In June 2025, the National Assembly passed a new Law on Management of State Capital (Law on State Capital 2025) replacing the same law issued in 2014 and amended in 2018 (Law on State Capital 2014). The Law on State Capital 2025 have given the individuals managing State-owned (or controlled) enterprises (i.e., the Members’ Council or the Chairman) substantial flexibility to run their businesses. In this post, we discussed some key changes introduced by the Law on State Capital 2025. A comparison between the Law on State Capital 2025 and Law on State Capital 2014 by Deep Research of Gemini 2.5 Pro can be found here.

Clearer scope of application

Law on State Capital 2025 clearly provides that enterprises which more than 50% charter capital or voting shares of which is held by the State are also subject to this law. This point is not clear under the Law on State Capital 2014.

Definition of State Capital

Under Law on State Capital 2025, State capital in a State-owned enterprise only includes the contributed capital portion held by the State out of the total owner's equity of the enterprise. In addition, the Law on State Capital 2025 defines State capital by reference to the holding percentage of the State. This new approach is a significant change from the Law on State Capital 2014 because:

The Law on State Capital 2025 excludes other funding sources such as the state budget, public assets, and development investment funds from the definition of "State capital" within an enterprise. Instead, the Law on State Capital 2025 classifies these as sources of capital and assets to be used for investing state capital in enterprises; and
in many scenarios, the holding percentage is more important than the absolute amount of State capital.

Capital raising by State-owned enterprises

For enterprises wholly owned by the State (State-owned enterprises), the Members’ Council comprising all individuals appointed to directly represent the State capital can decide on all borrowings by the State-owned enterprises subject to the following:

the borrowing plan must ensure the ability to repay the loan; and
if the leverage ratio of the State-owned enterprise exceeds 3:1 then the enterprise must report to the authority representing State capital (e.g., the Ministries or the provincial People’s Committees) (such authority, Owner Representative Agency) for information and monitoring. There is no clear requirement for approval by the authority representing State capital. Under the Law on State Capital 2014, the Members’ Council of a State-owned enterprise could only approve borrowings of up to 50% of the enterprise's owner's equity.

Capital spending by State-owned enterprises

The Law on State Capital 2025 simply provides that State-owned enterprises are allowed to invest and to purchase securities in accordance with law. Coupled with the fact that a restriction on real estate investment was removed from the final draft of the law, it appears that State-owned enterprises can now invest in real estate, banks and securities companies if permitted by the Government. Currently, under Decree 91/2015, State-owned enterprises are generally restricted from investing in real estate, banks and securities companies. The restriction that a State-owned enterprise cannot co-invest with its subsidiaries is also removed.

The Law on State Capital 2025 also simplify the investment procedures for State-owned enterprises. In particular, if the State-owned enterprise invests using “public capital” (vốn đầu tư công) in whole or in part, then it only needs to follow laws on public investment. In the past, the State-owned enterprise must also follow laws on public investment and laws on investment.

Similar to the Law on State Capital 2014, the Law on State Capital 2025 requires the Members’ Council to seek approval from the Owner Representative Agency if the investment project or the procurement transaction exceeds (1) 50% of the enterprise’s owner equity, or (2) 50% of the total investment capital of the owner, or (3) a minimum amount set by the Government, whichever is higher (such amount, Approval Amount). However, to give more flexibility to State-owned enterprises

the Law on State Capital 2025 removes the minimum amount equal to the amount of an investment group “B” project under the Law on State Capital 2014. Instead, this minimum amount will be set by the Government;
the Law on State Capital 2025 expressly provides that approval by the Owner Representative Agency is limited to the investment objective, the investment amount, source of fund and implementation time;
there is no requirement that the investment decision must comply with annual business plan, and five-year investment plan of the relevant enterprise.

Law on State Capital 2025 allows a State-owned enterprise to allocate no more than 50% of their after-tax profits for investment and expansion of business production. Previously, the Law on State Capital 2014 only allowed an allocation of no more than 30%.

Sale of investment and projects by State-owned enterprises or sale of State capital

The Law on State Capital 2025 now allows the Members’ Council to decide on the sale of investments or projects owned by the State-owned enterprise that do not exceed the Approval Amount. Previously, divestment of any amount required approval from the Owner Representative Agency.

For sale of shares in unlisted companies, the Law on State Capital 2025 provides that the sale can be done either via public auction or “other methods” decided by the Government. In the past, sale of unlisted shares must be conducted via public auction, or (if public auction fails) competitive bidding or (if both public auction and competitive bidding fail) direct sale.

For sale of State capital in a joint stock company or a limited liability company, the Law on State Capital 2025 requires the Owner Representative Agency to engage a licensed valuer to determine the value of State capital. Thereafter, the sale process seems to be similar to the sale process of investment and projects by State-owned enterprises.

Stricter qualifications to be the individual representatives

Law on State Capital 2025 stipulates the following additional requirements for an individual to represent the State capital in a State-owned enterprise or represent the capital of a State-owned enterprise in another enterprise:

Not having a prohibited family relationship with certain key personnel. The prohibited relationships include: spouse; biological or adoptive parent; parent-in-law; stepparent; biological or adopted child; son- or daughter-in-law; biological sibling; and sibling-in-law. This restriction applies to relationships with the following individuals: The head or deputy head of the Owner Representative Agency; and Within the same enterprise: the Chairman or a member of the Members’ Council/Board of Directors; the Company President; the General Director or Director; the Controller; or the Chief Accountant
Must not have never been dismissed from the position of Chairman or member of the Board of Members; Chairman or member of the Board of Directors; Company President or General Director, Director of a state-owned enterprise; or
Failing to meet other qualifications stipulated in the relevant charter.

Issues to be clarified or regulated by the Government

The Law on State Capital 2025 delegates several important issues to the Government for further guidance. Without further guidance by Government, it is unlikely that the Law on State Capital 2025 could function in practice. There are at least 28 issues to be regulated by the Government which include, among other things:

Information system on management of State capital;
Specifies other legal sources of capital—beyond the state budget, public assets, and corporate funds—that can be used for investment;
Additional Capital Injections: Outlines specific cases for providing more capital to 100% SOEs and to joint-stock or limited liability companies to maintain the state's ownership percentage.
State Capital Investment Rules: Details the regulations for investing state capital to (1) establish 100% State-owned enterprises, (2) increase capital in existing 100% State-owned enterprises; (3) add capital to joint-stock and limited liability companies; and (4) contribute capital to or purchase shares in other businesses.
Investment Authority and Process: Defines who has the authority to approve state capital investments (for cases not decided by the National Assembly) and sets the procedures for investing state funds into enterprises.
Business Strategy: Details requirements for the development strategies and annual business plans of SOEs.
Capital Mobilization and Lending: Sets the principles for how State-owned enterprises can raise and lend capital.
Investment Activities: Regulates the investment activities of SOEs, including the specific investment amounts that the Board of Members or Company Chairman can approve independently.
Transfer of Projects and Capital: Specifies the value of projects and investments that the Board of Members or Company Chairman can decide to transfer, alternative methods for capital transfer besides public auction, and procedures for transferring domestic and foreign investment projects.
Restructuring Capital in Other Companies: Governs how SOEs restructure their investments in other joint-stock and limited liability companies.
Salaries and Bonuses: Regulates the salaries, remuneration, and bonuses for direct owner's representatives and controllers.
Profit Distribution: Details how after-tax profits are distributed, including which expenses can be covered by these profits and when the remaining profit can be used to increase charter capital instead of being paid to the state budget.
Capital Preservation: Specifies the requirements for preserving and growing the capital of SOEs.
Management of Majority-Owned Enterprises: Regulates the use of stock dividends to increase state capital, directs the state capital representative on the company's financial rules, and outlines the content of the annual business plans for these enterprises.
Restructuring Plan: Sets criteria for classifying enterprises and planning the restructuring of state capital.
Corporate Reorganization: Regulates alternative methods to public auction for selling shares during a change in enterprise type, financial handling during the transition, and the authority and procedures for mergers, acquisitions, splits, and conversions.
Transfer of State Capital: Details alternative methods for transferring state capital besides public auction and financial handling during the process.
Transfer of Ownership Rights: Defines cases for transferring ownership representation rights and the authority, procedures, and financial handling involved.
Transfer of Projects, Capital, and Assets: Regulates cases for transferring projects, capital, and assets, the management of share purchase rights, and the authority and procedures for such transfers.
State Orders: Creates a mechanism for the state to place orders with and assign tasks to enterprises.
Salaries and Bonuses: Details the salaries, bonuses, and other benefits for state capital representatives (both full-time and part-time).
Reporting and Disclosure: Details the reporting requirements on enterprise operations.

This post is written by Nguyen Thu Giang and Nguyen Quang Vu.

Vietnam Business Law