Foreign Investment under Decree 118 detailing the Law on Investment

Law on investment 2014 has taken effect since 01 July 2015 with significant changes in the investment policies and procedures. Being struggle with a completely new platform, both investors and executive agencies were craving for a detailing decree, which has just been issued on 12 November 2015, after 4 months as of the effective date of the LOI. Decree 118/2015/ND-CP detailing and guiding a number of provisions of the Law on Investment (Decree 118), which is expected to facilitate the investment environment for foreign investors in Vietnam shall enter into effect on 27 December 2015.

The most striking feature of the Decree 118 is the simplification of investment procedure regarding the purchase of shares, capital, and contribution of capital. In particular, foreign investors are not required to obtain Investment Registration Certificate if the investment is conducted via purchase of share, capital, and contribution of capital. In this case, Decree 118 only obligates the economic organization whom foreign investor invested into to adjust the list of members, shareholders at the competent authority, except for the two following circumstances where the purchase of shares, capital, contribution of capital need to be registered by the investors: (i) the target company is operating in a conditional business line for foreign investors; and (ii) the investment result in a consequence that the foreign investor holds at least 51% of the economic organization’s charter capital.

In addition, regarding the obtainment procedure of Investment Registration Certificate and Enterprise Registration Certificate, Decree 118 provides a co-ordination mechanism for the investment registration authority and business registration authority. Under Article 24 Decree 118, foreign investors shall be able to submit both investment registration and business registration dossier to one agency – investment registration authority, who shall afterwards transfer the business registration dossier to the competent authority.  Moreover, the registration authorities are allowed to notify to the investors regarding the shortcomings of the whole dossier once only. The provision potentially prevents the practice that the investors have to amend the dossier over and over.

On the other hand, Decree 118 requires the Ministry of Planning and Investment to co-operate with other Ministries and agencies to publicize the conditional business lines applicable to foreign investors, along with its legal basis and details of the conditions on the national portal. A consolidated list of conditional business lines is estimated to bring convenience and efficiency to the foreign investors in making their investment decision.

To sum up, after 4 months waiting, issuance of the Decree 118 is tagged along with a considerable expectation in clarification of policies and procedures in foreign investment. Although it has not been effective, one cannot deny is that it would help to tidy up the mess left by the gap between the LOI 2005 and the LOI 2014.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at info@LNTpartners.com or our website http://www.LNTpartners.com.

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