When performing investment activities, investors are free to choose the form of investment suitable to their needs and objectives. The selection of appropriate forms of investment plays a very important role in the effective implementation of investment project activities, bringing profits to investors. Therefore, it is necessary to understand the provisions of the law on the characteristics and conditions of each form of investment before conducting investment activities. To clarify this issue, we would like to send customers the following advice:

Legal grounds

• Investment Law 2020;
• Decree No. 118/2015/ND-CP detailing and guiding the enforcement of a number of provisions of the Investment Law.

Forms of investment

Forms of investment in Vietnam in accordance with the law on investment include 5 forms, including:

Investment in establishment of a business entity

Every investor shall establish a business entity in accordance with the following regulations:

• A domestic investor shall establish a business entity in accordance with regulations of law on enterprises and law corresponding to each type of business entity;
• A foreign investor that establishes a business entity shall satisfy market access conditions applied to foreign investors;
• Before establishing a business entity, the foreign investor must have an investment project and follow the procedures for issuance or adjustment of an investment registration certificate, except for the establishment of a small and medium-sized start-up enterprise and a  startup investment fund in accordance with regulations of the Law on Small and Medium-sized Enterprises.

From the date on which the enterprise registration certificate or an equivalent document is issued, the business entity established by a foreign investor shall be the investor that executes the investment project set out in the investment registration certificate. 

Investment in the form of capital contribution or purchase of shares or stakes

Investors are entitled to contribute capital, purchase shares or purchase stakes of business entities.

Foreign investors making investments by contributing capital, purchasing shares, and purchasing stakes of business entities must:

• Satisfy market access conditions applied to foreign investors;
• Ensure national defense and security in accordance with this Law;
• Comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes. 

Execution of an investment project

Economic organizations must satisfy the conditions and carry out investment procedures as prescribed for foreign investors when investing in the establishment of other economic organizations; investment in capital contribution, purchase of shares, purchase of contributed capital by other economic organizations; investment in the form of a BCC contract if such economic organization is in one of the following cases:

• Case 1: Having foreign investors holding more than 50% of charter capital or having a majority of general partners being foreign individuals, for economic organizations being partnerships;
• Case 2: Having an economic organization in case of 1 holding more than 50% of charter capital;
• Case 3: There are foreign investors and economic organizations in case 1 holds more than 50% of charter capital.

Investment in the form of business cooperation contracts (BCC)

• Business cooperation contracts signed between domestic investors shall be executed in accordance with civil law.
• Procedures for issuance of investment registration certificates in Article 38 of this Law shall apply to business cooperation contracts signed between a domestic investor and a foreign investor, or between foreign investors.
• Parties to a business cooperation contract shall establish a coordinating board to execute the BBC. Functions, tasks and powers of the coordinating board shall be agreed upon by the parties. 

New forms of investment and types of economic organizations under the Government’s regulations.

In addition to the above 4 forms of investment,  new forms of investment, new type of economic organization as prescribed by the Government shows that the provisions of law are no longer stereotypical and tightening, but instead open and flexible to welcome investment forms, a new type of economy appears in the future. This is a good opportunity for investors who want to do business in Vietnam.

If you need advice, for more detailed information and how to use this service, please contact the Deputy director in charge of business directly: Nhat Nam Lawyer via hotline: 0912.35.65.75, 0912.35.53.53 or call hotline 1900.6575 for the free legal advice or send a service request via email: lienheluathongbang@gmail.com

We Hope you and your family will be healthy, peaceful and successful!

Best regards!