Foreign investors are free to choose an investment form suitable to their needs and objectives when conducting investment activities in Vietnam. The choice of investment form plays a very important role in bringing profits to investors. Therefore, it is very necessary to know the legal provisions on conditions of each form of investment before participating in the market.
Forms of investment in Vietnam
There are four types of investment in Vietnam as follows:
- Establishing economic organizations;
- Contributing capital or purchasing shares / capital of economic organizations;
- Investing in the form of a public private partnership (PPP) contract
- Investing in the form of a business cooperation contract (BCC).
Establishing economic organizations
According to Vietnam’s Law on Investment 2014, investors are allowed to set up economic organizations to carry out investment activities.
Before establishing an economic organization, foreign investors must have an investment project, apply for an investment registration certificate in accordance with regulations, and must fully satisfy the conditions for the ratio of charter capital ownership in accordance with the Law on Investment and the conditions for the scope of activities and forms of investment in Vietnam, Vietnamese partners participating in the implementation of the investment activities and other conditions in accordance with provisions of international treaties to which the State of the Socialist Republic of Vietnam is a member country. After the economic organization is established, foreign investors shall carry out investment projects through this economic organization.
Contributing capital or purchasing shares / capital contributions to economic organizations
In addition to establishing economic organizations, investors are also allowed to invest in the form of capital contribution, or purchase of share / capital of existing economic organizations.
When doing this, foreign investors must comply with regulations on forms and conditions for capital contribution, share / capital purchase under the Law on Investment.
Foreign investors may contribute capital to economic organizations in the following forms:
- Buying shares issued for the first time or additional shares issued by a joint stock company;
- Contributing capital to partnerships and limited liability companies (LLC);
- Contributing capital to other types of economic organizations.
Foreign investors may purchase shares or capital of business organizations in the following forms:
- Purchasing shares in a joint stock company from a company member or from an individual shareholder;
- Buying capital contributions from members of the limited company to become a member of the limited company;
- Purchasing the equity interests from capital contributors in partnerships to become a capital contributor of a partnership;
- Buying stakes from members of other types economic organizations;
Investing in the form of a public private partnership (PPP) contract
This is a form of investment under a business cooperation contract (BBC) between investors for business cooperation and distribution of products, and distribution of profits without establishing an economic organization. The parties to a BCC contract must set up a coordination board to perform the BCC contract. Functions, duties and powers of the coordination board are agreed by the parties. Under the provisions of Article 28 of the Law on Investment 2014, BCC contracts are signed between domestic investors to comply with the current civil law. BCC contracts signed between domestic and foreign investors or between foreign investors need to follow the procedures for applying for investment certificates according to regulations.
This form of investment is increasingly being chosen by domestic and foreign investors when conducting investment activities because it does not require establishment of a legal entity. Besides, investors and partners can agree on rights and obligations through contracts in a flexible way, which helps saved time and costs.
Investing in the form of a business cooperation contract (BCC)
This is form of investment has just been regulated in the Law on Investment 2014. When making an investment in this form, investors may sign PPP contracts with competent state agencies to execute investment projects on new construction or to renovate, expand, upgrade, manage and operate infrastructure facilities or provide public services. The fields, conditions and procedures for implementing investment projects in this form are specified by law in detail in the Government’s Decree No. 15/2015 / ND-CP.
Alice Hoang Thao – VietnamCredit
VietnamCredit is a Member of BIIA