Understanding Market Access Requirements For Uncommitted Businesses Under Investment Law 2020

Article 9 of the Investment Law 2020 provides for three kinds of business for foreign investors:

  • market-access-prohibited business lines (ngành, nghề chưa được tiếp cận thị trường in Vietnamese) (Prohibited Businesses);

  • business lines with conditional market access (ngành, nghề tiếp cận thị trường có điều kiện in Vietnamese) (Conditional Businesses); and

  • business lines which are not Conditional Businesses and Prohibited Businesses and are subject to the same market access treatment as domestic investors (Unrestricted Businesses).

However, Decree 31/2021 introduces another category of business lines being "business lines without market access commitment" (ngành, nghề Việt Nam chưa cam kết về tiếp cận thị trường in Vietnamese) (Uncommitted Business). It is unclear what the relationship between the Uncommitted Business and the Conditional Business under the Investment Law 2020 is.

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Written by Nguyen Quang Vu On In ,

Unclear Condition For Offshore Investors To Acquire Equity Originating From Land Use Right Contributions

Under Article 24.2 of the Investment Law 2020, offshore investors who intend to acquire equity in Vietnam-based companies must meet the land regulations on “conditions for receiving land use right” (LUR). However, the land law does not specify any conditions applicable to the offshore investors given that they are not a regulated land user.

Article 28.1(d) of the Land Law 2024 and its guiding provision, Article 9.1 of Decree 102/2024 only permit foreign-invested entities (FIEs), which can be established by offshore investors, to receive a transfer of equity being value of land use right originating from land allocation with land use fee payment or land lease with one-time rental payment to the State. Article 9.1 of Decree 102/2024 suggests that "equity being value of land use right " (vốn đầu tư là giá trị quyền sử dụng đất) (LUR Equity) is the equity in a company's charter capital created by contributing land use rights.

These provisions seem vague and can be interpreted differently, leading to varying conclusions.

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Written by Nguyen Quang Vu On In ,

After The Storm - New Amendments to the Securities Law 2019

In the FLC and Van Thinh Phat cases, the authorities have accused the controlling shareholders of FLC and Van Thinh Phat of various crimes including crimes relating to public issuance of securities, stock manipulation or private issuance of bonds. In an apparent attempt to prevent these crimes to be recommitted, in December 2024, the National Assembly passes some important amendments to the Securities Law 2019 (2024 Amendment). The Amendment takes effect from 1 January 2025 and could impose significant risks to public companies and their shareholders in Vietnam.

Sweeping changes to the liability regime for public companies, their shareholders and advisors

Under the 2024 Amendment, organization or individuals participating in the process of preparing applicable files or reporting documents relating to securities activities and securities market (hoạt động chứng khoán và thị trường chứng khoán) will be responsible for ensuring that:

  • such application files and reporting documents are legal, accurate, true and complete; and

  • such application files and reporting documents have clear and not misleading information and contain all material content which affect decision of the authorities, organisations and investors.

Advisors, who provide advice on the application files and reporting documents relating to securities activities and securities market, must be honest and prudent and must ensure that all analysis is reasonable and prudent.

Before the 2024 Amendment, the Securities Law 2019 only imposes liabilities to issuers, underwriters, auditors and “certifying organisations” when they conduct a public offering of securities or register their securities for listing or trading. However, by referring to all securities activities and securities market, the 2024 Amendment appears to expand the liability regimes to apply to all activities in the market including those which are normally not subject to such liability such as (1) private offering of securities, (3) public disclosures by a public companies or their shareholders, (4) secondary trading of securities by investors, and (4) advisors who are involved in these activities.

In practice, it would be very difficult for public companies and their shareholders and advisors to ensure that all of the documents and information relating to their public disclosures and securities trading activities do not contain misleading information and contain all material information, which affect decision by not only investors but also the authorities and other organisations.

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Written by Nguyen Quang Vu On In ,

The concept of indirect subsidiaries of a parent company under the Enterprise Law 2020

It is unclear whether indirect ownership or control is taken into account when determining a company is the parent company of another company. Under Article 195.1 of the Enterprise Law 2020, a company will be deemed to be a parent company of another company in one of the following circumstances:

  • the former owns more than 50% of the charter capital or the total number of ordinary shares of the latter;

  • the former has the right to directly or indirectly appoint “the majority or all directors of the Board, Director or the General Director” of the latter; or

  • the former has the right to amend the charter of the latter.

The above definition makes it unclear because indirect control is only clearly mentioned in the case of appointing Board directors and Director (General Director) (i.e. the second limb).

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Written by Nguyen Quang Vu On In ,