TMF Vietnam Managing Director Suresh Kumar shares his views on
the changes to Decree 60, with the liberalisation of foreign
ownership caps on public companies, and the impact to businesses
and investors in Vietnam.
The Vietnamese government introduced Decree No. 60/2015/ND-CP
(Decree 60) on 1 September 2015, shortly after launching
the new laws on investment and enterprises, with aims to
improve its institutional framework as well as attract foreign
investment capital to restructure and modernise the local
Decree 60 has had a positive effect on investor sentiment, as
Demonstrates the country is opening up its borders to
the integrating global economy. Public companies are able
to attract foreign capital into Vietnam securities. The exception
being companies carrying out the following business activities:
operating in a sector where relevant
Vietnamese laws or trade agreements provide a foreign equity
operating in a sector
"conditional for foreign investment" where relevant
applicable laws are silent on any specific equity cap; the public
companies will be subject to the cap of 49%
operating in business lines and
industries with different provisions on foreign ownership ratio,
then the foreign ownership ratio will not exceed the lowest ratio
applicable to the business lines and industries, unless otherwise
provided under international treaties.
Improves stock market liquidity, and
mergers and acquisition (M&A) activity in the country.
Market observers have seen the number of trading codes granted for
foreign investors surge. According to the Vietnam Securities Depositary (VSD), by the end
of May 2016, there was a three-month record high with 19,150
foreign investors granted trading codes for securities, including
16,209 individuals and 2,941 institutions.
Saigon Securities Inc., an
established local securities company, was first to announce it was
open to a full foreign acquisition in 2015, followed by Everpia
Vietnam JSC (EVE) and Vinh Hoan Finsheries
Bank for Investment and Development
of Vietnam Insurance Joint Stock Corporation's foreign
ownership rose to 49%, from 21.5% in February 2016
Vietnam Dairy Products Joint Stock
Company (VNM) consulted with shareholders selling off seven
subsidiaries to make it more attractive to foreign investors.
Revenue in 2015 was US$1.7 billion.
With the implementation of Decree 60, foreign investors need to
be well-prepared and informed when acquiring shares of public
companies resulting in ownership of 51% or more, as the investments
will be deemed as foreign invested enterprises ("FIEs")
rather than local companies.
Companies will be required to review and amend current charters
of these former "local companies". This includes dividing
the current enterprise (business) registration certificate into the
investment registration certificate and the enterprise registration
The lifting of foreign investment caps provides opportunities
for investors looking to invest in Vietnam and its growing
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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