Business red tape sliced

The decree drafts, designed to replace Decree 139/2007/ND-CP guiding the implementation of the Law on Enterprises and Decree 108/2006/ND-CP guiding the implementation of the Investment Law, have common regulations on the establishment of enterprises with less than 49 per cent foreign ownership.

According to the final decree draft replacing Decree 139/2007/ND-CP, foreign investors establishing enterprises in Vietnam for the first time will have to propose investment projects for each case.

Both decree drafts regulate that foreign investors, who have already set up enterprises in Vietnam, will have to register for the establishment of enterprises with less than 49 per cent in foreign capital like with domestic investors.

For the establishments with more than 49 per cent foreign ownership, foreign investors in Vietnam will have to register to gain an investment certificate needed for business registration.

“The above regulations of the two drafts sufficiently solve the current problems relating to capital ownership of foreign investors in Vietnamese enterprises,” said a note of YKVN Lawyers sent to Vietnam Investment Review last week.

Those regulations will remove the log jam in business registrations for foreign investors who wish to establish enterprises with less than 49 per cent foreign ownership.

Under Decree 108’s regulations, foreign investors must propose an investment project if they want to establish an enterprise in Vietnam, even though they hold less than 49 per cent in contributed capital.

Meanwhile, Decree 139 regulates that foreign investors do not have to propose an investment project if they hold less than 49 per cent of the capital.

The overlapping regulations have embarrassed business regulation authorities and in some cases have denied handling applications for establishing enterprises with less than 49 per cent in foreign capital.

The ambiguous regulations have also prevented many foreign investors for expanding business operations in the country.

In Hanoi, for example, the business registration authority is holding about 800 applications for establishing enterprises with less than 49 per cent in foreign capital. This action forced investors and law firms to sue the Hanoi Department of Planning and Investment for denying business registration applications.

“It is very good news as the two new decrees can remove this obstacle. That means we can handle all the applications without violating legal documents,” said Nguyen Van Tu, deputy director of Hanoi Department of Planning and Investment. However, the two drafts just remove overlapping regulations, but not create favourable conditions for investors.

“The overlapping has been removed, but the new regulations still make it difficult for investors to apply,” said Le Net, a partner at LNT & Partners.