GOVERNMENT	Socialist Republic of Vietnam Independence - Freedom - Happiness
No: 36/2003/QD-TTg	--------------------
	Hanoi, 11 March 2003

 

DECISION OF THE PRIME MINISTER

 

On promulgation of the Regulation on the capital contribution and purchase of shares by Foreign Investors in Vietnamese Enterprises

----------------------

 

THE PRIME MINISTER

 

-           Pursuant to the Law on Organization of Government dated 25 December 2001;

 

-           Pursuant to the Domestic Investment Promotion Law (amended) dated 20 May 1998; the Law on Foreign Investment in Vietnam (amended) dated 3 June 2000; the Enterprise Law and the Cooperative Law;

 

-           Pursuant to Decree No. 51/1999/ND-CP dated 8 July 1999 providing detailed regulations on the implementation of the Domestic Investment Promotion Law (amended); Decree No. 64/2002/ND-CP dated 19 June 2002 on transforming state owned enterprises into Joint Stock Companies;

 

-           Upon the proposal of the Minister of Finance.

 

DECIDES:

 

Article 1: To promulgate herewith this Decision the Regulation on the capital contribution and purchase of shares by Foreign Investors in Vietnamese Enterprises.

 

Article 2: The Minister of Finance, the Minister of Planning and Investment, the Governor of the State Bank of Vietnam, and Ministries and relevant branches shall provide guidance on the implementation of this Decision.

 

Article 3: This Decision shall replace Decision No. 145/1999/QD-TTg of the Prime Minister dated 28 June 1999 and shall take effect 15 days from its publication on the Official Gazette.

 

Article 4: Ministers, Heads of Ministerial-level agencies, Heads of Government bodies, Chairmen of People’s Committees of provinces and cities under Central Authority shall be responsible for the implementation of this Decision.

 

FOR THE PRIME MINISTER

DEPUTY PRIME MINISTER

(Signed and sealed)

 

Nguyen Tan Dung

 

 

GOVERNMENT	Socialist Republic of Vietnam Independence - Freedom - Happiness
	--------------------

Regulation

On the capital contribution and purchase of shares by Foreign Investors in Vietnamese Enterprises

(Issued in conjunction with Decision No. 36/2003/QD-TTg of the Prime Minister dated 11 March 2003) 

 I. GENERAL PROVISIONS

   

Article 1.  Objectives

This Regulation is to encourage foreign investors to contribute capital, purchase shares of Vietnamese enterprises; in order to mobilize capital, technology and enterprise management methods of foreign countries, expand markets and enhance the competitiveness among Vietnamese enterprises.

 Article 2. “Foreign Investors” making capital contribution or purchasing shares from Vietnamese enterprises under this Regulation including:  

1.         “Foreign economic and financial organizations” are economic and financial organizations, which are established in accordance with foreign laws and operate in foreign countries or in Vietnam.

 2.         “Non-permanent foreign residents in Vietnam” are foreign citizens residing overseas.

 3.         “Permanent foreign residents in Vietnam” are foreign citizens and non-Vietnamese citizens residing, working and living for a long period of time in Vietnam.

 4.         “Overseas Vietnamese residents” are foreign citizens and non-Vietnamese citizens residing, working and living overseas for a long period of time.

 Article 3: “Vietnamese Enterprises” receiving capital contributions, selling shares to Foreign Investors include: 

State Owned Enterprises conducting equitization, joint stock companies, limited liability companies, partnerships, unions of cooperatives and cooperatives operating in the lines and trades as decided by the Prime Minister or authorized the Minister of Planning and Investment to announce at each period of time.

Article 4: The rate of capital contribution and purchase of shares

 The rate of capital contribution and purchase of shares by foreign investors in Vietnamese enterprises in accordance with Article 3 of this Regulation shall be equal to 30% at maximum of the charter capital of Vietnamese enterprises. 

 Article 5: Forms of capital contribution and purchase of shares by foreign investors

1.         Forms of shares purchase:

 a.         Purchase of initially issued shares from State Owned Enterprises conducting equitization.
b.         Purchase of additionally issued shares from joint stock companies or re-purchase of shares owned by shareholders in joint stock companies.

 2.         Forms of capital contribution

 a.         Re-purchase of capital contribution from members of limited liability companies or contribution of capital to limited liability companies to become new members of such companies. 
b.         Contribution of capital to partnerships; re-purchase of capital contribution of partnerships’ members to become members making capital contribution to the partnerships.
c.         Contribution of capital to the union of cooperatives and cooperatives to become members of such union of cooperatives and cooperatives. 

Article 6. The power to decide on receipt of capital contribution and sale of shares to foreign investors. 

1.         For State Owned Enterprises conducting equitization: the competent authority approves the plan for equitization of State Owned Enterprises. 

2.         For joint stock companies under operation: 

a.         The General Meeting of Shareholders or the Board of Management (in accordance with the Organizational or Operational Charter of the joint stock company) shall decide the sale of additionally issued shares to foreign investors. 

b.         Shareholders which own their shares, shall, at their discretion, decide to sell their contribution capital to foreign investors in accordance with the current regulations and the Organizational or Operational Charter of the joint stock company. 

c.         In the case where the joint stock company has been listed in the stock market, the sale of shares shall be conducted in accordance with the applicable laws on securities. 

3.         For limited liability companies, partnerships, unions of cooperatives and cooperatives:  

The Council of members (in case of limited liability companies with many members), partnerships’ members (in case of partnerships), owners of companies (in case of one-member limited liability companies), General Meeting of cooperatives’ members (unions of cooperatives, cooperatives) shall decide the plans of capital contribution mobilization by foreign investors. 

Article 7. The form of capital contribution and purchase of share. 

1.         Foreign investors shall contribute capital and purchase shares from Vietnamese Enterprises in Vietnamese dong. 

a.         If the capital contribution and purchase of shares are made in foreign currencies, the conversion shall be made into Vietnamese Dong according to the buying rate published by commercial banks which are permitted to carry out foreign exchange activities at the time of capital contribution and purchase of shares.  

b.         If the capital contribution and purchase of shares are made by way of machinery, equipment, raw materials, goods, technology transfer, intellectual property right, valuable securities, and other assets, the values shall be determined subject to the market price. The enterprises shall have to set up an Assets Evaluation Council (or hire consulting organizations having functions to evaluate the same) to determine the value of assets at the market price at the time of capital contribution or purchase of shares with an approval from the contributing and purchasing party.  

2.         Foreign investors contributing capital and purchasing shares by way of machinery, equipment, raw materials, goods, technology transfer and other assets must comply with the regulations of the laws of Vietnam on technology, culture and environment. 

Article 9. The State protection 

Foreign investors contributing capital and purchasing shares from Vietnamese enterprises shall be ensured by the Socialist Republic of Vietnam in terms of their legal rights and interests in accordance with the laws of Vietnam. 

 

II. DETAILED PROVISIONS ON RECEIVING CAPITAL CONTRIBUTION AND SALE OF SHARES TO FOREIGN INVESTORS.

Article 9. Receipt of capital contribution and sale of shares to foreign investors 

1.         Vietnamese enterprises’ sale of shares:

 

a.        State Owned Enterprises conducting equitization having the need and capability of capital mobilization, technique, technology, foreign management experiences shall make plans for equitization, in which requesting the sale of shares to foreign investors and submit them to competent authorities deciding the equitization for approval. 

b.   Joint stock companies under operation: The Board of Management of Directors shall set up investment plans, issue additional shares to mobilize capital, including plans for selling shares to foreign investors and submit them to the General Meeting of Shareholders for decision.

 

2.         Vietnamese enterprises’ receipt of contributed capital:

 

a.         The Chairman of the Council of Members or Directors of limited liability companies, partnerships, the Board of Management of the union of cooperatives and cooperatives shall prepare investment plans, including plans for receiving capital contributed by foreign investors and submit them to the Council of members (for limited liability companies and partnerships), the General Meeting of cooperatives’ members (for the union of cooperatives and cooperatives) for decision.

 

b.         One-member limited liability companies: Chairmen of the companies or the Board of Management of enterprises shall set up plans for investment, including plans for receiving capital contributed by foreign investors to submit to the owners or authorized organizations being the owners’ representatives for decision (applicable to cases where one-member limited liability companies transforming into more than one-member limited liability companies or joint stock companies).

Article 10. Information on sale of shares and receipt of capital contribution

Upon issuance of a decision by a competent person as stated in Article 6 of this Regulation, Vietnamese enterprises shall inform on mass media and publicly announce all of their key information for foreign investors’ reference prior to the sale of shares and receipt of capital contribution.

Article 11. Implementation of capital contribution, purchase and sale of shares 

1.         Foreign investors contribute capital to and purchase shares from Vietnamese enterprises

 a.         When foreign investors have investment needs, they shall directly contact with Vietnamese enterprises or through share issuing brokerage financial agents to buy shares from or contribute capital to Vietnamese enterprises.

b.         Foreign investors shall open accounts at Vietnamese financial organizations or commercial banks or foreign financial institutions and commercial banks operating in the Vietnamese territory. All activities relating to the sale, purchase of shares, transfer of contributed capital, collection and use of dividends, money transfer abroad and other activities in relation to the investment in Vietnamese enterprises shall be conducted through these accounts. 

2.         Vietnamese enterprises conducting the sale of shares:

 

a.         The initial sale of shares by State Owned Enterprises conducting equitization shall be conducted in accordance with Decree No. 64/2002/ND-CP of the Government dated 19 June 2002 on transformation of State Owned Enterprises into joint stock companies. 

b.         The sale of shares to foreign investors by joint stock companies which are listed in the stock market shall be conducted in accordance with the regulations on securities.

 

c.         The sale of shares to foreign investors by joint stock companies which are not listed in the stock market, shall be conducted at the enterprises or through brokerage financial organizations issuing shares. 

3.         Vietnamese enterprises’ receipt of contributed capital:

 

The capital contribution by foreign investors to limited liability companies, partnerships, union of cooperatives, and cooperatives shall be conducted at the enterprises according to the principles of agreement between the contributing party and the receiving party in accordance with this Regulation and other regulations of the laws of Vietnam.

 

4.         In case where many foreign investors register for capital contribution at the same time or purchase shares with the total value exceeding 30% of the enterprise’s charter capital, Vietnamese enterprises shall, at their discretion, select or conduct an auction in accordance with the laws of Vietnam to select foreign investors. 

In case where foreign investors cannot directly participate in the auction, they shall negotiate with the sellers on the price of selling and purchasing shares, but such price shall not be lower than the sale price to domestic investors and conditions stipulated in Article 4 and point b, clause 1 of

Article 11 of this Regulation must be satisfied. 

Article 12. The sale price of shares and contributed capital

 

1.         The sale price of shares of joint stock companies which are listed in the stock market shall be in accordance with the current regulations on securities.

 

2.         The sale price of initially issued shares of State Owned Enterprises conducting equitization is stipulated in Decree No. 64/2002/ND-CP of the Government dated 19 June 2002 on transforming State Owned Enterprises into joint stock companies.

 

3.         The sale price of additionally issued shares of joint stock companies which are not listed in the stock market shall be agreed between Vietnamese Enterprises and foreign investors.

 

4.         The re-selling price of shares owned by shareholders shall be agreed between shareholders and foreign investors.

 

5.         The price of contributed capital by foreign investors to partnerships, limited liability companies, union of cooperatives, cooperatives to become new member shall be decided by the Council of members (for limited liability companies with many members), owners (for one-member limited liability companies), partnerships’ members and members making capital contributions (for partnerships) General Meeting of cooperatives’ members (for the union of cooperatives and cooperatives). 

Article 13. Forms of certification of shares and capital contribution

Share and capital contribution by foreign investors to Vietnamese enterprises shall be certified by one of the two following forms:

 

a.         Registered share certificate or non-registered share certificate.

 

b.         Book-entry.

The issuance, management of shares, and book entry shall be implemented in accordance with the laws of Vietnam.

Article 14. Announcement of results on receipt of contributed capital and sale of shares

After 15 days of termination of the purchase of shares to and receipt of capital contribution by foreign investors, the enterprises shall send a report on results to implement as follows: 

1.         State Owned Enterprises conducting equitization: shall send reports the to competent authorities deciding the equitization of State Owned Enterprises.

 

2.         Joint stock companies, limited liability companies, partnerships, the union of cooperatives and cooperatives: shall send reports to the authorities issuing the Business Registration Certificate.

 

III. INTERESTS AND OBLIGATIONS OF FOREIGN INVESTORS

 

Article 15. Interests of foreign investors contributing capital to, and purchasing shares from Vietnamese enterprises

 

1.         To use shares to pledge in credit relations and in the civil obligation performance guarantee in accordance with the law of Vietnam.

 

2.         To transfer the ownership of shares, participate in the stock market when the joint stock company has already been listed in the stock market in accordance with the Law on Enterprises and other regulations on securities.

 

3.         To transfer the contributed capital in limited liability companies, partnerships, the union of cooperatives, cooperatives in accordance with the laws of Vietnam and the organizational and operational Charter of the enterprise.

 

4.         To convert investment capital (principal and interest) and other proceeds from the sale of shares, assignment of equity, and other legal incomes in Vietnam into foreign currency for remittance abroad upon fulfilment of all financial obligations and foreign exchange management regimes in accordance with applicable laws of Vietnam.

 

5.         To be entitled to preferences as stipulated in the Domestic Investment Promotion Law or the Law on Foreign Investment in Vietnam if dividends gained from capital contribution, purchase of shares of Vietnamese enterprises are used to re-invest in Vietnam.

 

6.         Investors being individuals shall be entitled to personal income tax exemption for the income arising out of the capital contribution or purchase of shares from Vietnamese enterprises in accordance with Decree No. 51/1999/ND-CP dated 8 July 1999 providing detailed regulations on the implementation of the Domestic Investment Promotion Law.

 

7.         To be entitled to interests as shareholders or other Vietnamese members in the joint stock companies, limited liability companies, partnerships, the union of cooperatives, and cooperatives.

 

8.         To be entitled to other legitimate interests as stipulated by the laws of Vietnam.

 

9.         Foreign residents living in Vietnam, overseas Vietnamese living abroad which purchase shares or make capital contributions to Vietnamese enterprises operating in accordance with the Enterprise Law and the Cooperative Law shall be entitled to manage the enterprises in accordance with these laws and the organizational and operational Charter of the enterprises.

 

Article 16. Obligations of foreign investors

 

The foreign investors shall have to fully perform their obligations as stipulated in this Regulation and the organizational and operational Charter of the enterprise from which they make capital contributions or purchase shares, and other relevant regulations of the law.

 

IV. ORGANIZATION OF THE IMPLEMENTATION 

Article 17. Responsibilities of State Management Agencies

1.         Ministers, heads of ministerial-level agencies, Heads of Government bodies shall be responsible for guiding and monitoring the sale of shares by State Owned Enterprises conducting equitization as decided by them to foreign investors.

 

2.         Chairmen of People’s Committees of provinces and cities under Central Authority shall be responsible for guiding and monitoring the sale of shares or receipt of capital contribution from foreign investors by State Owned Enterprises conducting equitization, and other enterprises operating under the Law on Enterprises, and the Cooperatives Law in the localities.

 

3.         The Ministry of Finance, the State Bank of Vietnam, Ministries and relevant branches shall be responsible for guiding the implementation of this Regulation.

 

 

 

FOR THE PRIME MINISTER

DEPUTY PRIME MINISTER

(Signed and sealed)

 

 

Nguyen Tan Dung