ARTICLE
4 September 2025

Vietnam – Decree 210 On Investments By Startup Funds In Innovative Startups And Venture Capital Funds

DM
Duane Morris LLP

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Effective from September 15, 2025, Decree 210/2025/ND-CP establishes a comprehensive legal framework to facilitate investment by startup investment funds in innovative startups in Vietnam, enhancing capital access for these enterprises.
Vietnam Corporate/Commercial Law

Effective from September 15, 2025, Decree 210/2025/ND-CP establishes a comprehensive legal framework to facilitate investment by startup investment funds in innovative startups in Vietnam, enhancing capital access for these enterprises. This article outlines the key provisions of Decree 210, highlighting its significance in fostering a secure investment environment for startups and venture capital funds.

Decree 210 formally recognizes convertible investment instruments, enabling investment funds to provide capital to startups through mechanisms that can later be converted into equity or capital contributions. Prior to this decree, investors often relied on convertible loans or restructured preferred shares under existing enterprise regulations to inject capital into startups. The absence of a clear legal framework posed potential risks. The introduction of these provisions represents a significant advancement, reducing uncertainty and enhancing investor confidence.

The decree also introduces provisions allowing investment funds to negotiate preemptive rights to acquire new shares in subsequent funding rounds of startups. This regulation aligns with common practices in venture capital and startup ecosystems, ensuring that investors can protect their legitimate interests by maintaining their proportional ownership in future capital raises.

Decree 210 establishes specific guidelines to ensure the safe and transparent operation of investment funds and startups:

  1. Fund Composition and Legal Status: An investment fund may consist of 2 to 30 investors and does not have legal entity status. This flexible structure is well-suited to the experimental and smaller-scale nature of early-stage venture capital funds.
  2. Investment Limits: The total capital invested by a fund in a single startup may not exceed 50% of the startup's charter capital post-investment. This restriction aims to prevent excessive control by a single investor and encourages startups to diversify their funding sources.
  3. Prohibition on Cross-Investment: The decree strictly prohibits innovative startup investment funds from investing in other similar funds. This measure enhances financial transparency, mitigates risks associated with capital recycling, and prevents speculative financial structures.

To maintain the focus on fostering innovation, Decree 210 imposes specific limitations on the activities of startup investment funds:

  • Funds are prohibited from engaging in commercial lending or guaranteeing loans.
  • Investment in listed securities, bonds, or fund certificates on the stock market is not permitted.
  • Funds are barred from promising guaranteed returns when raising capital from investors.

These restrictions underscore the decree's intent to prioritize venture capital investments that support innovation and creativity, rather than purely financial or speculative objectives.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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