I. DECREE NO. 47/2021/ND-CP
Definition of contribution of capital, purchase of shares of other enterprises
Decree No. 47/2021/ND-CP (“Decree 47”) dated 01 April 2021 providing guidances on several articles of the Law on Enterprises, takes effect as of 04 January 2021.
Decree 47 specifies some features of the Law on Enterprises 2020 regarding the issues related to social enterprises, state-owned enterprises, groups of companies, defense and security enterprises, and disclosure of information of state-owned enterprises.
Accordingly, in order to specify regulations regarding “subsidiary companies of the same parent company with at least 65% state capital must not contribute capital to or purchase shares of other enterprises or to establish new enterprises” under Clause 3, Article 195 of the Law on Enterprises 2020 as well as cases of cross-ownership among companies in the group of companies, Decree 47 specifically explains the capital contribution, purchase of shares of other enterprises or for the establishment of new enterprises including the following cases:
- Joint contribution of capital to establish a new enterprise.
- Joint purchase of stakes/shares of existing enterprises.
- Joint acquisition of stakes/shares from members, shareholders of existing enterprises.
Accordingly, the business registration authority shall reject registration of change of company’s members and shareholders if the capital contribution, purchase of shares, enterprise establishment or transfer of shares or related contributed capital constitute violations against the above regulations while processing the application.
Moreover, regarding regulations on social enterprises, Decree 47 requires social enterprises to maintain pursue of social and environmental objectives, retained earnings for re-investment and other contents in the commitment to pursue social and environmental objectives throughout their operation. Unless the social and environmental objectives are terminated ahead of schedule, the social enterprise shall return all incentives, aids and sponsorships it received to pursue social and environmental objectives if it fails to fulfill the commitment to pursue social and environmental objectives and maintain retained earnings for re-investment.
Decree 47 also provides regulations on Conversion of social protection establishments, social funds and charitable funds into social enterprises. In particular, a social protection establishment, social fund or charitable fund may use all of its property, rights and obligations for conversion into a social enterprise after obtaining the written approval from the authority that issued the license for establishment.
After conversion, the social enterprise shall inherit all lawful rights, interests, debts (including tax debts), employment contracts and other obligations of the social protection establishment, social fund or charitable fund. The social protection establishment, social fund or charitable fund is shut down from the day on which the social enterprise is granted the Enterprise Registration Certificate.
Overall, Decree 47 has provided strict regulations used as a legal basis to help the implementation of the Law on Enterprises 2020 take place more smoothly, especially in determining the exact nature of transactions, responsibilities and powers of enterprise managers, state management agencies as well as in investment transactions related to capital contribution, purchase of shares, transfer of shares among companies in the group of companies.
II. DECREE NO. 31/2021/ND-CP
List of business lines with prohibited and restricted market access for foreign investors has officially been announced
Decree No. 31/2021/ND-CP (“Decree 31”) dated 26 March 2021 of the Government providing guidance on the Law on Investment, takes effect as of the issuance date.
Via Decree 31, the list of business lines with prohibited and restricted market access for foreign investors has officiallybeen announced for the first time, including 25 business lines that are prohibited from access to the market as prescribed in Section A of Appendix I and 59 restricted business lines. In addition, Appendix III specifies the list of geographical areas eligible for investment incentives in areas with difficult or particularly difficult socio-economic conditions, replacing the provisions of Appendix II of the List of geographical areas eligible for investment incentives (promulgated together with the Decree No. 118/2015/ND-CP of the Government dated 12 November 2015).
- Decree 31 has also supplemented several business lines eligible for investment incentives, including:
- Research, manufacture of biotechnology food products.
- Manufacture of sawmill products; manufacture of artificial planks, including: plywood, joinery planks, MDF.
- Investment in development, operation and management of infrastructural works of industrial complexes.
- Investment in facilities for protection of sex workers from gender-based violence in communities.
- Investment in power generation from exhaust gas of building material factories.
In addition, Decree 31 has supplemented 02 (two) cases of termination of investment projects, namely:
- Termination of an investment project in case the investor conducts investment activities on the basis of a sham civil transaction in accordance with the civil law.
- Termination of an investment project under a court’s judgment or decision or arbitral award.
It could be observed that the guidance and supplements in Decree 31 will create many significant changes in the field of investment management, thereby helping the legal corridor of enterprises and investment of our country becomemore and more complete and stricter in the face of the continuous development and innovation of Vietnam’s economy.
III. DECREE NO. 50/2021/ND-CP
Adjustment of names of certain types of construction contracts
Decree No. 50/2021/ND-CP (“Decree 50”) dated 01 April 2021 of the Government providing amendments to several articles of the Decree No. 37/2015/ND-CP (“Decree 37”) dated 22 April 2015 of the Government giving details and guidance on construction contracts, takes effect as of the issuance date.
The most notable feature of Decree 50 is the appearance of a new type of construction contract as “Simple and small-scale construction contract”. This type of construction contract for the performance of a contract package with a value not exceeding the limit on a small-scale contract package in accordance with regulations of law on bidding. The contents of the contractual work are of a simple technical nature and easy to be conducted.
Decree 50 also amends the name of the technological equipment supply contract (abbreviated as the Equipment Supply Contract) into the contract for procurement of materials, equipment and re-defines the EP contracts (Engineering and Procurement contracts), PC contracts (Engineering and Procurement contracts), EPC contracts (Engineering, Procurement and Construction contracts).
In order to overcome the shortcomings of Decree 37 when not referring to 02 (two) types of contracts “Charge-plus cost-based contract” and “Other construction contracts” as prescribed in Article 140 of the Law on Construction 2014, Decree 50 has supplemented to 02 (two) types of these contracts in the content of the Decree together with the provisions on their construction contract prices and applicable conditions.
Decree 50 was promulgated with the expectation of timely addition of incomplete and ambiguous provisions to help the actual law enforcement process take place smoothly and feasibly, while ensuring synchronization in the legal system on construction and overcoming shortcomings and limitations in order to shorten the implementation time and improve efficiency in the project investment process.
