The forms of investment under the 2020 Law on Investment have been recently updated

The 2020 Investment Law has introduced many important changes regarding the forms of investment in Vietnam, facilitating both domestic and foreign investors. According to Article 21 of the 2020 Investment Law, there are currently 5 main forms of investment that investors can choose from when entering the Vietnamese market. This article will detail the 3 most common forms: investment in establishing an economic organization; investment under a BCC (Business Cooperation Contract); and investment in the form of capital contribution, purchase of shares, or purchase of stakes.

Investment in Establishing an Economic Organization

Investment in establishing an economic organization is a form of direct investment where an investor establishes an enterprise in Vietnam using their own investment capital. This is a common choice for investors who wish to directly control their business operations in Vietnam.

For domestic investors:

• Must comply with the Law on Enterprises and corresponding domestic laws applicable to each type of economic organization.

For foreign investors:

• Must comply with market access conditions applicable to foreign investors. This includes requirements on the form of investment, charter capital ownership ratio, and other conditions related to the investment sector.
• Specifically, for sectors subject to restricted market access, investors must meet stringent conditions regarding the scope of operations and capital ownership ratios.
• The investor must have an investment project and complete the procedures for the issuance or adjustment of an Investment Registration Certificate (IRC) prior to establishing the economic organization.

Note:

• The investor executing the investment project is the economic organization established by the foreign investor from the date of issuance of the Enterprise Registration Certificate (ERC).

Investment under a Business Cooperation Contract (BCC)

A BCC is a form of cooperation between investors to share profits or distribute products without establishing a new economic organization. This is a suitable option for projects that do not require the formation of a separate legal entity.

Regulations on BCCs:

• BCCs between domestic investors: Executed in accordance with civil law regulations.
• BCCs between a foreign investor and a domestic investor: Require the issuance of an Investment Registration Certificate if the project is not subject to investment policy approval by competent state authorities.

Conditions for investment under a BCC:

• The project must not fall under the list of sectors banned from investment in Vietnam.
• Must comply with national planning, provincial planning, and other relevant regulations.
• Parties to a BCC must establish a coordination board to manage and execute the contract.

Investment through Capital Contribution, Purchase of Shares, or Purchase of Stakes

This form of investment allows investors to contribute capital to economic organizations or purchase shares or capital stakes in existing enterprises in Vietnam. This is a flexible option for investors looking to participate in existing companies without having to establish a new enterprise.

Conditions for foreign investors:

• Foreign investors must ensure compliance with requirements regarding national defense and security.
• Must comply with conditions on capital ownership ratios and the sectors in which foreign investors are permitted to participate.
• For economic organizations operating in special sectors (such as land and environment), investors must also satisfy requirements regarding land use rights and other related conditions.

Forms of capital contribution:

• Contributing capital to partnerships or limited liability companies (LLCs).
• Purchasing additionally issued shares or initial shares of joint-stock companies (JSCs).
• Purchasing capital stakes in LLCs or partnerships.

Investment Consulting Services for FDI Enterprises in Vietnam by BKC Law

BKC Law provides comprehensive investment consulting services for FDI (Foreign Direct Investment) enterprises in Vietnam. With a team of experienced lawyers and legal experts, we assist foreign investors throughout the investment process in Vietnam, from selecting the appropriate form of investment to completing all relevant legal procedures.

Our consulting services include:

• Advising on forms of investment that align with the business objectives of the FDI enterprise.

• Guiding and assisting with procedures to apply for the Investment Registration Certificate and Enterprise Registration Certificate.

• Advising on conditions and procedures related to mergers and acquisitions (M&A) or capital contributions into Vietnamese companies.

• Assisting in resolving legal issues related to national defense and security, the environment, and sectors banned from investment.

• Providing legal solutions for issues arising during the operational course of FDI enterprises in Vietnam.

With extensive experience and profound knowledge of Vietnamese law, BKC Law is committed to delivering effective consulting services, helping foreign investors optimize investment opportunities and minimize legal risks.

Frequently Asked Questions on Investing in Vietnam

How many forms of investment are there under the 2020 Investment Law?

• According to the 2020 Investment Law, there are 5 forms of investment: execution of an investment project; investment in establishing an economic organization; investment under a BCC; investment through capital contribution, purchase of shares, or purchase of stakes; and new forms of investment as prescribed by the Government.

In what forms can an investor contribute capital to an economic organization?

• Investors can contribute capital to partnerships and limited liability companies; purchase newly issued shares or initial shares of joint-stock companies; or purchase capital stakes in other economic organizations.

What are the market access conditions for foreign investors?

• Foreign investors must meet conditions regarding the form of investment, scope of operations, capital ownership ratio, investor capacity, and other conditions related to the investment sector as prescribed by current regulations.

How much is the fee for applying for an Investment Registration Certificate?

• The fee for applying for an Investment Registration Certificate depends on the investment type and related services. Investors can consult detailed fee schedules and necessary procedures by contacting legal consulting firms.

Contact Us:

• Phone: 0901 3333 41

• Email: info@bkclaw.vn

• District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, Sai Gon Ward, Ho Chi Minh City.

• Binh Tan Office: 41 Ten Lua Street, An Lac Ward, Ho Chi Minh City.

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