New FDI Rules Released

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Jun. 23 – Vietnam has approved the newest regulations regarding foreign capital investment in the country effective August 15.

The regulation is made up of 4 chapters and 13 articles and is known as Decision No.88/2009/QĐ-TTg. It lays down the rules for foreign investors wanting to contribute capital or buy shares in local companies as well as capital contributions, share purchases and mode of payments.

One is allowed to acquire the capital contribution share of the owner of a private enterprise in order to transfer the private enterprise into two-member or a limited liability company. Accordingly the owner of a private enterprise can transfer capital to foreign investors.

Roughly, foreign investors can contribute capital in the following ways:

a. purchase of shares in the initial issue or additional issues of joint-stock companies;

b.acquisition of shares of shareholders of joint stock companies;

c. acquisition of the capital contribution share of a member of a limited liability company;

d. capital contribution to a limited liability company having two members or more in order to become a new member of this company; or acquisition of all charter capital of owner of the sole member limited liability company to become the new owner of this company;

e. capital contribution to a partnership or acquisition of the capital contribution share of a member of a partnership in order to become a capital contributing member of the partnership.

When contributing capital or purchasing shares in a local company, investors can avail of mortgages or pledge shares in credit relations or as security. Investors are also allowed to transfer the ownership of their shares, and to trade them on the securities market; to convert their investment capital (principal and interest), income from the sale of their shares or assignment of their capital contribution, and other legal income in Vietnam into foreign currency for remittance abroad upon fulfillment of all financial obligations and foreign exchange control regulations.

An account with a Vietnamese commercial bank will need to be opened by foreign investors to maximize the new regulation. The bank account will be used to purchase and sell of shares, assign capital contribution, receipt and use of dividends, profit distribution, or remittance of funds overseas, and any other activity related to investment in a Vietnamese company.