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LAW ON FOREIGN INVESTMENT IN VIETNAM

 

CHAPTER II

Forms of Investment

Article 4

Foreign investors may invest in Vietnam in any of the following forms:

1. Business co-operation on the basis of a business co-operation contract;

2. Joint venture enterprise;

3. Enterprise with one hundred (100) per cent foreign owned capital.

Article 5

Two or more parties may, on the basis of a business co-operation contract, enter into a business co-operation, such as profit sharing production, product sharing co-operation, or other business co-operation.

The parties shall agree on, and expressly state in the business co-operation contract, the objects, nature and duration of the business, their respective rights, obligations and responsibilities, and the relationship between them.

Article 6

Two or more parties may, on the basis of a joint venture contract, co-operate to establish a joint venture enterprise in Vietnam.

A joint venture enterprise may co-operate with foreign investor(s) or Vietnamese enterprises to establish a new joint venture enterprise in Vietnam.

A joint venture enterprise shall be established in the form of a limited liability company and shall be a legal entity in accordance with the law of Vietnam.

Article 7

1. The foreign party to a joint venture enterprise may make its contribution to the legal capital in:

(a) Foreign currency or Vietnamese currency originating from investments in Vietnam;

(b) Equipment, machinery, plant and other construction works;

(c) The value of industrial property rights, technical know-how, technological processes and technical services.

2. The Vietnamese party to a joint venture enterprise may make its contribution to the legal capital in:

(a) Vietnamese currency or foreign currency;

(b) The value of the right to use land in accordance with the law on land;

(c) Resources, the value of the right to use water and sea surfaces in accordance with the law;

(d) Equipment, machinery, plant and other construction works;

(e) The value of industrial property rights, technical know-how, technological processes and technical services.

3. Contribution of capital by the parties in forms other than those stipulated in clauses 1 and 2 of this article must be approved by the Government.

Article 8

Capital contribution of a foreign party or foreign parties to the legal capital of a joint venture enterprise shall be agreed by the parties and shall not be limited provided that the contribution is not less than thirty (30) per cent of the legal capital, except in cases stipulated by the Government.

In the case of a multi-party joint venture enterprise, the minimum capital contribution to be made by each Vietnamese party shall be determined 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 Vietnamese party's contribution to the legal capital of the joint venture enterprise.

Article 9

The value of the capital contribution made by each party to a joint venture enterprise shall be calculated by reference to the market price at the time of contribution. The capital contribution schedule shall be agreed by the parties, stated in the joint venture contract and approved by the body in charge of State management of foreign investment.

The value of equipment and machinery contributed as capital must be certified by an independent inspection organization.

The parties shall be responsible for the truth and accuracy of the value of their respective capital contributions. Where necessary, the body in charge of State management of foreign investment has the right to appoint an inspection organization to revalue the capital contribution of each party.

Article 10

The parties shall share the profits and bear the risks associated with a joint venture enterprise in proportion to their respective capital contributions, except where it is otherwise agreed by the parties as stated in the joint venture contract.

Article 11

The board of management shall be the body in charge of the management of the joint venture enterprise and shall comprise representatives of the parties to the joint venture enterprise.

Each party to a joint venture enterprise shall appoint members to the board of management in proportion to its capital contribution to the legal capital of the joint venture enterprise.

In the case of a two-party joint venture enterprise, each party shall have at least two members on the board of management.

In the case of a multi-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 more than one foreign party, or one foreign party and more than one Vietnamese party, the Vietnamese or foreign party concerned shall have the right to appoint at least two members to the board of management.

In respect of a joint venture enterprise established by an existing joint venture enterprise in Vietnam and a foreign investor or a Vietnamese enterprise, the existing joint venture enterprise shall have at least two members on the board of management, one of whom must be appointed by the Vietnamese party.

Article 12

The chairman of the board of management shall be appointed by the parties to the joint venture enterprise. The chairman of the board of management shall be responsible for convening and chairing meetings of the board of management and for monitoring the execution of any resolutions of the board of management.

The general director and deputy general directors shall be appointed and dismissed by the board of management. They shall be responsible before the board of management and the law of Vietnam for the management and running of the operations of the joint venture 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, the general director and the first general director shall be stated in the charter of the joint venture enterprise.

Article 13

The board of management shall decide on regular meetings.

Extra-ordinary meetings of the board of management may be convened at the request of the chairman of the board of management, two thirds of the board members, 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.

Meetings of the board of management must have a quorum of at least two thirds of the members of the board of management representing the parties to the joint venture.

Article 14

1. Principal matters which relate to the organization and operation of the joint venture, comprising the appointment and dismissal of the general director, the first deputy general director and the chief accountant; amendments of and additions to the charter of the enterprise; approval of final annual financial statements and final financial statements of capital construction and loans for investment, shall be decided by the members of the board of management who are present at the meeting on the basis of the principle of unanimous decision.

The joint venture parties may agree on and state in the joint venture charter other issues which require unanimous decision.

2. With respect to matters which are not referred to in clause 1 of this article, the board of management shall decide on the basis of the principle of simple majority voting by members who are present at the meeting.

Article 15

Foreign investors may establish in Vietnam an enterprise with one hundred (100) per cent foreign owned capital.

An enterprise with one hundred (100) per cent foreign owned capital shall be established in the form of a limited liability company and shall be a legal entity in accordance with the law of Vietnam.

An enterprise with one hundred (100) per cent foreign owned capital may co-operate with a Vietnamese enterprise to establish a joint venture enterprise.

With respect to important economic establishments as determined by the Government, Vietnamese enterprises shall, on the basis of agreements with the owner of the enterprise, be permitted to purchase a part of the capital of the enterprise to convert such enterprise into a joint venture enterprise.

Article 16

The legal capital of an enterprise with foreign owned capital must be at least thirty (30) per cent of its invested capital. In special cases and subject to approval of the body in charge of State management of foreign investment, this proportion may be lower than thirty (30) per cent.

During the course of its operation, an enterprise with foreign owned capital must not reduce its legal capital.

Article 17

The duration of an enterprise with foreign owned capital and the duration of a business co-operation contract shall be stated in the investment licence for each project in accordance with regulations of the Government, but shall not exceed fifty (50) years.

Pursuant to regulations made by the Standing Committee of the National Assembly, the Government may, on a project by project basis, grant a longer duration but the maximum duration shall not exceed seventy (70) years.

Article 18

Foreign investors may invest in industrial zones and export processing zones in any of the investment 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 any of the investment forms stipulated in clauses 1 and 2 of article 4 of this Law or may establish their wholly owned enterprises.

The transfer of goods between enterprises operating in the Vietnamese market and export processing enterprises shall be deemed to be an export-import activity and shall be regulated by the provisions of the law on export and import. The Government shall provide simple and convenient procedures for export processing enterprises to purchase raw materials, materials and other goods from the Vietnamese market.

The Government shall make regulations on industrial zones and export processing zones.

Article 19

Foreign investors investing in the construction of infrastructure facilities may enter into Build-Operate-Transfer contracts, Build-Transfer-Operate contracts, or Build-Transfer contracts with an authorized State body of Vietnam. Foreign investors shall be entitled to the rights and be subject to the obligations stipulated in such contract.

The Government shall make detailed regulations on investment on the basis of Build-Operate-Transfer contracts, Build-Transfer-Operate contracts, and Build-Transfer contracts.

 

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