New Enterprise Law 2014 and Investment Law 2014

The National Assembly passed this morning (26 November 2014) the amended Enterprise Law 2014 and amended Investment Law 2014. Enterprise Law 2014 and Investment Law 2014 will take effect from 1 July 2015 and replace the current Enterprise Law 2005 and Investment Law 2005 respectively. These two important laws will have major impacts on operation and management of companies including foreign invested companies and foreign investors in years to come. In the next several posts, we will highlight and comment on various key changes under Enterprise Law 2014 and Investment Law 2014. The executed versions of the Enterprise Law 2014 and the Investment Law 2014 are not available to public yet. Our comments are based on unofficial final versions of these laws. Therefore, there may be changes after the executed versions of the laws are available. 

Please click here to visit the special page on Enterprise Law 2014 and Investment Law 2014.

SCIC To Take Control of State capitals in a Large Number of Vietnamese Enterprises

The Ministry of Finance has just issued Circular 118/2014 to allow State Capital Investment Corporation (SCIC) to take over State capital currently held by numerous provincial People’s Committees (PCs) and Ministries in a large number of enterprises. In particular, the SCIC will replace the provincial PCs and Ministries as representatives of State’s capital in:

• Limited liability companies with two members or more which have State capital;
• Joint venture companies in which provincial PC or Ministries are joint venture parties;
• Joint stock companies which are converted from wholly State-owned enterprises or which are newly incorporated in which provincial PC or Ministries are shareholders;
• Single member limited liability companies after being restructured pursuant to plans approved by the Prime Minister for the period 2011 – 2015; and
• Large State Economic Groups in case instructed by the Prime Minister.

To show commitment to the SOEs restructuring process, Circular 118/2014 expressly imposes liabilities to provincial PCs or Ministries which delay the transfer process. Circular 118/2014 is another effort in making SCIC to be a “Temasek” of Vietnam.

However, Circular 118/2014 would likely make it more difficult for existing and future strategic investors in SCIC-to-be-transferred enterprises to structure their investments. This is because existing and potential strategic investors in these enterprises usually want to have a shareholder agreement with representative of State capitals being provincial PCs or Ministries. If SCIC is to replace these provincial PCs or Ministries, it is not clear whether SCIC will accede to such shareholder agreement or if the strategic investor will need to re-negotiate and enter into a new shareholder agreement.