In a recent private placement by a 100% Vietnamese-owned company (“VNCo”), a 100% foreign-invested member fund (set up and operating under Vietnamese law) subscribed and then would own a majority part of VNCo’s shares. Such subscription obliges the fund and VNCo to seek approval from the competent planning and investment department (“M&A Approval”).
The regulations are crystal clear about Vietnam registered investment funds’ right to invest in companies under the laws of Vietnam and their obligation to obtain the M&A Approval, however, investors may never expect that the hiccups arise out of the absurdity of the licensing authority’s reasoning.
First, the right to invest and apply for the M&A Approval was questioned. The legal status of the fund was repeatedly challenged by the opinion that the fund is not an economic organization as stipulated in Article 3.21 of the Investment Law and it should carry out the investment following securities regulations. The fund pushed back this reasoning by referencing the prevailing Investment Law and its older version since Doi Moi.
The fund’s right and obligation to proceed with the M&A Approval procedures was also reaffirmed and underscored by the Ministry of Planning and Investment (MPI) under their official letter guiding this specific case referring to Article 2, Article 21, Article 3.18, 3.19, 3.21, 3.22, Article 24, Article 25, Article 26 of the Investment Law.
When everything had been cleared, the licensing authority came up with the idea that they did not know how to consider the “legal representative” field in the M&A Approval application form – the second obstacle. Once more time, MPI issued its instructions with legal references and stressed that the fund management company (fund manager) is the authorized representative of the fund and all investments would be made by the fund manager on the fund’s behalf in accordance with Article 3.1 Circular No. 98/2020/TT-BTC, Article 4.2, and Article 10.1 Circular No. 99/2020/TT-BTC. Hence, by no means, the licensing authority is entitled to reject the application, but they are still reluctantly processing it.
