Decision No. 36/2003/QD-TTg dated March 11, 2003 of the Prime Minister promulgating the regulation on contribution of capital to, and purchase of equities from, Vietnamese enterprises by foreign investors

DECISION

PROMULGATING THE REGULATION ON CONTRIBUTION OF CAPITAL TO, AND PURCHASE OF EQUITIES FROM, VIETNAMESE ENTERPRISES BY FOREIGN INVESTORS

THE PRIME MINISTER

Pursuant to the Law on Organization of the Government of December 25, 2001;

Pursuant to the (amended) Law on Domestic Investment Promotion of May 20, 1998; the (amended) Law on Foreign Investment in Vietnam of June 3, 2000; the Law on Enterprises and the Law on Cooperatives;

Pursuant to the Government’s Decree No. 51/1999/ND-CP of July 8, 1999 detailing the implementation of the (amended) Law on Domestic Investment Promotion; and Decree No. 64/2002/ND-CP of June 19, 2002 on the transformation of State enterprises into joint-stock companies;

At the proposal of the Finance Minister,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on contribution of capital to, and purchase of equities from, Vietnamese enterprises by foreign investors.

Article 2.- The Minister of Finance, the Minister of Planning and Investment, the Governor of the State Bank of Vietnam and the concerned ministries and branches shall guide the implementation of this Decision.

Article 3.- This Decision replaces the Prime Minister’s Decision No. 145/1999/QD-TTg of June 28, 1999 and takes effect 15 days after its publication on the Official Gazette.

Article 4.- The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government, the presidents of the People’s Committees of the provinces and centrally-run cities and the chairmen of the Managing Boards of Corporations 91 shall have to implement this Decision.

REGULATION

ON CONTRIBUTION OF CAPITAL TO, AND PURCHASE OF EQUITIES FROM, VIETNAMESE ENTERPRISES BY FOREIGN INVESTORS

(Promulgated together with the Prime Minister’s Decision No. 36/2003/QD-TTg of March 11, 2003)

I. GENERAL PROVISIONS

Article 1.- Objectives

This Regulation aims to encourage foreign investors to contribute capital to, and/or purchase equities from, Vietnamese enterprises, in order to mobilize foreign capital, technologies and enterprise-managing methods, expand markets and raise the competitiveness of Vietnamese enterprises.

Article 2.- "Foreign investors" that contribute capital to, and/or purchase equities from, Vietnamese enterprises under the provisions of this Regulation include:

1. "Foreign economic and financial organizations," which are economic and/or financial organizations established under foreign laws and conducting business activities in foreign countries or Vietnam.

2. "Foreigners not permanently residing in Vietnam," who are foreign nationals residing in foreign countries.

3. "Foreigners permanently residing in Vietnam," who are foreign nationals and persons not bearing Vietnamese nationality but permanently residing and earning their living in Vietnam.

4. "Overseas Vietnamese," who are persons bearing Vietnamese nationality and those of the Vietnamese origin, and permanently residing and earning their living in foreign countries.

Article 3.- "Vietnamese enterprises" which receive contributed capital or sell their equities to foreign investors include: equitized State enterprises, joint-stock companies, limited liability companies, partnerships, unions of cooperatives and cooperatives doing business in domains, lines and trades decided by the Prime Minister or announced in each period by the Minister of Planning and Investment under the Prime Minister’s authorization.

Article 4.- Level of capital contribution or equity purchase

The maximum level of capital contributed to and equities purchased from Vietnamese enterprises by foreign investors according to Article 3 of this Regulation shall be equal to 30% of the charter capital of such Vietnamese enterprises.

Article 5.- Forms of capital contribution and equity purchase by foreign investors

1. Equity purchase forms:

a/ Purchase of equities issued for the first time by equitized State enterprises.

b/ Purchase of stocks additionally issued by joint-stock companies, re-purchase of stocks from stockholders in joint-stock companies.

2. Capital contribution forms:

a/ Re-purchase of contributed capital proportions of members of limited liability companies; contribution of capital to limited liability companies to become new members thereof.

b/ Contribution of capital to partnerships; re-purchase of contributed capital proportions of partners to partnerships to become capital-contributing partners thereto.

c/ Contribution of capital to unions of cooperatives or cooperatives to become members thereof.

Article 6.- The competence to decide on reception of capital contributions from, or sale of equities to, foreign investors

1. For equitized State enterprises: The authorities competent to approve plans on the equitization of such State enterprises shall have such competence.

2. For operating joint-stock companies:

a/ Stockholders’ General Assembly or the Managing Board (according to the organization and operation charters of such joint-stock companies) shall decide the sale of additionally issued stocks to foreign investors.

b/ Stockholders owning stocks shall decide to sell their contributed capital proportions to foreign investors according to the current law provisions and the organization and operation charters of joint-stock companies.

c/ For joint-stock companies already listed on the securities market, the current provisions of the securities legislation shall be complied with.

3. For limited liability companies, partnerships, unions of cooperatives and cooperatives.

Members’ councils (for limited liability companies with more than one member), partners (for partnerships), company owners (for one-member limited liability companies), cooperative members’ congresses (for unions of cooperatives and cooperatives) shall decide on plans for mobilization of foreign investors’ contributed capital.

Article 7.- Value denomination of capital contribution and equity purchase

1. Foreign investors shall contribute capital to, and/or purchase equities from, Vietnamese enterprises in Vietnam dong.

a/ If they contribute capital and/or purchase equities in foreign currencies, such foreign-currency amounts shall be converted into Vietnam dong at the buying rates of commercial banks licensed to conduct foreign exchange operations at the time of capital contribution or equity purchase.

b/ If they contribute capital and/or purchase equities with assets being machinery, equipment, raw materials, goods, transferred technologies, intellectual property rights, valuable securities and other assets, the values thereof shall be determined at the market prices. The concerned enterprises shall have to set up asset-pricing councils (or hire consultancy organizations with the pricing function) to determine such assets’ values at the market prices at the time of capital contribution or equity purchase, with the consents of capital contributors or equity purchasers.

2. Foreign investors that contribute capital and/or purchase equities with machinery, equipment, raw materials, materials, goods, transferred technologies and other assets shall have to comply with the provisions of Vietnamese laws on technology, culture and environment.

Article 8.- The State’s protection

The foreign investors contributing capital to, and/or purchasing equities from, Vietnamese enterprises shall have their legitimate rights and interests protected by the State of the Socialist Republic of Vietnam according to the provisions of the Vietnamese law.

II. SPECIFIC PROVISIONS ON RECEPTION OF CONTRIBUTED CAPITAL FROM, OR SALE OF EQUITIES TO, FOREIGN INVESTORS

Article 9.- Reception of contributed capital from, or sale of equities to, foreign investors

1. For Vietnamese enterprises selling their equities:

a/ Equitized State enterprises which have demand and capability to mobilize foreign capital, techniques, technologies and managerial experience shall work out equitization plans, proposing the sale of their equities to foreign investors, then submit them to the agencies deciding on the enterprise equitization for approval.

b/ Operating joint-stock companies: Their Managing Boards or Directors shall work out plans on investment or additional issuance of shares to mobilize capital, including the sale of stocks to foreign investors, then submit them to the Stockholders’ General Assembly or Managing Boards (according to the organization and operation charters of such joint-stock companies) for decision.

2. For Vietnamese enterprises receiving contributed capital:

a/ Chairmen of the members’ councils or directors of limited liability companies, partnerships, the management boards of unions of cooperatives or cooperatives shall work out investment plans which include a section on reception of contributed capital of foreign investors, then submit them to the members’ councils (for limited liability companies and partnerships), cooperative members’ congresses (for unions of cooperatives and cooperatives) for decision.

b/ For one-member limited liability companies: Company Presidents or Managing Boards shall work out investment plans, which include a section on reception of contributed capital of foreign investors, then submit them to the owners or organizations authorized to act as owners’ representatives for decision (applicable to cases where one-member limited liability companies are transformed into limited liability companies with more than one member or joint-stock companies).

Article 10.- Information on sale of equities or reception of contributed capital

After obtaining decisions of the competent persons defined in Article 6 of this Regulation, Vietnamese enterprises shall announce such decisions on the mass media and publicize principal information on the Vietnamese enterprises so that foreign investors can inquire into them before organizing the sale of equities or reception of contributed capital.

Article 11.- Effecting the capital contribution or equity sale and purchase

1. For foreign investors contributing capital to, and/or purchasing equities from, Vietnamese enterprises:

a/ When they wish to make investment, foreign investors shall directly transact with Vietnamese enterprises or intermediary financial institutions, which undertake the issuance, to contribute capital to, or purchase equities from, Vietnamese enterprises.

b/ Foreign investors shall open accounts at Vietnamese or foreign financial institutions or commercial banks operating in the Vietnamese territory. All activities of purchasing and selling equities, transferring contributed capital, receiving and using shared dividends and profits, transferring money abroad and other activities related to the investment in Vietnamese enterprises must be effected via such accounts.

2. For Vietnamese enterprises selling their equities:

a/ The sale of first-issued equities of the equitized State enterprises shall comply with according to the provisions of the Government’s Decree No. 64/2002/ND-CP of June 19, 2002 on the transformation of State enterprises into joint-stock companies.

b/ The sale of stocks of joint-stock companies already listed on the securities market to foreign investors shall comply with the provisions of the securities legislation.

c/ The sale of stocks of joint-stock companies not yet listed on the securities market to foreign investors shall be conducted at such companies or through intermediary financial institutions which undertake the issuance.

3. For Vietnamese enterprises accepting the capital contribution

The capital contribution by foreign investors to limited liability companies, partnerships, unions of cooperatives and cooperatives shall be effected at such enterprises on the principle of mutual agreement between the capital contributors and capital recipients according to the provisions of this Regulation and other provisions of Vietnamese laws.

4. In cases where many foreign investors register to contribute capital or purchase equities of a total value exceeding 30% of the charter capital of a Vietnamese enterprise, such enterprise shall choose by itself or conduct an auction under the provisions of Vietnamese law to choose foreign investors.

Foreign investors that have no conditions to directly participate in the auction shall agree with the sellers on purchasing prices and selling prices of equities, which must not be lower than the selling prices applicable to domestic investors and have to satisfy the conditions prescribed in Article 4 and Point b, Clause 1, Article 11 of this Regulation.

Article 12.- Selling prices of equities and prices of contributed capital

1. The selling prices of stocks of joint-stock companies already listed on the securities market shall comply with the provisions of the securities legislation.

2. The selling prices of first issued equities of equitized State enterprises shall be determined according to the provisions of the Government’s Decree No. 64/2002/ND-CP of June 19, 2002 on the transformation of State enterprises into joint-stock companies.

3. The selling prices of additionally issued stocks of joint-stock companies not yet listed on the securities market shall be the prices agreed upon between Vietnamese enterprises and foreign investors.

4. The re-selling prices of stocks owned by stockholders shall be the prices agreed upon between stockholders and foreign investors.

5. The prices of capital contributed by foreign investors to partnerships, limited liability companies, unions of cooperatives or cooperatives in order to become new members thereof shall be decided by the members’ councils (for limited liability companies with more than members), owners (for one-member limited liability companies), partners or capital-contributing members (partnerships), cooperative members’ congresses (for unions of cooperatives and cooperatives).

Article 13.- Forms of certification of equities or contributed capital

Either of the following two forms of certification of foreign investors’ capital contribution to, or equity purchase from, Vietnamese enterprises shall be effected:

a/ Certificates being registered or bearer shares.

b/ Accounting-book entries.

The issuance and management of shares and accounting-book entries shall comply with the provisions of Vietnamese laws.

Article 14.- Announcement of results of contributed capital reception or equity sale

Fifteen days after the completion of the reception of contributed capital or purchase of equities by foreign investors, enterprises shall send reports on the results thereof according to the following provision:

1. Equitized State enterprises shall send to the competent authorities decisions on equitization of State enterprises.

2. Joint-stock companies, limited liability companies, partnerships, unions of cooperatives and cooperatives shall send reports to the agencies granting business registration certificates.

III. RIGHTS AND OBLIGATIONS OF FOREIGN INVESTORS

Article 15.- Rights of foreign investors contributing capital to, and/or purchasing equities from, Vietnamese enterprises

1. To pledge shares in credit transactions and as security for the performance of civil obligations according to the provisions of Vietnamese law.

2. To transfer the ownership over shares, participate in transactions on the securities market when joint-stock companies are listed according to the provisions of the Enterprise Law and the provisions of the securities legislation.

3. To assign contributed capital proportions in limited liability companies, partnerships, unions of cooperatives or cooperatives according to the provisions of Vietnamese law and such enterprises’ organization and operation charters.

4. To convert into foreign currencies the investment capital (both principal and interest) and proceeds from the sale of equities, assignment of contributed capital and other lawful incomes generated in Vietnam for transfer abroad, after fulfilling the financial obligations and observing the foreign exchange regime prescribed by the Vietnamese law.

5. To enjoy the preferences provided for by the Domestic Investment Promotion Law or the Law on Foreign Investment in Vietnam if they use profits earned from the contribution of capital to, and/or purchase of equities from, Vietnamese enterprises to reinvest in such Vietnamese enterprises.

6. Investors being individuals shall be exempt from personal income tax for the income proportion earned from the contribution of capital to, and/or purchase of equities from, Vietnamese enterprises according to the provisions of the Government’s Decree No. 51/1999/ND-CP of July 8, 1999 detailing the implementation of the Domestic Investment Promotion Law.

7. To enjoy benefits like stockholders or other members being Vietnamese in joint-stock companies, limited liability companies, partnerships, unions of cooperatives or cooperatives.

8. To enjoy other legitimate interests prescribed by the Vietnamese law.

9. Foreigners permanently residing in Vietnam and overseas Vietnamese who purchase equities from, or contribute capital to, Vietnamese enterprises operating under the Enterprise Law or the Cooperatives Law shall be entitled to take part in the management of such enterprises according to the provisions of the said laws and the enterprises’ organization and operation charters.

Article 16.- Obligations of foreign investors

Foreign investors shall have to fulfill the obligations prescribed in this Regulation and the organization and operation charters of enterprises which they contribute capital to, and/or purchase equities from and other relevant provisions of law.

IV. ORGANIZATION OF IMPLEMENTATION

Article 17.- Responsibilities of the State management agencies

1. The ministers, the heads of the ministerial-level agencies and the heads of the agencies attached to the Government shall have to guide and inspect State enterprises which are equitized or sell equities to foreign investors under their own decisions.

2. The presidents of the People’s Committees of the provinces and centrally-run cities shall have to guide and inspect State enterprises which are equitized under their own decisions, and enterprises operating under the Enterprise Law and the Cooperative Law in their respective localities, which sell their equities to or receive capital contributed by foreign investors.

3. The Ministry of Finance, the State Bank of Vietnam and the concerned ministries and branches shall have to guide the implementation of this Regulation.