Enterprise Law

Policies name Enterprise Law
Legislation type Law
Issue organization Congress
Field, industry Investment
Content

 

The 2014 Investment Law was passed by Legislature of the National Assembly at its 7th Session on 26th November 2014, shall be of full force and effect from 1st July 2015, replace the current 2005 Investment Law with many important changes, especially the provisions on areas in which investment is prohibited, or investment with conditions and administrative procedure reform in investment. 

  1.   Regulations on prohibited investment activities, conditional investment activities

The most important change in the 2014 Investment Law is the creation of a transparent legal basis to ensure the implementation of constitutional principles on freedom of investment in business lines that law does not prohibit through the regulation on prohibited investmentactivities andconditional investment activities.

Collecting, reviewing and regulating in details the list of prohibited and conditional investment activities in the 2014 Investment Law by the exclusion method, have contributed to renovate substantially the principles to apply the law, for example, instead of the investors are only entitled to invest and do business in the lines that law allows, the investors will be able to have their freedom of investing in all business lines that the law does not prohibit or has conditions specified. 

Specifically, based on the review and removal ofprohibited investment or business lines which are duplicated under decrees guiding the implementation of Investment Law, Enterprise Law and Commercial Law, the 2014 Investment Law regulates06 sectorsin which investment is prohibited include: (i) Drug dealing as prescribed in Appendix 1 attached to the Law; (ii) Trade in toxic chemicals, minerals as specified in Appendix 2 attached to the Law; (iii) Trade in specimens of rare plants, wild animals as specified in Appendix 1 of the Convention on International Trade in Endangered Species; specimens of endangered animals, plants in Group I derived from natural as specified in Appendix 3 attached to the Law (iv) Prostitution; (v) Buying orselling people, human tissues or body parts; (vi) Activities related to human reproductive cloning.

About sectors of investment with conditions: Based on the review of 386 lines of business and investment in conditions stipulated by the current law, the Law has specified list of lines business investment on the following principles:

+ Abolishing the lines and conditions of business and investment which are unreasonable, unclear, burdensome compliance costs for investors;

+ Modifying some conditions of business and investment towards reducing forms licensed, certified or approved by the authorized agencies in order to apply forms of issuing regulations on standards and conditions in order that investors could register themselves and management agencies could check later;

+ Updating precisely the name and system of some lines of business to reflect accurately, transparently the conditional business and investment, avoiding duplication and facilitating the implementation of the provisions the law on this issue. 

Based on the above principles, the list of sectors in which investment is conditionalspecified in Appendix 4 of the Law consists of 267 sectors.

The law also revises the jurisdiction on regulating conditional business and investment. Accordingly, lines of conditional business and investment are only defined in the Investment Law, and specific conditions for each line of business and investment are stipulated in the laws, ordinances, decrees and international treaties to which Vietnam is a member. Since the date that the law takes effect on (July 1, 2015), prohibitedand conditional lines of business and investment regulated in other legal documents will be expired. The applicable conditions of 267 conditional lines of business and investment which are attached to the 2014 Investment Law and defined in the documents under the decree continue to be effective until the date of July 1st, 2016.

2. Consolidate and improve the mechanism of investment guarantees in accordance with the provisions of the Constitution and International Treaties to which Vietnam is a member

The 2014 Investment Law keeps maintaining mechanisms and principles of protecting investment which are defined in the 2005 Investment Law, in the meantime, improving these mechanisms and principles with modification and supplementation as follows: 

- Update on the provisionson which the Government ensures the proprietary rights of investors and commit to appropriately and equitably compensate in cases of nationalization or expropriation the investors’ properties, accordance with the Constitution’ regulations.

-Improvement inprovisions on which the Government ensures not to discriminate amongst the investors, in line with Vietnam’s commitments in international treaties.

-Improvement inprovisionsonapplying the non-retroactive principle in case that the change of legal documents affects adversely to investment incentives applied to investors. Accordingly, the Law abolished provision on only implementing the non-retroactive principle to investment incentives specified in the Investment Certificate in order to ensure equality in the implementation of this principle between investors who receive anInvestment Certificate and investors who do not have to follow this procedure.

3. Continue to reform administrative procedures associated with the higher responsibility of investors in the implementation of investment projects

The 2014 Investment Law has reformed strongly the administrative procedures towards transparency, simplicity and ensuring effective management in investment with important amendments and supplements, including:

Firstly, the Law has repealed issuing Investment Certificate to local investors (Article 36)

Secondly, the Law has simplified dossier requirements, process, and procedures and shortened the timing for granting an Investment Certificate for the foreign investors with a maximum term of 15 days instead of 45 days as previously (Article 37).

Along with the simplification of administrative procedures, the Law has added, amended some provisions in order to enhance the efficiency of implementation of investment projects, such as additional provisions for ensuring implementation obligations of investors by deposit; additional provisions on machinery quality control to implement investment projects; completing regulations on the transfer of investment projects, extension of investment, investment suspension, revocation of investment certificate and investment projects termination… towards determining clearly conditions and procedures for performing these activities, as well as the responsibilities of investors and handling competence of the local agencies.

Thirdly, the law has reformed the process of enterprise establishment for foreign investors towards repealing regulations on granting an Investment Certificate which concurrently functions as the Business Registration Certificate in order to separate investment activities from the business registration activities. Accordingly, after being granted an Investment Certificate, foreign investors are allowed to set up enterprises in the business registration agency as domestic investors.

In addition, the Law has also clarified the legal status of foreign-invested enterprises to implement investment conditions and procedures for these enterprises, of which, only enterprises owning more than 51% of foreign capital have to obey new conditions and procedures as foreign investors. The remaining only has to comply with conditions and procedures as domestic investors.

Fourthly, the Law has reformed capital contribution processes, purchasing shares of foreign investors by allowing foreign investors to directly follow procedures to change membership in accordance with the law of enterprises, without obeying investment procedures, except the case where foreign investors contribute capital, purchase shares, and the contribution to the enterprise performing conditional investment lines applied to foreign investors or in case foreign investors own more than 51% of the charter capital of the enterprise after the capital contribution and share purchase.

To reform this process, the Law has also clearly defined the scope of the Investment Law and Securities Law in the share purchase, specified the forms of capital contribution, buy shares, share capital of foreign investors and clarified requirements for foreign investors.

4. Perfect the preferential investment policies in order to improve the quality and efficiency of investment attraction

The Law has perfected the provisionsof the current Investment Law about the preferential investment sectorsas well as the conditions for investment preferences in order to attract investmenteffectively,focus on the industries using high technology and modern technical, large scale manufacturing projects, investment projects in rural areas with more labors, production projects ofindustrial support products, the projects which are carried out in social fields (health, education, vocational training, cultural...)

In order to overcome the unrestrained implementation of investment preference to all projects in a preferential investment area, the Law regulates that there is no application of investment incentivesbygeographical areascriteriafor the mineral exploitation projects, projects on manufacturing and trading goods and serviceswhich are subject tothe special consumption tax according to Special Consumption Tax Law.

5. Complete the decentralized regime and improve the efficiency of state administration for investment activities

To ensure the efficiency of state administrationon the important, large-scale investment projectswith interdisciplinary, multi-areas impacts, the Laws has supplemented the regulationson the jurisdiction and procedures of investment plan approval of the National Assembly, the Prime Minister and Provincial People's Committees on the following directions:

-Stipulating for projects under the investment approval jurisdiction of the National Assembly and the Prime Minister on the basis of inheriting, legalizing and completing the respectiveregulations in Resolution No.49/2010/QH12 datedJune 19th 2010 of the National Assemblyand the regulations in Decree No.108/2006/NĐ-CP datedJune 22nd2006 of the Government which provideddetailed regulations for implementation of the Investment Law.

- Supplementingregulationson investment approval jurisdiction of theProvincial People's Committees on the projects thatreceive tenure allocation, leasing, andchanging of land use.

The new point is to standardize and simplify administrative procedure for some projects under investment approval jurisdiction of Provincial People's Committees.According to that, investment management agencies implement procedures for approving the investment plan together with consider to verify land use demand, conditions of land allocation,conditions of lease of land, change of land use. The application of all these procedures will cut down the time to carry out the administrative procedures because the investors do not have to implement proceduresrelated to the use of land according the current law one by one.

Moreover, the Law has transferred the jurisdiction on issuing the Investment Certificate from the Provincial People's Committees to the Department of Planning and Investment; supplemented the regulation on the responsibility of the Government, the Prime Minister,the Provincial People's Committees’ staff, and the management board in industrial zones, export processing zones, high-tech zones, and economic zonesin investment management; as well as completed regulationsonthe regime of investment reporting, monitoring and evaluating investment activities.

6. Reform outbound investment procedures

The regulations on this issue are made based on amending and supplementing some correlative content of the previous Investment Law. The law has legalized and refined some regulations in Decree No.78/2006/ND-CP of the Government dated August 9, 2006 of outbound investment. Accordingly, the the Law affirms the principle that investors are allowed to make offshore investment activities to explore, develop and expand the markets; increase export capacity of goods and services, earn foreign currencies; access to modern technology, improve management and implement resources to develop the national economy; offshore investment activities must comply with these provisions, with the law of the investment at destination country and International Treaties to which Vietnam is a member; Investors are solely responsible for the investment performance.

The Law also defines the responsibilities of investors in raising funds (including foreign currencies) to conduct offshore investment; determined the competence and responsibility of investors, as well as representative offices owners and state agencies involved in investment decisions, offshore investment management; and supplemented a number of provisions on offshore investment procedures in order to create a mechanism to monitor and closely manage funds transferred abroad to carry out investment activities.

In addition, the Law hassupplemented forms of offshore investment through buying or selling securities, other valuable papers and investment through securities investment funds, financial institutions, other intermediaries in foreign countries without directly involved in managing investment activities and assigned the task to the Government to provide detailed regulations for implementation of these investment activities.

 

Mr Quach Ngoc Tuan

Deputy Director – Department of Legislation, Ministry of Planning and Investment