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New regulations for Enterprises and Investments in Vietnam

Fidinam Vietnam

On 17 June 2020, the National Assembly in Vietnam ratified the new Law on Enterprises (LOE 2020) and the new Law on Investment (LOI 2020), which took effect on 1 January 2021. What follows is a summary of the significant changes due to the implementation of the aforementioned laws.

Law on Enterprises 2020


Capital Contribution
The time limit for capital contributions remains 90 days from the ERC date but the new law excludes the time for transportation, import and implementation of administrative procedures to transfer the ownership of assets to the company if the capital contribution is in-kind.

Legal Representatives
The new regulation specifies responsibilities of legal representatives of the enterprise. Specifically, rights and obligations of each Legal Rep. must be specified in the Company's Charter, otherwise the Legal Rep. will have full authority before any third party, and all of the legal representatives will have joint responsibility for any damage caused to the company.

Company Seal
The Company Seal is no longer required to enterprises to notify their seal to the licensing authorities before using it. Additionally, the LOE 2020 also recognizes two types of seal being (i) the physical seal and (ii) the digital signature in accordance with the regulations on electronic transactions.

Law on Investment 2020

Negative List
The new law emphasizes that there will be no discrimination between local investors and foreign investors if the foreign investor is investing in industries which do not fall in the list of restricted sectors for foreign investors and list of business lines with conditional market access.

Changes in Requirements for M&A Approvals
The new regulation provides one new case that requires the M&A approval, which applies to foreign investor conducting the acquisition of a company that has a land use right certificate on an island, a coastal or border commune, ward or town or in another area which affects national defense and security.
Notably, the new law removes the registration requirement if the M&A transaction does not result in an increase of the foreign ownership percentage of the target company.

Investment Incentives
The new law regulates new forms of investment incentives, which are the accelerated depreciation and increase in the amount of deductible expenses when calculating taxable income.
Furthermore, the government strongly supports start-ups and SMEs in Vietnam as well as enterprises in the environmental protection industry for a solid and sustainable development in the near future.

Finally, the fundamental changes due to the adoption of the LOI 2020 and the LOE 2020 are meant to free enterprises from administrative procedures, eliminate recurrences of investment-related regulations, as well as facilitate opportunities for investors into Vietnam markets with new investment incentives.

Fidinam Vietnam
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