On 26 March 2021, the Government issued Decree 31/2021/ND-CP ("Decree 31") to detail and guide the implementation of some of the articles of the Law on Investment 2020. It lays down detailed provisions on investment procedures, with salient features as follows:
a. New Concept of Market Access Restriction
Decree 31 publishes a "negative list" of prohibited or restricted business lines. For those industries and businesses for which Vietnam has not yet given international commitments on market access, and for which no market access restrictions are provided under law, foreign investors will be treated as domestic investors for market access purposes. While it remains to be seen how this will be implemented in practice for unregulated sectors, it potentially opens new doors for foreign investors that invest in areas that are not specifically listed in the "negative list".
b. Investment incentives
Decree 31 adds more business lines and sectors that can enjoy investment incentives. These include product distribution chains of small and medium enterprises ("SMEs"), (i) of which at least 80% of participating enterprises are SMEs; (ii) with at least 10 locations to distribute goods to consumers; and (iii) at least 50% of the chain's revenue is generated by SME's participating in the chain.
c. New requirements to submit in-principle agreement in applications for M&A procedure
In addition to the documents required under the former laws to obtain approval for foreign investors to acquire or invest in Vietnamese companies (often called an "M&A approval"), Decree 31 introduces a requirement for investors to submit an in-principle agreement for capital contribution/shares acquisition/ capital transfer. Therefore, parties are required to execute a preliminary agreement for their transactions before seeking M&A Approval.
