CHAPTER II:  FORMS OF INVESTMENT

Article 4

Foreign Investors may invest in Vietnam in the following forms:

1. Business co-operation on the basis of a Business Co-operation Contract;
2. Joint Venture Enterprise; [and]
3. Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital.

Article 5

Two Parties or Multiple-Parties may engage in business co-operation on the basis of a Business Co-operation Contract, such as profits sharing co-operation, production sharing co-operation and other forms of business co-operation.

The subject matter[s] (13), scope [and] term of operation, as well as the rights and interests, obligations [and] responsibilities of each party [and] the relationship between the parties shall be agreed upon by the parties and stated in the Business Co-operation Contract.

Article 6

Two Parties or Multiple-Parties may co-operate with each other in order to establish a Joint Venture Enterprise in Vietnam on the basis of a Joint Venture Contract.

A Joint Venture Enterprise may co-operate with a Foreign Investor or a Vietnamese enterprise in order to establish a new Joint Venture Enterprise in Vietnam.

A Joint Venture Enterprise is established in the form of a limited liability company having the status of a juridical person under Vietnamese law.

Article 7

1. The Foreign Party participating in a Joint Venture Enterprise may make [its] contribution to Legal Capital in [the form of]:

a. Foreign currency [and] Vietnamese currency derived from investment in Vietnam;

b. Equipment, machinery, buildings [and] other construction work (14); [and]

c. The value of industrial property rights, technical know-how, process technology [and] technical services.

2. The Vietnamese Party participating in a Joint Venture Enterprise may make [its] contribution to the Legal Capital in [the form of]:

a. Vietnamese currency [and] foreign currency;

b. The value of land use rights in accordance with the provisions of the land law;

c. Natural resources [and] the value of the rights to use water surface [and] sea surface in accordance with the provisions of law;

d. Equipment, machinery, buildings and other construction work; [and]

e. The value of industrial property rights, technical know-how, process technology [and] technical services.

3. Capital contributions [to be made] by the parties in forms other than the forms stipulated in Clauses (1) and (2) of this Article must be approved by the Government.

Article 8

The Portion of Capital Contribution of a Foreign Party or Foreign Parties to the Legal Capital of a Joint Venture Enterprise shall not be limited to a maximum ceiling under the agreement of the parties but [it] shall not be less than 30% of the Legal Capital, except in circumstances stipulated by the Government.

With respect to Multiple-Party Joint Venture Enterprises, the minimum proportion of Capital Contribution of each of the Vietnamese Parties shall be stipulated by the Government.

With respect to important economic establishments as determined by the Government, the parties shall agree to increase gradually the proportion of the capital contribution of the Vietnamese Party to the Legal Capital of the Joint Venture Enterprise.

Article 9

The value of the Portion of Capital Contribution of each party to a Joint Venture Enterprise shall be determined on the basis of the market price at the time of capital contribution. The timing for capital contribution shall be agreed upon by the parties [and] stated in the Joint Venture Contract and shall be approved by the State authority in charge of management of foreign investment.

The value of the equipment [and] machinery used for a capital contribution must be supported by an evaluation certificate issued by an independent evaluation organization.

The parties shall be responsible for truthfulness [and] accuracy with respect to the value of their respective Portion of Capital Contribution. In necessary circumstances, the State authority in charge of management of foreign investment shall have the authority (15) to appoint an evaluation organization to re-appraise the value of the Portions of Capital Contribution of the parties.

Article 10

The parties shall share the profits from, and bear the risks of, the Joint Venture Enterprise in accordance with the proportion of their respective capital contribution, except in circumstances where otherwise agreed by the parties as stipulated in the Joint Venture Contract.

Article 11

The Board of Management (16) is the leading body of a Joint Venture Enterprise and consists of representatives of the parties participating in the Joint Venture Enterprise.

The parties shall appoint their own people (17) to the Board of Management at a ratio corresponding to [their] [respective] Portion of Capital Contribution in the Legal Capital of the Joint Venture Enterprise.

In the case of a Two-Party joint venture, each party shall have at least two members on the Board of Management.

In the case of a Multiple-Party joint venture, each party shall have at least one member on the Board of Management.

If a Joint Venture Enterprise has one Vietnamese Party and several Foreign Parties, or one Foreign Party and several Vietnamese Parties, then that Vietnamese Party or Foreign Party shall have the right to appoint at least two members to the Board of Management.

In the Board of Management of a Joint Venture Enterprise established between an existing Joint Venture Enterprise in Vietnam and a Foreign Investor or Vietnamese enterprise, the existing Joint Venture Enterprise shall have at least two members, of whom at least one member shall be from the Vietnamese Party.

Article 12

The Chairman of the Board of Management of a Joint Venture Enterprise shall be appointed by agreement of the parties to the Joint Venture. The Chairman of the Board of Management is responsible for convening [and] presiding over meetings of the Board of Management, [and] for overseeing the implementation of resolutions of the Board of Management.

The General Director (18) and Deputy General Directors shall be appointed [and] removed by the Board of Management, [and] are accountable to the Board of Management and liable before Vietnamese law for the management [and] administration (19) of the activities of the Enterprise.

The General Director or the First Deputy General Director shall be a Vietnamese citizen.

The duties [and] powers of the Chairman of the Board of Management, General Director [and] First Deputy General Director shall be stated in the Enterprise?s charter.
Article 13

Regular meetings of the Board of Management shall be determined by the Board of Management. The Board of Management may hold an extraordinary meeting (20) at the request of the Chairman of the Board of Management or two-thirds of the members of the Board of Management or the General Director or the First Deputy General Director. Meetings of the Board of Management shall be convened by the Chairman of the Board of Management.

A meeting of the Board of Management must have the attendance of at least two-thirds of the Board of Management?s members representing the parties to the Joint Venture.
Article 14

1. The most important matters in the organization and operation of a Joint Venture Enterprise, including the appointment [and] removal of the General Director [and] First Deputy General Director, [and] the amendment [and] supplement of the Enterprise?s charter shall be determined by the Board of Management in accordance with the principle of unanimity among the members of the Board of Management present at the meeting.

The parties to the Joint Venture [Enterprise] may agree in the Enterprise?s charter on other matters that require to be determined in accordance with the principle of unanimity.

2. With respect to matters that are not stipulated in Clause 1 of this Article, the Board of Management shall make decisions [thereon] in accordance with the principle of simple majority of the members of the Board of Management present at the meeting.
Article 15

Foreign Investors may establish Enterprises With One Hundred Per Cent (100%) Foreign-Owned Capital in Vietnam.

An Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital shall be established in the form of a limited liability company having the status of a juridical person under Vietnamese law.

An Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital may co-operate with a Vietnamese enterprise in order to establish a Joint Venture Enterprise.

With respect to important economic establishments as determined by the Government, Vietnamese enterprises on the basis of the agreement with the enterprise?s owner may acquire a portion of the enterprise?s capital in order to form a Joint Venture Enterprise.

Article 16

The Legal Capital of an Enterprise With Foreign Capital Investment must be equal to at least thirty per cent (30%) of the Investment Capital of the Enterprise. In special circumstances, this ratio may be less than thirty per cent (30%) but it must be approved by the State authority in charge of management of foreign investment.

During the course of its operation, an Enterprise With Foreign Capital Investment must not reduce its Legal Capital.

Article 17

The term of operation of an Enterprise With Foreign Capital Investment and the term of a Business Co-operation Contract shall be stated in the Investment License for each individual project in accordance with the stipulations of the Government, though [it] shall not exceed fifty (50) years.

Based on stipulations of the Standing Committee of the National Assembly, the Government [may] set a longer term for each individual project, though [it] shall not exceed seventy (70) years.

Article 18

Foreign Investors may invest in Industrial Zones [and] Export Processing Zones in the forms stipulated in Article 4 of this Law.

Vietnamese enterprises in any economic sector may co-operate with Foreign Investors to invest in Industrial Zones [and] Export Processing Zones in the forms stipulated in Clauses 1 and 2 of Article 4 of this Law, or establish enterprises with 100% of their own capital.

Relations involving the exchange of goods between enterprises in the Vietnamese market and Export Processing Enterprises shall be deemed import-export relations and must comply with the provisions of import and export law. Export Processing Enterprises may purchase raw materials, materials [and] goods from the domestic market to an Export Processing Zone in accordance with the simple and convenient procedures stipulated by the Government.

The Government shall promulgate regulations on Industrial Zones [and] Export Processing Zones.

Article 19

A Foreign Investor investing in the construction of an infrastructure facility may execute a Build-Operate-Transfer Contract, Build-Transfer-Operate Contract or Build-Transfer Contract with the competent State authority of Vietnam. The [above] Foreign Investor is entitled to enjoy the rights and interests, and shall perform the obligations, stipulated in the [relevant] Contract.

The Government shall provide specific regulations on investment under Build-Operate-Transfer Contracts, Build-Transfer-Operate Contracts [and] Build-Transfer Contracts.

Article 19a

An Enterprise With Foreign Investment Capital [and] the parties to a Business Co-operation Contract are entitled to convert [their] form of investment [and] to divide, separate, merge [and] consolidate [their] enterprise during the course of operation.

The Government shall set forth the conditions [and] formalities for the conversion of forms of investment, [and] for the division, separation, merger [and] consolidation of enterprises.

NOTES:

13. Subject matters: The Vietnamese expression used here is "doi tuong", which is literally "subject matter" in English. Most likely, the drafters mean the "subject matters" of a Business Co-operation Contract.

14. Construction work: The Vietnamese version uses the phrase "cong trinh xay dung", which may also be translated as "constructed facilities", "construction facilities" or "facilities under construction".

15. Authority: The Vietnamese version adopts the term "quyen" here. This term can also be translated as "right" in English. This translation prefers the English word "authority" in this context to facilitate understanding.

16. Board of Management: is a literal translation of the Vietnamese word "Hoi dong quan tri" used here and else where in the original Vietnamese text of this Law. It is the equivalent of the "Board of Directors" found under common law system.

17. People: The Vietnamese version uses the word "people" rather than "members".

18. General director: The equivalent of a general manager, company president or chief executive officer; not necessarily a member of the Board of Management.

19. Administer: The Vietnamese word "dieu hanh" is used here. It may also mean "to run a business".

20. Irregular meeting: The Vietnamese phrase literally reads as "the Board of Management may meet irregularly...". In this context it has been translated as "the Board of Management may hold extraordinary meetings..." to facilitate understanding.

Source: Vietnam ministry of planning and investment-MPI (MPI website)