New provisions for foreign investors and conditional investment sectors under the law on investment 2014

Foreign investors under the investment law
The LOI defines a foreign investor according to the investor’s nationality. Accordingly, a foreign investor is defined as a foreign individual or an organisation established under foreign law. It is noted that a Vietnam-based economic organisation (EO) must apply the same investment conditions and procedures as applicable to a foreign investor in three cases: where 51 percent or more of its charter capital is held by foreign investor(s); an EO having 51 percent or more of charter capital held by the foreign investor(s); or a combination of both.

Under the current law on investment, foreign investors must conduct procedures to obtain an investment certificate (IC) which concurrently acts as an enterprise registration certificate (ERC) granted to domestic companies. It only takes one week to obtain an ERC for a domestic company, but about two months or more for foreign investors to obtain an IC. Under the LOI, an IC will be replaced by an investment registration certificate (IRC) and the foreign investor shall conduct separate procedures to obtain both an IRC and an ERC. However, the timeline to obtain an IRC under the LOI is reduced to 15 days only. For certain large or strategic investment projects, both foreign and domestic investors must first obtain an in-principle approval from the government.

Where the foreign investor or the EO involved with 51 percent foreign ownership, as mentioned above, conducts an M&A activity into a conditional investment project or as a result of a transaction acquiring 51 percent or more of the target company’s charter capital, they only need to conduct a simple registration, but not an IC as previously required, for such M&A activity at the licensing authority of the target company.

Conditional investment sectors
All conditional investment sectors have been listed in the LOI with 267 sectors compared to 386 sectors as at present. The prohibited investments sectors are also reduced and only limited to business of drugs, toxic chemicals and minerals, wild animal and vegetation, prostitution, living organ trading and asexual reproduction.

The LOI takes effect on 1 July 2015.