Overcoming the Covid-19 pandemic, Vietnam is still an attractive destination and a potential market thanks to the efforts in improving the law. The fact that the Law on Investment 2020 (effective from the beginning of this year) introduces new changes in business lines with restrict market access and registration for capital contribution, purchase of share and contributed capital (M&A) is a proof. By clarifying the above general provisions, Decree 31/2021/ND-CP (“Decree 31”) promises to strengthen the attraction and expand opportunities for foreign investors in the forthcoming time.

“Head-counting” the business lines with restrict market access

Decree 31 specifies the names of each business line, forming a list including:

• 25 business lines in which foreign investors have prohibitive market access: trading gold bars, raw gold, catching/exploiting seafood, temporary importing for re-export, border-gate transferring of goods, public postal services, judicial administration, opinion polling, traveling (except for international tourists), etc.; and
• 59 business lines in which foreign investors have conditional market access: advertising, insurance, banking, securities, education, mining, oil and gas, e-commerce, casino, etc.

The above list and specific conditions for each business line will be updated on the National Investment Portal.

“Guiding a path” for market access conditions

Decree 31 sets out principles for applying market access conditions to foreign investors where appropriate, specifically:

• For business lines in the list: (1) investors are not allowed to set foot in the “restricted areas” of 25 business lines that are prohibitive market access; (2) investors need to satisfy the respective conditions of 59 business lines with conditional market access in which they intend to conduct business.

Accordingly, these conditions can be found from the laws and regulations or international treaties of Vietnam. In which: (1) WTO Commitments can be applied to investors from countries that are not a WTO member (unless otherwise provided); (2) the application of international treaties shall prevail if it is more favorable for investors; (3) investors can choose if there are many applicable international treaties to their circumstance.

• For business lines not in the list: the investors access the market as similar as domestic investors.
• For business lines that have not been committed: applying Vietnamese law (if any); on the contrary, investors are treated like domestic investors.

Additionally, promoting non-retrospect, Decree 31 affirms that if there is a change in the law, investors who have satisfied the previous conditions can continue without being reviewed. However, regarding establishing a company, implementing a new project, receiving a project transfer, M&A or changing the target or business line(s), the investor must follow and satisfy the new conditions.

M&A registration: what is new?

M&A registration is closely related to determining the limit of foreign ownership in the company. Accordingly, Decree 31 clarifies: (1) investors only need to satisfy the highest rate if there are many applicable international treaties to their circumstances; (2) however, if doing business in several business lines, investors must satisfy the lowest rate among them.

Notably, Decree 31 requires the submission of an M&A principal agreement between the parties in the application dossier. For the M&A registration in enterprises using land in islands, border or coastal communal-level administrative units or areas affecting national defense and security, it is required to provide a copy of the Land Use Right Certificate. These requirements will more or less affect the structure of M&A transactions of foreign investors.