TRANSFER OF TECHNOLOGY, ENVIRONMENTAL PROTECTION AND IMPORT OF EQUIPMENT AND MACHINERY

No. 12/CP

Hanoi, 18 February 1997

DECREE OF THE GOVERNMENT

SETTING FORTH DETAILED REGULATIONS FOR
IMPLEMENTING THE LAW ON FOREIGN INVESTMENT IN VIETNAM

• Pursuant to the Law on Organization of the Government
  dated September 30, 1992;
• Pursuant to the Law on Foreign Investment in Vietnam
  dated November 12, 1996;
• Pursuant to the Law on Promulgation of Legal and Statutory Instruments
  dated November 12, 1996;
• Based on the proposal of the Minister of Planning and Investment,

The State bodies having the authority to issue Investment Licenses as stipulated in Article 55 of the Law on Foreign Investment in Vietnam shall be:

• The Ministry of Planning and Investment;
  
• The People’s Committees at the provincial level which fully meet the conditions laid out in the decision of the Government on division of authority.
  

On the basis of the proposals of the People’s Committees at the provincial level and based on the condition of each Industrial Zone Management Board, the Ministry of Planning and Investment shall [prepare] a presentation to the Prime Minister of the Government for his decision in regard to the Ministry of Planning and Investment authorizing Industrial Zone Management Boards to issue Investment Licenses to investment projects in their [respective] Industrial Zones.

1. In [respect of their] investment activities in Vietnam, subjects participating in investment co-operation as stipulated in Article 2 of this Decree must comply with the provisions of the Law on Foreign Investment in Vietnam, the provisions of this Decree and other relevant provisions of Vietnamese law.
2. In circumstances where Vietnamese law does not yet have provisions governing foreign investment relations in Vietnam, the parties may agree in the contract to apply foreign law, but such agreements must not be contrary to the provisions of Vietnamese law.

A Business Co-operation Contract must have the following principal contents:

1. The nationalities, addresses and authorized representatives of
   the Business Co-operation Parties;
2. The objectives and scope of business;
3. The contributions by the Business Co-operation Parties, distribution
   of the business results and timing for implementing the contract;
4. The main products and ratio for export and domestic sales;
5. The term for implementing the contract;
6. The rights and obligations of the Business Co-operation Parties;
7. [Provision for] amending and terminating the contract,
   and conditions for assignment;
8. [Provision for] resolution of disputes.

A Business Co-operation Contract shall take effect from the date of issuance
of the Investment License.

• During the course of business, the Business Co-operation Parties may agree to establish a Co-ordination Committee to monitor and supervise the implementation of the Business Co-operation Contract. The Co-ordination Committee of a Business Co-operation Contract shall not be the legal representative of the Business Co-operation Parties.
• The function, duties and powers of the Co-ordination Committee shall be agreed upon by the Parties.

The application dossier for the issuance of an Investment License with respect to projects investing in the form of a Business Co-operation Contract shall include:

1. The Foreign Party shall perform [its] tax obligations and other financial obligations in accordance with the Law on Foreign Investment in Vietnam.
   The Vietnamese Party shall perform [its] tax obligations and other financial obligations in accordance with the provisions of laws applicable to domestic enterprises.
2. Each Business Co-operation Party shall bear responsibility for all of its activities before the law of the Socialist Republic of Vietnam.

1. A Joint Venture Enterprise shall be an enterprise established in Vietnam on the basis of a Joint Venture Contract executed between a Vietnamese Party or Parties and a Foreign Party or Parties in order to [conduct] investment and business in Vietnam.
   
   
2. A New Joint Venture Enterprise shall be an enterprise established between a Joint Venture Enterprise [already] licensed to operate in Vietnam and a foreign investor or a Vietnamese enterprise or a Joint Venture Enterprise or an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital which has already been licensed to operate in Vietnam.
   
   In special circumstances, a Joint Venture Enterprise may be established on the basis of a treaty signed between the Government of the Socialist Republic of Vietnam and the government of a foreign country.
   
   
3. A Joint Venture Enterprise is established in the form of a limited liability company having the status of a juridical person under Vietnamese law; each Joint Venture Party shall be liable to the other Party and the Joint Venture Enterprise within the limits of its capital contribution to the Legal Capital.
   
   
4. A Joint Venture Enterprise is established and operates from the date of issuance of the Investment License.

The application dossier for the issuance of an Investment License for investment in the form of a Joint Venture Enterprise shall include:

1. An application for the issuance of the Investment License;
2. The Joint Venture Contract;
3. The Charter of the Joint Venture Enterprise;
4. Documents certifying the legal status and financial standing of the Joint Venture Parties;
5. The economic and technical statement;
6. The materials stipulated at Articles 38, 39, 45 and 85 of this Decree.

A Joint Venture Contract must have the following principal contents:

1. The nationalities, addresses and authorized representatives of the Joint Venture Parties;
2. The objectives and scope of business;
3. The Investment Capital, Legal Capital, proportion of capital contributions, method and timing for making capital contributions, and the timing for construction of the enterprise;
4. The main product and ratio for export and domestic sales;
5. The term of operation of the enterprise;
6. The rights and obligations of the parties;
7. [Provision for] amending and terminating the contract, conditions for assignment and conditions for termination and dissolution of
   the enterprise;
8. [Provision for] resolution of disputes.

The Charter of a Joint Venture Enterprise must have the
following principal contents:

1. The nationalities, addresses and authorized representatives of the Joint Venture Parties, and the name and address of the enterprise;
2. The objectives and scope of business of the enterprise;
3. The Investment Capital, Legal Capital and proportion of contributions to the Legal Capital, and the method and timing for making contributions to the Legal Capital;
4. The number, composition, duties, powers and term of the Board of Management; the duties and powers of the General Director and Deputy General Directors of the enterprise;
5. The representative of the enterprise before the Court, Arbitration [bodies] and State authorities of Vietnam;
6. Financial principles;
7. The ratio for distribution of losses and profits to the Joint Venture Parties;
8. The term of operation, termination and dissolution of the enterprise;
9. Labor relations within the enterprise; plans for training managerial, technical and professional personnel and workers;
10. The procedures for amending the Charter of the Joint Venture Enterprise.

1. The Joint Venture Parties shall make their contributions to the Legal Capital in accordance with the stipulations in Article 7 of the Law on Foreign Investment in Vietnam.
2. The Vietnamese Party may mobilize its own capital and sources of capital from domestic enterprises and individuals in order to attain an appropriate proportion of the Legal Capital of the Joint Venture Enterprise.
3. The value of the capital contributions of each party shall be agreed upon by the parties on the basis of market prices at the time the capital is contributed.
4. The Foreign Party participating in the Joint Venture Enterprise may make its capital contribution in Vietnamese currency received from the profits, liquidation or assignment of investment capital in Vietnam.
5. Contributions to capital in [the form of] the value of land use rights by the Vietnamese Party must be based on the specific condition of the project in order to ensure efficiency with respect to the use of land and the business.

1. The Legal Capital of a Joint Venture Enterprise must be equal to at least thirty per cent (30%) of the Investment Capital; with respect to projects for construction of infrastructure facilities in areas with difficult socio-economic conditions, investment projects in mountainous, outlying or remote areas and investment projects for afforestation, this ratio may be as low as 20% but [it] must be approved by the Investment License Issuing Authority.
2. The proportion of capital contribution by the Foreign Party or Parties shall be agreed upon by the Joint Venture Parties, but [it] must not be lower than thirty per cent (30%) of the Legal Capital of the Joint Venture Enterprise.

   In the case of a new joint venture, the proportion of contribution to the Legal Capital by the foreign investor must ensure the proportion referred to above.

   In a number of circumstances, based on the area of business, technology, market, business efficiency and other socio-economic benefits of the project, the Investment License Issuing Authority may consider permitting the Foreign Party participating in the joint venture to have a proportion of contribution to Legal Capital as low as 20%.

3. With respect to important projects, the Joint Venture Parties may, upon the execution of the Joint Venture Contract, agree on the timing, method and ratio for increasing the capital contribution of the Vietnamese Party to the Legal Capital of the Joint Venture Enterprise.

The Legal Capital may be contributed in full at one time upon the establishment of the Joint Venture Enterprise or in instalments over a reasonable period of time; the method and timing for making contributions to the Legal Capital must be stipulated in the Joint Venture Contract and be consistent with the economic-technical statement.

1. The leading body of a Joint Venture Enterprise shall be the Board of Management. The Board of Management shall consist of the Chairman of the Board of Management, the Vice Chairman of the Board of Management and [other] members.
   
   The number of members of the Board of Management and members from the Joint Venture Parties, the designation of members and nomination of the Chairman of the Board of Management and the appointment of the General Director and Deputy General Directors shall be implemented in accordance with the provisions of Articles 12 and 13 of the Law on Foreign Investment in Vietnam.
   
   The nomination, designation and appointment of the members referred to above must be carried out within a time limit of no later than 60 days from the date of issuance of the Investment License.
   
   The Chairman of the Board may concurrently hold the position of General Director of the Joint Venture Enterprise.
2. The term of the Board of Management shall be agreed upon by the Joint Venture Parties but [it] shall not exceed five (5) years.
3. In the event a new Joint Venture Enterprise is established, the [existing] Joint Venture Enterprise party shall have at least two (2) members on the Board of Management [of the new Joint Venture Enterprise] and at least one of whom must be a Vietnamese citizen representing the Vietnamese party in the [existing] Joint Venture [Enterprise].

1. The Board of Management must meet at least once a year. Meetings of the Board of Management shall be convened by the Chairman of the Board of Management; extraordinary meetings must be [convened] at the request of 2/3 of the members of the Board of Management or one of the parties to the Joint Venture Enterprise or the General Director or First Deputy General Director.
2. A meeting of the Board of Management must have the attendance of at least two-thirds (2/3) of the members of the Board of Management representing the Joint Venture Parties. A member of the Board of Management may provide written authorization to a proxy to attend a meeting and vote on his/her behalf as to the issues which have been authorized. The Chairman of the Board of Management may authorize the Vice Chairman to convene and preside over meetings of the Board of Management.

1. The Chairman of the Board of Management shall have the [following] powers and duties:

• Convene and preside over meetings of the Board of Management;
• Play a key role in supervising and realizing the implementation of the resolutions of the Board of Management.

2. Members of the Board of Management shall not be entitled to salaries, but may be entitled to allowances in connection with the activities of the Board of Management as decided upon by the Board of Management. These expenses shall be accounted for in the management cost of the Joint Venture Enterprise.

• The General Director and Deputy General Directors of the Board of Management of a Joint Venture Enterprise shall manage and administer the day-to-day activities of the Joint Venture Enterprise. The General Director shall be the representative of the Enterprise before the Courts and State authorities of Vietnam. The General Director or the First Deputy General Director must be from the Vietnamese Party and be a Vietnamese citizen residing permanently in Vietnam. In cases where the Joint Venture Enterprise has only one Deputy General Director, the Deputy General Director shall function as the First Deputy General Director.
  
  
• The Board of Management shall demarcate the powers and duties between the General Director and the First Deputy General Director. The General Director shall be accountable to the Board of Management for the activities of the Joint Venture Enterprise. In the event that the General Director and the First Deputy General Director have different opinions regarding the management and administration of the work of the Enterprise, the opinions of the General Director must be followed; however, the First Deputy General Director has the right to reserve his opinion and bring [it] before the Board of Management for consideration and decision at the next meeting.

1. 1. Based on the business field and nature of the project, the Board of Management of the Joint Venture Enterprise may hire a management organization to manage the business operations of the Enterprise.
   
   The contract for the hire of the management shall be a contract for hiring the operation, management and exploitation of the facility agreed upon by the parties executing the contract. The execution and performance of the contract must be consistent with the provisions of Vietnamese law.
   
   The contract for the hire of management must not cause changes to the objectives and scope of operation of the project as stipulated in the Investment License. The contract for the hire of management must be approved by the Investment License Issuing Authority within 30 days from the date of receipt of the [application] dossier. If, upon the expiry of the above time limit, the Investment License Issuing Authority does not give [its] approval, it must notify to the investor in writing and clearly state the reasons [therefor].
2. The management organization shall operate within the extent stipulated in the approved contract for the hire of management.
3. The management organization must perform [its] tax obligations and other obligations in accordance with the provisions of law currently in effect. The Joint Venture Enterprise shall be responsible for submitting these tax amounts to the State of Vietnam on behalf of the management organization.
4. In all circumstances, the Joint Venture Company shall bear responsibility before the law in respect of the activities of the management organization in [its] performance of the contract. The General Director and Deputy General Director of the Joint Venture Company shall be responsible for assisting and supervising the activities of the management organization.

An Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital is an enterprise that is wholly owned by a foreign investor and is established in Vietnam by the foreign investor who shall manage [it] and take responsibility for the business results on its own.

The application dossier for the issuance of an Investment License for investing in the form of an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital shall include:

1. An application for seeking the issuance of the Investment License;
2. The Charter of the Enterprise;
3. Documents certifying the legal status and financial standing of the foreign investor;
4. The economic-technical statement;
5. The materials stipulated in Articles 38, 39, 45 and 83 of this Decree.

1. The Legal Capital of an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital must be equal to at least thirty per cent (30%) of the Investment Capital; with respect to projects for construction of infrastructure facilities in areas having difficult socio-economic conditions, investment projects in mountainous, outlying or remote areas and investment projects for afforestation, this ratio may be as low as 20%, but [it] must be approved by the Investment Licence Issuing Authority.
2. During the course of its operation, an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital may not reduce its Legal Capital. Increases to the Legal Capital and Investment Capital shall be decided upon by the Enterprise and must be approved by the Investment License Issuing Authority.
3. With respect to important projects, the Ministry of Planning and Investment shall provide guidelines for foreign investors to agree on the assignment of their capital to Vietnamese enterprises. The conditions, proportion and timing for the assignment shall be specified in the Investment Application.

The Charter of an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital must have the following principal contents:

1. The nationality, address and authorized representative of the foreign investor, and the name and address of the enterprise;
2. The objectives and scope of business of the Enterprise;
3. The Investment Capital, Legal Capital, method and timing for capital contribution and the timing for construction;
4. The representative of the Enterprise before the Court, Arbitration [bodies] and State authorities of Vietnam;
5. Financial principles;
6. The term of operation, termination and dissolution of the Enterprise;
7. Labor relations within the Enterprise; plans for training managerial, technical and professional personnel and workers;
8. The procedures for amending the Charter of the Enterprise.

All amendments and/or supplements to the Charter of the Enterprise With Hundred Per Cent (100%) Foreign-Owned Capital shall only take effect after being approved by the Investment License Issuing Authority.

1. The term of operation of an Enterprise With Foreign Investment Capital and the term of a Business Co-operation Contract shall be as proposed by the investor in accordance with Article 17 of the Law on Foreign Investment in Vietnam, approved by the Investment License Issuing Authority and stipulated in the Investment License.
2. The term of operation of an Enterprise With Foreign Investment Capital and the term of a Business Co-operation Contract shall be calculated as from the date of issuance of the Investment License.
   
   In cases where Enterprises With Foreign Investment Capital and Business Co-operation Parties propose to extend the term of operation stipulated in their Investment Licenses, they must, no later than 6 months prior to the end of the term of operation, prepare and submit an application to the Investment License Issuing Authority for consideration and decision. Within a time limit of 30 days from the date of receipt of the application for extension, the Investment License Issuing Authority shall notify its decision. If, upon the expiry of the above the time limit, the Investment License Issuing Authority does not give [its] approval, it must notify the investor in writing and clearly state the reason[s].

Enterprises With Foreign Investment Capital and Business Co-operation Parties must announce the principal contents stipulated in their Investment Licenses in a central or local newspaper. The content of the announcement shall include:

• The names and addresses of the Joint Venture Parties, Business Co-operation Parties or the foreign investor;
• The objectives and scope of business;
• The Capital of the Business Co-operation, or the Investment Capital and Legal Capital of the Enterprise With Foreign Investment Capital and the proportionate capital contributions of each party;
• The representative of the Enterprise or of the Business Co-operation Parties before the Court, Arbitration [Bodies] and State authorities of Vietnam;
• The date of issuance of the Investment License and the term of operation of the Enterprise or the term for implementing the Business Co-operation Contract.

1. An Enterprise With Foreign Investment Capital and a Business Co-operation Contract shall terminate operation under the circumstances stipulated in Article 52 of the Law on Foreign Investment in Vietnam. Within 15 days from the date of termination of operation, the Enterprise With Foreign Investment Capital and the Business Co-operation Parties must provide notification in a central or local newspaper regarding the termination of operation and proceed with the liquidation of the assets of the enterprise or liquidation of the contract.
2. The time limit for liquidation of the enterprise or liquidation of the contract shall not exceed 6 months from the expiry of the term of operation or from the time of having the decision to dissolve the Enterprise or terminate the contract prior to its expiry. In especially necessary circumstances as approved by the Investment License Issuing Authority, this time limit may be extended but [it] shall not exceed one year.
3. With respect to joint venture enterprises, no later than 6 months prior to the expiry of the term of operation or no later than 30 days after the decision to dissolve the Joint Venture Enterprise prior to its expiry, the Board of Management shall be responsible for establishing an Enterprise Liquidation Committee consisting of representatives of the Joint Venture Parties, and stipulating the powers and duties of the Liquidation Committee. The members of the Liquidation Committee may be chosen from the employees of the Joint Venture Enterprise or from experts outside the Joint Venture Enterprise.
4. The liquidation of a Business Co-operation Contract [and] the liquidation of the assets of an Enterprise With One Hundred Per Cent (100%) Foreign-Owned Capital shall be decided by the Business Co-operation Parties and the foreign investor [respectively].
5. All expenses related to the liquidation of the enterprise and the liquidation of the contract shall be borne by the Enterprise and the Business Co-operation Parties [as the case may be] and shall be given priority over payment of other obligations.
6. The other obligations of the Enterprise and of the Business Co-operation Parties shall be settled in accordance with the following order of priority:
   • The salaries and social insurance expenses which the Enterprise
     or the Business Co-operation Parties still owe the workers;
   • Taxes and other financial obligations of the Enterprise or the Co-op