1. First, it is necessary to identify “foreign investors”, “direct investment” and “indirect investments” in Viet Nam in accordance with 2005 Investment Law as follows: According to Article 3.5, “foreign investors” means foreign organizations/individuals investing capital to carry out investment activities in Vietnam including enterprises established under the Law on Foreign Investment in Viet Nam before the Investment Law takes effect; foreign organizations/individuals; overseas Vietnamese people; foreigners permanently residing in Vietnam and other organizations in accordance with Vietnamese law;

Under clause 2 of this Article, “direct investments” means investments in which investors invest capital and participate in management of such investment activities;

Clause 3 of this Article stipulates that “indirect investments” means investment via purchase of shares, share certificates, bonds, and other valuable papers, securities investor funds and via other intermediary financial institutions that investors do not directly involve in management of investment activities.

As such, “direct investment” and “indirect investments” are classified according to 2 major features of form of investing capital and management as follows:

Direct investments Indirect investments
1. form of investing capital – capita contribution

– loan capital

– Purchase of shares, share certificates, bonds, and other valuable papers

– via securities investment funds

– via other intermediary financial institutions

 

2. form of management Directly involved in management of investment activities. Not directly involved in management of investment activities

2 . Governing law:

2.1  With respect to “direct investments”, where the “foreign investors” are enterprises:

The procedures for the dossiers for establishment of enterprises (in the form of limited liability companies/of joint stock companies/or partnerships) in accordance with the Enterprise Law, Decree No. 88/2006/ND-CP of the Government on business registration; Decree No 108/2006/ND-CP of the government implementing and providing guidelines for implementation of some Articles of the Investment Law and relevant documents;

Procedures for the investment project dossier shall comply with the Investment Law, Decree No 108/2006/ND-CP of the Government implementing and providing guidelines for implementation of some Articles of the Investment Law, specialized laws and relevant document.

2.2 With respect to “indirect investments”:

(i)                 Where foreign investors purchase a part of capital contribution/shares of members/shareholders in a Vietnamese enterprise; accordingly, leading to no change in the legal person or in capital (assets) of the enterprise and as such, not subject to re-establishment of the enterprise; the enterprise shall register with the business registration agency in accordance with Enterprise Law and Chapter V Decree No. 88/2006/ND-CP with respect to relevant procedures.

(ii)               Where foreign investors buy the whole of capital contribution/shares of members/shareholders in a Vietnamese enterprise; there is a change in the owner, not in the legal person or in the capital (assets) of the enterprise: As such, it is not required to the re-establish the enterprise, but to change the owns; the enterprise must register with the business registration agency regarding relevant procedures in accordance with Enterprise Law and Decree No. 88/2005/ND-CP; Foreign investors shall report of the dossier receiving agency stipulated in Article 40 of Decree 108/2006/ND-CP for re-registration in the case of foreign invested businesses.

(iii)             Where foreign investors by shares of foreign invested businesses in Vietnam, the enterprise shall carry out the procedures for adjustment of the Investment Certificate (change of the contents of business registration) in accordance with Article 51, 52 Decree 108/2006/ND-CP at the dossier receiving agency of the project stipulated in Article 40 of this Decree.

If you would like further information on Please help to distinguish the application of law on foreign direct and indirect investment in Viet Nam with respect to foreign investors?, please either email to our Partners at: info@sblaw.vn or call to our Office:
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