Vietnam’s regulations on venture capital funds

Regulations on venture capital funds of Decree No. 38/2018/NĐ-CP of Vietnam’s Government have attracted a lot of attention. To be specific:

Features of venture capital funds

- A venture capital fund is not considered a juridical person and established by capital contributed by not more than 30 investors according to the fund’s Charter. A venture capital fund is not entitled to make investments in other venture capital funds.

- Investors may make contributions to a venture capital fund by VND cash, gold, land-use rights and other assets which may be valued in VND. Investors are not entitled to contribute borrowed capital to a venture capital fund.

- Portfolio and investments of a venture capital fund include:

+ Deposits at commercial banks as prescribed by law;

+ Total investment made in a startup shall not exceed 50% of its charter capital after receiving investments.

- Total paid-in capital and assets of investors at a venture capital fund must be recorded separately from those of the fund management company.

- Investors that contribute capital to a venture capital fund shall themselves reach an agreement on the power to make decision on investment portfolio which must be specified in the fund’s Charter and the contract signed with the fund management company (if any).

Management of venture capital funds

A venture capital fund shall be managed under at least one of the following models:

- General meeting of investors, the fund management company;

- General meeting of investors, the fund’s Board of representatives or Director, the fund management company;

- General meeting of investors, the fund’s Board of representatives and Director, the fund management company.

The fund’s investors may either establish or hire a company to take charge of managing the venture capital fund. The fund management company shall carry out procedures for establishment of the venture capital fund and apply for registration of its additional business sector, which is management of venture capital funds, in accordance with the law regulations on company registration when taking charge of managing the venture capital fund.

The management of the venture capital fund prescribed herein shall be done according to the fund’s Charter and agreements or contracts signed with the fund (if any), and not be governed by regulations of the Law on securities of Vietnam.

Unless otherwise specified in the fund’s Charter, the fund management company shall submit reports to the fund’s Board of representatives/ Director on a three-month basis on the following contents:

- The fund’s investment portfolio, including total investment made in each startup.

- The investment plan and divestment plan (if any).

- The administration costs and bonuses (if any) paid to the fund management company, the fund’s Board of representatives or Director and other service charges as regulated in the fund’s Charter that arise during the reporting period.

- Other contents at the request of the fund’s Board of representatives or Director.

Transfer of shares of a founding shareholder of the fund management company shall be made in accordance with regulations of the Law on enterprises of Vietnam.

Decree No. 38/2018/NĐ-CP of Vietnam’s Government takes effect from March 11, 2018.

-Thao Uyen-

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