision of enterprises”.
4 State owned enterprises
State owned enterprises only include enterprises in which the State holds 100% of the charter capital. State owned enterprises include enterprises in which the State holds 100% of the charter capital and enterprises of which the controlling shares or capital contributions are held by the State.
5 Capital contribution
Owners and shareholders of limited liability companies and shareholding companies must contribute full capital within 90 days from the date on which the enterprise registration certificate is issued. The Ministry of Planning and Investment requested the Government to consider the amendment to the extent that there would be no time limit for the capital contribution.
 

 

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For more information, please contact:

 

David Lim, Partner, ZICOlaw

david.lim@zicolaw.com