Principles for Using State Capital in Enterprises in Vietnam

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What are the principles for using state capital in enterprises?

Under Article 5 of the 2014 Law on Management and Use of State Capital Invested in Production and Business at Enterprises, as amended by Clause 1, Article 22 of the 2018 Law Amending and Supplementing Certain Articles of 37 Laws Related to Planning, the use of state capital in enterprises shall follow these principles:

(1) Complying with legal regulations on investment, management, and use of state capital at enterprises.
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(2) Being consistent with socio-economic development strategies and plans, and national sectoral planning.
(3) Investing state capital to form and maintain enterprises in key stages and phases of certain industries and sectors where other economic components do not participate, or where the State holds 100% of charter capital, maintaining the share or capital contribution ratio as prescribed in Articles 10 and 16 of this Law.
(4) The owner’s representative agency and state management agencies shall not directly intervene in the production and business activities of enterprises or the management and administration of enterprise managers.
(5) Managing state capital invested in enterprises through the direct owner’s representative or the representative of state capital; ensuring enterprises produce and do business under market mechanisms, on an equal, cooperative, and competitive basis in accordance with law.
(6) The owner’s representative agency, the direct owner’s representative, and the representative of state capital are responsible for managing and using state capital at enterprises, ensuring efficiency, preservation, and growth of the value of state capital invested in enterprises; preventing spreading, waste, and loss of State and enterprise capital and assets.
(7) Openness and transparency in investing, managing, and using state capital at enterprises.
(8) Consistency with international treaties to which the Socialist Republic of Vietnam is a member.

What forms of state capital investment in enterprises are there?

Under Article 6 of the 2014 Law on Management and Use of State Capital Invested in Production and Business at Enterprises, state capital investment in enterprises is carried out in the following forms:

(1) Investing state capital to establish enterprises with 100% state-held charter capital.
(2) Investing additional charter capital in operating enterprises with 100% state-held charter capital.
(3) Investing additional state capital to continue maintaining the State’s share and capital contribution ratio at joint-stock companies and multi-member limited liability companies.
(4) Investing state capital to acquire part or all of an enterprise.

Who has the authority to decide on state capital investment to establish an enterprise?

The person competent to decide on state capital investment to establish an enterprise is prescribed in Article 11 of the 2014 Law on Management and Use of State Capital Invested in Production and Business at Enterprises as follows:

Authority to decide on state capital investment to establish an enterprise
1. The Prime Minister decides on state capital investment to establish enterprises in the following cases:
a) Enterprises with production and business assets formed from the implementation of national important projects for which the National Assembly has decided the investment policy;
b) Parent companies of state economic groups and enterprises with the function of investing and trading state capital.
2. The owner’s representative agency decides on state capital investment to establish enterprises not falling into the cases prescribed in Clause 1 of this Article.
3. Where state capital investment to establish an enterprise has criteria equivalent to a national important project, the Prime Minister decides on the investment after the National Assembly decides the investment policy.

Thus, the persons competent to decide on state capital investment to establish an enterprise are the Prime Minister and the owner’s representative agency, specifically:

(1) The Prime Minister decides on state capital investment to establish enterprises in the following cases:
– Enterprises with production and business assets formed from the implementation of national important projects for which the National Assembly has decided the investment policy;
– Parent companies of state economic groups and enterprises with the function of investing and trading state capital.
(2) The owner’s representative agency decides on state capital investment to establish enterprises not falling into the cases prescribed in (1) above.

Note: Where state capital investment to establish an enterprise has criteria equivalent to a national important project, the Prime Minister decides on the investment after the National Assembly decides the investment policy.

Notes on Applying Current Legal Regulations

This article belongs to the Corporate & M&A Knowledge series and is presented for reference purposes, helping readers understand the legal issue at an overview level before preparing dossiers or carrying out transactions.

Legal regulations may change over time, by locality, dossier type, and specific circumstances. If you need to determine the exact legal basis applicable to your dossier, please contact an ANT Legal lawyer at 0966.475.966 for verification and advice before proceeding.

Common Risks to Watch Out For

Applying legal instruments that have been amended, supplemented, or replaced.
Preparing incomplete dossiers, documents, or evidence.
Misunderstanding the conditions, procedures, time limits, or competent authority.
Signing, filing, or carrying out transactions without fully assessing legal risks.

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ANT Legal helps review your specific situation, check dossiers, determine the applicable legal basis, advise on handling plans, and represent clients in dealings with individuals, organizations, or competent authorities when necessary.

For quick advice, please contact our lawyers at 0966.475.966.

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